We’re talking about common misconceptions people have about budgeting. These myths are also some reasons why people don’t budget. We’re busting 3 such myths today: budgets don’t have to be super-detailed or time consuming or even super restrictive.
Financial experts say coming into a large sum of money by way of a salary increase or other means won’t solve your financial problems. That will only help you get by for the next few days, weeks, or months. With the same financial behaviour and spending habits, chances are you’ll continue to struggle financially. So what’s the most effective way to handle your finances?
Budgeting is said to be the best remedy for all financial problems. There’s a lot that goes into budgeting, but it all boils down to setting a financial plan for a certain period of time. In most cases, it’s about knowing how much exactly you’re earning, allocating it according to your needs, and most importantly, sticking to the plan.
As you will probably get many suggestions from other people, you may think the idea of budgeting is a complex one. So instead of trying to incorporate budgeting into your finances, you brush it aside and go on with your usual spending habits. The myths surrounding budgeting can get in the way of allowing people to gain control over their finances. Here are three of the biggest misconceptions about budgeting that we’d like to debunk.
Common budgeting myth 1: Making a Super-Detailed Budget
Don’t listen to those who say your budget should be extremely detailed. This idea is said to be the biggest misconception when it comes to budgeting. Most believe that you need to list all the items and numerical figures when making a budget. They think that they need to use Excel or a ledger to do so. They’re under the impression that budgeting only applies to accountants, financial experts, and other people who have the time to learn all about it.
If you enjoy making an itemized breakdown of your monthly expenses, then you can do so, by all means. But you don’t have to. You can make a budget in the simplest possible way. Less restrictive alternatives include the 50/30/20 budget, the 80/20 budget, or even the anti-budget. However, you don’t necessarily have to follow other people’s way of budgeting. You can come up with a simple and personal financial plan. You just need to find a way to track your expenses and allocate your resources which you can follow on a regular basis. It’s that simple!
Common misconception about budgeting 2: Not Going Over Budget Limit
As far as your budget is concerned, you should stick to it at all costs. This is why a lot of people decide not to go with a budget. Many people say that it’s almost impossible to make a budget and stick to it because you may incur unexpected expenses along the way.
However, those people are absolutely wrong. A budget entails flexibility. It’s supposed to serve as a guideline, not a hard-and-fast rule. You set a budget to guide yourself, basically. But you can tweak it here and there as you go along. For instance, let’s say you allocated $300 to your groceries and $50 to your leisure budget. For some reason, your grocery bill totalled $320. So it’s only right that you stick to $50 for your leisure expenses. This is just one way you can be flexible with your budget.
Why people don't budget Myth 3: Having a Time-Consuming Budget
The idea that budgeting is time-consuming is just one big misconception. The truth is, budgets don’t have to be overly complicated. You can simply sit down and figure out what to do with your pay given your usual expenses. Come up with a budget that you can stick to every month. Just make some necessary changes, if you have time. Besides, there are free apps for budgeting that you can use. With such apps in place, you can pretty much automate your budget. You won’t need to do anything manually. However, if you prefer carrying a pen and paper with you so you can write down your transactions, then you can do so as well. It’s up to you!
Ultimately, it’s worth noting that budgeting is more helpful than harmful. There is a good reason why you should stick to a budget. If you do, you’ll develop wise spending habits. Who knows? In just a matter of time, you may end up being one step away from attaining financial freedom.
This is why financial wellness & literacy is crucial to the success of your business & employees, get in touch today to see how we can help.