In last week’s edition, we discussed an easy 50/30/20 budgeting rule. But sometimes, knowing what not to do becomes more important than what to do!
In this context, let us discuss and bust 7 budgeting myths that individuals have in common!
Budgets Are for Math Scholars
A common myth that holds people back from preparing a budget is that it requires one to be a math expert, as it will require a lot of complex calculations. But the truth is that designing a budget is just a simple addition and subtraction game. And we have calculators for that too! Hence, anyone can prepare a budget without a mathematical background.
It’s Always in My Head
Some people believe there’s no need to create a written budget as all the rough calculations are always in my head! But that is not the correct way to go about creating a budget. One should always have a laid budget in a written format. This procedure allows you to revisit your budget calculations every time there’s a deviation. This approach further helps set up a realistic budget over time as you come to know what’s working and what’s not!
It’s Too Early to Prepare a Budget
People in their 20s and 30s often think it is too early to prepare a budget, and they can do it later as they have a long life ahead. But this is not true. The earlier you start, the better it is. If you start early, you start treading along the correct path, and your finances align with your living standard and future goals! To reap, you must sow!
There Are Always Some Unexpected Expenses
Many people think that there are and will always be some unexpected expenses that will turn the planned budget upside down. Hence it is a waste of time to prepare a budget. These people tend to forget that a provision for contingent expenses can always be made while planning a budget. However, there can be some issues in assigning an exact amount to it. But the option for inclusion is always there!
Making a Budget is Complicated
Individuals step back from preparing a budget, thinking it will take a lot of time and effort and is a complicated exercise. However, one needs to tally up their income sources and expenses, and allocate the income to needs, wants and savings/investments. It is that simple. No logarithms are involved!
I Already Save Money, and I Don’t Need a Budget
People already saving money and investing it in building wealth often think there is no need to create a budget since they are well on track. However, a budget is always required to control expenses and generate incremental savings from the same income over time, investing it in financial assets and creating the necessary emergency funds.
I Have No Debt, So I Don’t Need a Budget
People with no debt think their finances are well-planned and there is no need to create a budget. However, a budget is a requirement for gaining discipline over overspending and building a savings and investing habit over time. A budget serves as a summary of your current financial status.
These are some common myths that people have about creating budgets. The purpose of highlighting them was to encourage people to overcome these myths and start creating their budgets so that finances remain well in place!
