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الأربعاء، 7 أكتوبر 2015

5 Myths About Budgeting, And How They’re Keeping You From Saving Money

Most people don’t really keep a budget, even though we know we should.

And if you do use a budget to track your finances, chances are it gives you only a rough idea of what’s going in and out of your bank account. Am I right?

That’s the boat I was in not long ago. I had a “budget” set up — and I use that term loosely here — but it wasn’t really helping me manage my money.

I had always believed that actually setting up and maintaining a good budget would be a huge project, one I didn’t have time for. But my wife and I could see we were heading toward a financial cliff, and really needed some help.

Without even realizing it, we were spending a lot more than we were bringing in every month. We were overdrafting our account at least once a month, and our credit card balances kept creeping higher.

I knew something had to change.

So I decided to dive in and give budgeting a shot, and I quickly realized budgeting isn’t nearly as bad as most people make it out to be!

A lot of the things I had believed about budgeting were either exaggerated or simply not true. And once I got past those misconceptions, I was able to use a budget to finally see our whole financial picture, identify where we needed to make improvements and come up with a plan to get us back on track.

Here are five myths I believed about budgeting that held me back from reaching my money goals — and how to get past them.

Myth #1: Setting Up a Budget is Complicated

Does the idea of setting up a budget feel complicated?

Nothing could be further from the truth! Creating a budget can actually be simple: At its basic level, it’s nothing more than a list of the money coming into your life and the money going out.

While I use Excel to manage my budget, you’ll want to use a platform that feels comfortable for you. Explore other systems like Mint, EveryDollar or You Need a Budget. They all have free versions!

EveryDollar is my favorite, because it feels most intuitive and user-friendly. It also has a mobile app so you can track your budget on the go. You can pay for small extras if you want, but the main budgeting tool is free.

If those options sound daunting, it’s perfectly OK to use a piece of paper and pencil.

At the top of your budget, write your net monthly income (that’s your take-home pay after taxes), and underneath, write the expenses you have every month. BOOM! Just like that, you have a simple budget!

Now if you want, you can get fancy and start adding details like gross pay or credit card balances. You can add as many details as you want, and you probably will add line items as you go along and get more comfortable with your system.

But the truth is, none of that is really necessary. All you need to do is list your income — what’s coming in — and expenses — what’s going out.

If you’re avoiding creating a budget because it feels scary and intimidating, do yourself a favor and keep it simple.

Myth #2: You Have to Be Good With Numbers

If you passed second grade math, you can set up a budget. All it takes is a little addition and subtraction!

Once you’ve listed your income and expenses, add them up separately. You’ll see your total income — which is really only applicable if you have more than one job, or if your significant other also earns a paycheck and you combine your money — and your total expenses.

After that, simply subtract your total expenses from your total income. If you end up with a negative number, you know you need to start cutting down on your expenses.

If you subtract your expenses from your income and come up with a positive number, congratulations! You’re already a lot further ahead than I was at this point, and that’s worth celebrating.

Myth #3: Budgeting Takes Too Much Time

The truth is, creating a budget does take a bit of a time investment… at first. When you start out, you’re not only learning how to budget, you’ll also need to really look at and record how you spend, which requires some thought.

But after the initial set-up, it will take very little time each month to update your budget, especially if you keep it simple as I’ve suggested.

I usually spend half an hour at the end of every month updating my budget, adding what I earned and spent that month, as well as looking forward to what I expect to earn and spend the next month.

That’s it! And that half hour has made a huge difference in my life. It has helped me learn to control my spending each month, which means less stressing over money.

Myth #4: Budgeting Means I Won’t be Able to Have Fun Anymore

Think budgeting means cutting out everything fun in your life, and living on just the bare essentials?

It doesn’t have to!

Instead, think of budgeting as planning how much you’re going to spend so you don’t run out of money before the end of the month. That way, you can spend money where and when you want to, without wondering whether you’ll have enough to pay the rent.

If you like to go out to eat every day, that’s fine! Just put it in your budget. If you want to go to the movies at least a few times a month, that’s OK, too — just put it in your budget.

All you’re doing is setting the money aside to make sure it’s there for that activity.

Some people might complain, “But that takes all the fun out of everything! I want to be spontaneous!”

If that’s you, work some spontaneity into your budget. If you look back at your spending habits and notice you’ve spent around $200 a month on activities you didn’t expect, then budget $200 the next month to use for that “fun fund.”

The trick here is prioritizing. If you want to have that $200 a month to use however you’d like, it means you won’t have $200 to spend elsewhere. And if that’s $200 you need to buy groceries, you might have to scale back your “fun fund” a bit.

Knowing how much you have to spend and how you usually spend it will help you make choices in line with your priorities.

Myth #5: But… I Already Have a Budget

No, you don’t. Not if you set it up six months ago and haven’t looked at it since.

That’s exactly what I did before I truly began keeping a budget. It was a rough framework, yes, but not enough to actually help me control my spending.

Looking at your finances once isn’t enough; you need to update your budget every month for it to be effective. That’s the only way you’ll really be able to see where your money goes, versus where it should go.

It’s like financial guru Dave Ramsey says: “Tell your money where to go every month instead of wondering where it went.”

It’s not only effective, it also feels good.

Your Turn: What scares you the most about creating a budget? If you update your budget regularly, what used to hold you back from doing that?

Tom Gordon is a freelance writer and recovering spendaholic living in Las Vegas with his wife and three incredible sons. He has developed a passion for common-sense, real-world ways the average American can save and earn extra money, and wants nothing more than to share that passion with the world.

The post 5 Myths About Budgeting, And How They’re Keeping You From Saving Money appeared first on The Penny Hoarder.



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