3064: 4 Budgeting Myths You Should Ignore by Kumiko of The Budget Mom

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[00:00:30] This is Optimal Finance Daily – 4 Budgeting Myths You Should Ignore by Kumiko of TheBudgetMom.com The word budget looks scary to a lot of people. It sounds like work, looks like restriction, and implies that you need to love math. I went 24 years without a budget for one huge reason. I didn't want to take the time to do it.

[00:00:54] I was paying bills, making the minimum payments on my credit cards, and I had enough left over for food. What else could I ask for? Having this idea that budgeting would take up most of my life left me restricted to just getting by. It's true that you can manage your money without a budget, but you won't be able to manage your money effectively. If you have a plan for your money, also known as a budget, it's absolutely amazing what you can accomplish with the income you currently have.

[00:01:24] Budgeting completely changed my financial life. It can for you too. Just make sure to ignore these myths. Stop living a life where you only get by and embrace the idea that you can learn how to effectively manage your money. All it takes is a budget. I don't need a budget. The most common thing I hear from people who don't budget is,

[00:01:47] I do it in my head, and I budget by keeping track of everything I spend. Doing it this way, you only kinda, sort of have an idea or have rough estimates of the real values for your budget. If you're budgeting in your brain and you have a spouse, hang on to your pants because they have no idea what magic budget you're creating in your head.

[00:02:06] This is where spending and money can cause conflicts. Most people only look at budgeting as one thing, looking at the past and using past figures to determine estimates for your budget now. It's great that you know what you're spending on, but you're only looking at what you have spent last month. Budgeting is looking at the past, but you must also look to the future.

[00:02:28] You have to budget for the money you haven't spent yet. Your budget is a plan, a guide on how you should spend your future dollars. Budgeting is boring. Well, let me be the one to splash a cool glass of water on your face. Time to wake up! What is more boring than looking at your credit card statements or going through your bank account online?

[00:02:51] Talk about a snooze fest. If you are not budgeting, I guarantee a lot of you look at your bank account online or go through your credit card statement and say, Yeah, looks good. If budgeting isn't fun, you are completely doing it wrong. I want you to think about what you really, really want. How cool is it to think and fantasize about all the nifty things you want to have and do? A trip to Asia? Check. New sofa for the living room? Check.

[00:03:17] Check. In budgeting, we have a list of things we want and need. The things we need, which are at the top of our list, like food, bills, and our mortgage. And the things we want, which are at the bottom of our budgeting list. The trip to Asia and the new sofa for the living room. At first, you might only have enough for need items. But the fun part about budgeting are the wants that are further down your budgeting list. Budgeting is too much math.

[00:03:45] Math is really the easiest part of budgeting. All you need to know is how to add, subtract, and occasionally use division. Not too painful, right? The harder part of budgeting is figuring out your spending and knowing where to cut your expenses. If the math is keeping you from creating a budget, there are a million online resources that do the math for you. Even Excel has budgeting templates that have built-in formulas. You just need to type in the numbers. Budgeting is too restrictive.

[00:04:16] This is where budgeting gets its ugly reputation. A lot of people feel like creating a budget will restrict them from spending money on things they want. This myth will not only take away your opportunity to manage your money effectively, but it will prevent even the responsible spenders from reaching their true saving potential. You have to look at budgeting as something that allows you to spend the money you do have on the things that matter most and are the most important to you.

[00:04:45] It's a positive approach, not a negative one. It's important for you to realize that budgets are actually meant to have flexibility. You're far more likely to succeed with budgeting if you can adapt to your life changes. You'll set limits for certain spending categories, but you also have the ability to add or subtract from these categories. You're able to add to one category when you need to and subtract from another to make up the difference. Budgeting doesn't have to feel like work or a chore.

[00:05:14] Make it fun, make it personal, and make sure you do what works for you. A budget illustrates your goals, your spending habits, keeps you on track, and allows you to find areas of extra money you didn't even know were there. We make plans for the important things in our lives like weddings, vacations, holidays, and events. Your money is just as important. Make sure you have a plan for it. You just listened to the post titled,

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[00:07:54] If you've been listening for a while, you know that I'm a huge fan of budgeting and tracking my spending. This is the key habit that enabled me to get out of 30 grand of debt in 11 months and start saving 60% of my income. So I'm with Kimiko on this one. When you have a plan, it's amazing what you can accomplish with your money. Remember, a budget is just the simple act of telling your money where to go versus wondering where it went.

[00:08:23] It's an exercise in awareness over your money that contributes to the mindful management of your hard-earned dollars. I think it's pretty difficult to improve your finances until you have a crystal clear picture of what's going on right now. And that's where the tracking of your spending comes in. Then you play with some assumptions on where adjustments can be made, test those assumptions, and reassess.

[00:08:47] A budget allows you to do this, but it only really helps you if you continually engage with it. This means once or twice a month, you're assessing your actual spending against what you budgeted. Or you can use apps like You Need a Budget where you can do this in real time as you're spending money. By continually engaging with your budget, you'll be able to see where you need to make adjustments or where you were being unrealistic about desired spending versus actual spending.

[00:09:15] For me, the simple act of tracking my spending during each transaction made me much more thoughtful during the key inflection point when I was about to swipe my credit card. I got myself into debt through mindless spending. So if you're like me, try bringing some awareness into the equation and see how it affects your purchasing behaviors. And that will do it for today. Have a great day and start to your weekend if you're listening in real time.

[00:09:42] And I'll be back here over the weekend where your optimal life awaits.