Budgeting Myths

Budgeting is an important financial tool regardless of your income or life stage. It is as important if you have $2 or $2 million in your bank account. In fact, proactively using a budget can help exponentially grow your networth. It is a tool to help your tell your money where to go, rather than reactively wondering where it all went or why you may not have as much as you think you should have.

There are a few key myths on why people don't actively utilize a budget. By giving into these mindsets you may actually be loosing money and adding to your stress.

1. I don't have enough money to need a budget

   When income is low it is even more important to know where and when you money is needed. Making a plan ahead of time can help you take control over something when many other aspects of your life feel overwhelming. By knowing that you can maintain your 4-walls and pay your current bills it can provide a sense of relief from weight you didn't realize was creating subconscious stress.

   
   

   By simply writing out a modest income budget, you can increase your ability to find hope and create margin. Knowing how much more you need to earn to tackle debts or savings goals empowers you to get creative with increasing your income in order to shape your life the way you want it to be. It is more than possible to get out of the constant stress than unknown finances can bring.

   
   

2. My income is irregular, budgeting is impossible

   Inconsistent income can be tricky to budget for, but it is not impossible. It doesn't matter if the irregularity is due to commissions, working in the service industry, having a sales-based career, being a seasonal employee, or if your income is high or low. Inconsistency can be frustrating due to its lack of predictability.

   
   

   Budgeting and planning ahead makes navigating the variabilities easier. By basing the budget on the average of your income, lower end if you are a worrier, you are able to build in margin when there is extra income. Start your skeleton budget with the basics of your 4-walls, monthly bills and minimums of any debt payments. After the basics are covered, add on savings, extra debt payments and additional fluff items that could be cut if needed. If there are large swings in income, it may be useful to allocate additional funds towards a future month's budget and have a larger emergency fund. By building in a baseline of need-based expenses and only considering the additional as extra income, it can help shift the focus to positive knowing your necessities are not in jeopardy. This shift prioritizes items that you need versus those you would like to have; reviewing your budget from this perspective will highlight forgotten expenses that you may no longer want or need, saving you money.

   
   

3. I have a good income, I don't need a budget

   Congratulations! Let's intentionally put more of your income to work in the areas you want it to go, rather than diverting only the left-overs to your dreams. By not prioritizing yourself and your dreams you are actually creating a delay in the life you want to life. Without intentionality, your dreams "will happen when they happen," rather than within your timeframe; this could be weeks, months, if not years further down the road than you may have liked. Without a budget and a mindset that focuses on I have enough to do what I want versus what do I want to do with what I have it is very easy to simply spent at will without too much though on how our actions today impact the future. Without planning where to spend your money it is more likely to be spent on impulse purchases.

   
   

   Conversely, by telling your money what its job is, where you want it to be allocated towards and when you are fast tracking the larger things that you want to enjoy, not merely the impulse buys you can afford. Budgets are more than a financial tool; they are indicative of your priorities. In retrospect, would you rather reflect upon staying up with current trends, living in your favorite community, traveling, giving generously, or checking off bucket list items?

   
   

4. My spending habits are consistent, a budget won't help

   Rinse, repeat and enjoy. It works with budgets too! Relatively consistent spending makes budgeting quick and easy for the day to day grind. It also makes managing those hiccups or moments of large generosity possible.

   
   

   Creating sinking funds for rainy day categories, can help live in the moment when an opportunity arrises to randomly tip generously, make an atypical purchase, or opt to hop on the next plane to visit a friend just because. No matter how predictable we may think our lives have become, there will always be those moments that shake things up. Depending on how well we have budgeted can determine how enjoyable or detrimental those unforeseen circumstances may be. Have fun with the sinking funds - give them silly names, set goals, use them to celebrate milestones or simply to surprise others.

   
   

5. I am too old or too young to use need a budget

   Age is only a number; so is the balance on your bank account. While the value of your age will continue to increase, without the intentionality of a budget your bank account does not hold the same guarantee.

   
   

   What you find important in your teens and twenties will be vastly different to that in your 40s, 60s, 80s, and beyond. Utilizing a budget and having a plan will help ensure that those needs and wants are able to be met, regardless of what they are. It helps make sure the rent and utilities are paid so there is left over to enjoy without an overwhelming sense of guilt hanging over you. Regular review of where your money goes also helps make sure that you are not spending on items you no longer need or are interested, helping keep more in your savings for big ticket items.

   
   

   It is more than ok that your priorities evolve over time, your budget will too with each new season of life that you enter. It is the act of budgeting that is more important than what each specific line items entails. There is a purpose to the act of planing your finances, to give you freedom and peace of mind. At the beginning you plan to chase your dreams, towards the end your plan to maintain your dignity and create a legacy. Both are equally as important not only to you but those you care about as well.

   
   

Budgeting is a financial planning tool that enables you to give power to your priorities. Actively using one decreases stress and anxiety that often accompanies the uncertainty of future what-if situations. Budgets give control over something you can actively manage when many other aspects of life can feel chaotic and overwhelming.