If you follow the public gallery, you most certainly dislike the idea of a personal budget or have given up on it before knowing what it is. The concept behind budgeting is not just adding and subtracting numbers around your income and expenses. If you ever want a personal budget to be meaningful, assess your habits and how you behave with money. This article debunks five common budgeting myths.
1. A Personal Budget will deny me the fun things of life
The argument here is always; why should a tool tell me how to spend my money? – money I have worked so hard to earn? How do I forego a nice meal or my favourite beverage at my favourite restaurant with my money?
If you perceive a budget as a deprivation tool, you will struggle with managing money. However, if you view it as an empowerment tool, it works for you instead. In simple terms, a budget is a plan. It enables you to prioritise your income and expenditure. It reveals core areas of focus; – living expenses, goals and the fun things of life. It grants you control of how to plan your money comfortably – fun items included.
2. I hear Personal Budgets are strict and only meant for the rich
A personal budget is not a straitjacket! Treat it like so only if you can live with the consequences. However, as a financial freedom tool – it needs to be relevant and flexible. A good plan should resonate with your personality and style – it brings clarity and grants you control over what to prioritise.
Given that planning is a habit thing; learning to budget with what you have now gives you a head start. Start now, get used and watch your path to better growth. Thus, to win, you must replace bad habits with better ones to enjoy personal financial wellness.
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3. I am comfortable, this budget thing is not for me
You are probably right, but only about the present. This comfort is deceitful and a recipe for disaster – unless you are super rich and have the license to spend your money whichever way you want.
A budget helps in predicting your financial future. Unles you have a crystal ball, remember that no one has a lease on life on this planet. The economy could take a sudden turn causing changes in your investments and income. A misfortune may happen – life suddenly becomes an uphill task. Through a budget, you discover the importance of an Emergency fund and Insurance – two planning concepts that can ease off any of these challenges. Everybody requires a budget – learn to tell your money where it should go.
4. Why budget when every expense feels like an emergency?
Now that you mentioned the unexpected, every expense feels like an emergency – why should I even attempt to budget?
Busted, you can only fix what you know where the fault lies – this is the work of a budget. You earn and do not care where your money goes; why would every expense not feel like an emergency? Record your spending, and organise it in terms of priority – this also reveals what is unnecessary. Holidays, School Fees, Birthdays, Subscriptions and Utility Bills are not emergencies!
Note: tracking shows the inflow and outflow of your money, while budgeting tells your next cycle’s money where it should go.
5. Doesn't a Personal Budgeting smack of hard work?
I bet you were born running- false! If not, you came into this world knowing how to read and write – wrong again! Remember the adage: practice makes perfect? To do better, you have two choices: work hard or smart. When enthused with creating a personal budget, financial coaches advocate that you first build a habit. The base habit is; learning how to record your transactions and knowing how to interpret them. A well-installed tracking habit elevates you to goal-setting. Here financial experts will advise you to employ a SMART approach. The approach is ideal when fused with the right tools and technology – it brings simplicity to goal setting. There are mobile apps that are simple and friendly to use. You can also customise an excel spreadsheet to automate your plan. Your budget should reflect your goals – and your goals should always wear a smart outfit.
Take away
Benjamin Franklin once said: “If you fail to plan, you are planning to fail!” This statement is so true when it comes to personal money management. You do not have to make ‘sack-loads’ of money to plan. The idea of budgeting is one of creating control through installing positive habits and a healthy relationship with money.
Note: If you dislike the word budget, replace it with the word plan. As you do this, you’ll realise that you rarely plan to fail!
