It’s hard to prioritize where your money goes even if you have a well-paying job. But successful budgeting makes it much easier to get out of debt and save for your future. A good budget will make you feel in charge of your money, not the other way around. Here, we bust these budgeting myths so you can save and spend confidently.
1. If you go over budget, you’re doomed
An all-or-nothing mindset is risky. It’s like when you splurge on junk food while dieting. You may think, “I’ve already ruined my diet” and then binge on everything in sight. Many people apply the same failed logic to budgets. You likely won’t follow your budget perfectly, especially as you begin. Don’t panic. MoneyWise suggests you cover all of your fixed expenses, then give yourself some flexibility from there.
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2. You have to know how to use spreadsheets
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3. Budgeting takes too much time
As financial guru Dave Ramsey says, if you think you don’t have the time to budget, weigh your priorities. Really, you can’t afford not to create a budget. It does take time. But once you have a system in place, it gets a lot easier. Consider watching one less Netflix show as an investment in your future.
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4. You have to be good at math
Plenty of apps and programs can do the math for you. Check out this free app, Every Dollar, to start. Online banking, which you likely already have with your checking account, is another great tool that automatically tracks your expenses so you don’t have to balance a checkbook.
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5. Budgeting is boring
Maintaining a budget may not be the most interesting activity. But do you know what’s really fun? Being debt free, as Dave Ramsey points out. Plus, when you start to successfully budget, you probably will start to feel satisfaction from it!
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6. You can do a budget in your head
You may be good at tracking your spending. But truly, it’s hard to manage a budget in your head unless you’re straight out of A Beautiful Mind. Besides, budgeting isn’t just about accounting for past spending. It’s about deciding where your money should go in the future. Intentionally write down your goals — don’t just think about them.
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7. A budget is too restrictive
No one will ask you to give up every joy in life. You love getting your nails done or playing golf? Great. Just put it in the budget! When you know how you spend, it actually gives you the ability to use money wisely on the things you want, instead of the thoughtless transactions that tempt us.
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8. You can’t account for unexpected expenses
Sure, you never know when your kid will break an arm or your dishwasher will clean its last dish. But one thing you can count on: Expenses will come up. And you’ll land in financial trouble by charging them to a credit card. The Balance advises having three months’ worth of monthly expenses in emergency cash reserves for unexpected things that come up.
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9. Your 401(k) is good enough
If your job provides you with a 401(k) and even 401(k) matching, you may think you’re set for retirement. Wrong. Planning for retirement is a crucial part of budgeting. And what you put into your 401(k) may not be enough to sustain the lifestyle you want to have. Here are nine things you need to know about your 401(k).
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10. Budgeting means no eating out
Budgeting doesn’t mean total deprivation. You can enjoy Chick-fil-A at lunch or do date night at a nice restaurant. Just be aware of how much you spend on these things and plan for them in your budget. You may even find eating out becomes more special when you do it intentionally with money you know you have. Check out these hacks on saving money eating out.
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11. Budgeting is only for people with money woes
If you live comfortably, you may think you don’t need a budget. While we have talked about how important budgets are for getting out of debt, budgets are for everyone, debt or no debt. If you don’t save and spend intentionally, your money controls you — not the other way around. Here’s how you can budget like a millionaire.
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12. It’s not a good time to start a budget
Big trip coming up? Christmas just around the corner? You may be tempted to say it’s not a good time to start a budget. But you’ll always be able to come up with an excuse. And entering a spendy season is the perfect time to start a budget. Decide ahead of time how much money you’ll use for that vacation or gifts, and keep that promise! This article can help you predict how much money you’ll need for a vacation, too.
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13. Everyone goes into debt to go to college
It’s no secret that many millennials are drowning in student loan debt. If that’s you, you can work hard to pay it off. But if you haven’t gone to school yet, you must know you do not have to go into debt to get a degree. You can budget for college and make it work. It might take more time than you hoped; you may need to go to community college for a few years first or work while studying, but you can do it!
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14. A budget must be super-detailed
Like we discussed, you don’t need to be a spreadsheet wizard to have a budget. But when the rubber meets the road, aren’t budgets still detailed? They don’t have to be. The 50/30/20 budget is an easier model to follow. It breaks down your spending into three categories: needs, wants, and saving.
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15. You don’t have a current savings goal so you don’t need to save
It can be hard for young people to wrap their heads around the things they need in the future. So naturally, they aren’t motivated to save. But breaking down savings goals into your budget can be a good motivator. If you’re 19 years old, it may not be on your radar to save for a house down payment. But you will thank yourself later if you create savings goals for your future.