Budgeting – where do you start, its too difficult, where do I look to budget, what is the best budget plan, its too hard to budget, I am too in debt to even think about budgeting – do any of these sound familiar to you?
This is what most people do when it comes to budgeting and then they just give up.
Budgeting sounds like big corporations only action and so how is little ol me going to budget towards my goals. Look at why budgets make sense.
Well, let me show you 7 myths about budgeting to help you get started. What are the 7 biggest budgeting myths?
Let me start by saying that doing a budget is only hard because you don’t know where to start and how to do it.
There are a huge number of sites that just tackle budgeting tips. But what do I mean when I say budgeting?? This word alone can scare anyone but if I changed the word to say Cash Flow or Monthly expenditure or Ins and Outs then can you see how more appealing this is – well budgeting is all of what I just mentioned.
When one is faced with money issues then they don’t think of budgeting and ignore the very thing that can help them with finding a solution.
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What is a Budget
Creating a budget and sticking to it can help you save and reach your short- and long-term financial goals. An effective household budget typically consists of these components that you must monitor each month:
Fixed expenses are unlikely to vary between months. These include things like rent, mortgage payments, or car loans are easy to budget every month because they remain constant. Some expenses like groceries or gas might change a little, but are easy to predict.
Variable expenses like eating out and shopping, change from month to month based on circumstances and appetites. These are good areas to focus on when money is tight.
Savings, whether in a bank or investment account, can be budgeted for too—if not right away, then aspirationally as your finances improve.
Intermittent expenses, such as car repairs, presents, or medical bills are ideally also accounted for in a complete budget (with costs spread out a little over each month), but beginners can also just group all this into a discretionary spending category for the sake of simplicity.
Breakdown of cost of living budgeting categories.
Total taxable monthly income is the income from your job or other resources including investment dividends, pensions, Social Security benefits, rental income and more.
The final step is to create your monthly budget using a basic budget worksheet. If you find you are not able to stick to your budget, it may mean you are spending beyond your means or that your budget is not flexible enough. Take the time to review and readjust your budget monthly until you find a plan that works for you to reach your goals.
Let me know show you the 7 biggest budgeting myths.
Myth 1: Budgets Are Very Very Complicated
This is probably the number 1 myth I want to expose. If you just do not know how to start, then what I suggest is that you write down all your expences and income on a sheet of paper or type them up on Excel. Use your bank statements to help you and this will make the task much easier.
Once you have done this, then you subtract your expences from your income to see if you have a negative number (more money going out than in) or a positive number with positive cash flow. Monthly budget.
That’s, it, this is simple, and it will not take long to do this exercise. You can now work towards your financial goals knowing where you stand each month.
I have personally done this and was surprised with the results that we actually had a positive cash flow but I was always thinking that we were in debt each month. Keep this simple. Start now.
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Myth 2: I need to be an expert in Maths and Financial Analysis
Can you total number? Can you add up numbers? Can you subtract numbers? If you can answer these questions with a YES then you can do a budget.
Some of these budgeting tools are online applications or software, some are downloadable software, some are for Windows, some are for Mac.
There is even free software around that you can use:
- Free Online Personal Finance Software
- AceMoney Lite
- Money Manager Ex
- Microsoft Money Sunset Deluxe
- Money Manager Ex
- Financial Fate Personal Financial Planning Software
- Free Budget Spreadsheets
I suggest you dig through and see if what works for your budget. Every person is different, therefore every budget will be different.
Myth 3: I am Too Much In Debt to Think About doing a Budget
When you are in debt, this is a sickening feeling and your motivation to take action is very low. Well, let me tell you that giving up is the not the right thing to do as the debts will not go away unless you take stock and take action.
To have financial success, you need to have a good budget and this will help maximize your financial needs.
Budgeting can help solve your problems but it will help you to find places to cut unnecessary expences and thus start to save money each month. Knowing what your monthly income and expences are, can give you the best ways to start saving money. Just by saving the extra few dollars a month will also help you feel better.
Myth 4: I Don’t Need a Budget
Having a budget does not matter if your are grappling with a huge debt or earning a decent average wage or even earning six figures a month. You can create a budget no matter what your circumstances are. You can reach your goals with a budget.
Get budgeting practice when you’re not struggling to make ends meet, and then you will be better prepared for whatever the future may hold. If you have a goal to aim for then again, a budget is what you need – become a stable investor.
On the other hand, if you are living on very limited funds, use budgeting to get a holistic view of where your money is going, so you can more confidently address difficult financial decisions.
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Myth 5: Budgeting Will Take Up Too Much of My Time
I have already shown you the different free software that is available to you. All you have to monitor each month is your expences and to input them in to your budget plan. You can even write these down on a piece of paper – keep it simple. This is not time consuming at all.
To reach your financial goals, you must have budget.
Myth 6: I am Earning Money and so I don’t need a budget
Do you know how much excess money you are left over with each month? Having a mental idea is not good enough. You need to manage spending and savings.
Did you know that roughly 70% of all lottery winners end up bankrupt. Now these people clearly had their windfall but then again after a few years end up penniless. This is an extreme example I am quoting but I just want to make a point.
Get a grip on your income and expenditure and do a budget.
Myth 7: I Can’t Use A Budgeting App To Manage My Money
The app world has just gone from strength to strength over the past 10 years and now more than ever there are over 6 million apps in the world.
There are so many apps that can be used for budgeting and so here is a sample of the best 4 apps that you can download now and start to use.
- Mint – (Android & iOS) Well known financial app and it can show you all your money, debts, bills, assets, stocks, retirement funds, and even your credit score on one slick dashboard.
- Wally – (Android & iOS) This app helps you track your income, expenses and offers you a snapshot of your remaining budget to help you avoid overspending.
- Money Dashboard – (Android & iOS) Money Dashboard gives you a fantastic overview of your finances. You can categorise spending and view your habits over six months through nifty charts and graphics to get a really clear idea of exactly how many hundreds of dollars/pounds you’d save each year.
- OnTrees – (iOS) OnTrees works with major UK banks in order for you to track exactly what is coming in and going out of your current account, savings accounts and credit cards, in one place with one login.
- You Need A Budget – (Android & iOS) You Need a Budget doesn’t let you create budgets around money you don’t have – it forces you to live within your actual income.
Download an app now and it could not be easier to manage your budget straight from your mobile.
Budgeting Is Rewarding
By taking action to develop your skill in budgeting will get you to your goals. By ignoring your finances, this won’t get your anywhere.
You don’t need to spend a ton of time on budgeting, but you should check in with the state of your finances at least once a week to develop the habit of tracking and saving.
Start now by tracking your spending. 5 biggest budgeting myths hacked for you.