Financial Planning doesn’t come effortlessly to many individuals. I can share this because I was one of them. What is dangerous is that the lack of a planned budget will drive you off-base. It then becomes critical to know the contrast amongst reality and fiction, when planning through the dogma of such a large portion of these myths for people to pick up control of their funds.
Don’t leave it to chance. Spending plans aren’t insidious, and everybody paying little respect to their habits of spending money, can benefit a great deal from Budgeting. A few of these common myths are listed below. I hope you can learn the real truth behind budgeting, get inspired, and manage your money well.
Myth 1: A Budget = Too Much Information to Look At
First and foremost, there is a huge misconception that budgets have to be made in a very detailed Excel, that need to be exposed line by line. Just because you are having a spreadsheet with ten different categories, separating the household product purchases with actual groceries in your transaction report – that doesn’t mean it needs to be painful. There are many apps out there that make this job very easy.
Shameless plugin, we are working on an app just for this purpose which solves this problem.
If you don’t wish to use our app for this, you can use budgets principals, which are known worldwide. They include budgets like the 50/30/20 budget, the 80/20 budget, or even the anti-budget. If you have a personal philosophy of budgets, you can always use them as well. The point is that, based on your situation, you can tweak the budget any way you like. The idea is to develop the discipline to make sure you document your expenses. But in the end, the budget recommendations are not hard and fast rules – they are to help you.
Myth 2: If you go over your Budget, you’re screwed!
No one can control what life throws at you. No matter what your intention is, sometimes things happen which are beyond your control, including a lapse in judgment of over spending where you didn’t intend to. There is no reason to feel defeated because your budget got screwed up. At the risk of repeating myself, always remember that budgets are guidelines, not set-in-stone. You can always shift your money from another category and adjust.
For example, let’s say you budgeted ₹600 to watch Bahubali in theaters. Your weekly budget for Groceries was ₹400. Now if you landed up cooking something special and that special ingredient overshot your Groceries budget by ₹200, your Groceries spend became ₹600. You are still in luck because you can simply refuse to get that popcorn and coke and be within the budget.
No one keeps their budget perfect. So you shouldn’t get caught up in those small numbers that you forget the bigger picture. Don’t be so hard on yourself. You have one life – enjoy it, smartly! What is important that you should keep your spending budgets within your sights. Track yourself for a few months to get the real picture.
Myth 3: Who has the time for a Budget?
Facebook is important, isn’t it? No, I’m just being mean. But in reality, budgets are not complicated at all and require very little time. The little time you spend is mainly in data entry. There is Mint, Albert, and other Expense Managers to help you take care of this problem. They pull data based on the SMS you received on your transaction.
To each his own of course. If you wish to carry a paper and pen everywhere and write down your transaction than that’s fantastic. But with an app, the only effort required for a very short duration of your time is to add the data and ensure that the transaction is categorized correctly.
Myth 4: Budgets Are for People Who Are…
Rich people are not the only ones who need a budget. The same applies to married, single, students, debt-free, etc. Everyone can benefit from a budget. It should be part of your life as taking a shower is.
a. Debt Free: If you are debt-free, you are in a good financial situation. You can find ways to adjust your spending to reach your short and long term goals. However, even in this situation – you’ll be tempted to spend all your money and land up with no savings, no investments and will not reach your long-term goals, such as retirement goals, etc.
b. Rich: If you are wealthy, or saving comes naturally to you – again, you are in great shape. Even in this situation, you need to have a Budget. First of all, it is always good to optimize your taxes and there is always a way to do that. Secondly, it is very helpful to keep track of any changes in your spending patterns. You’ll save yourself from most of the unexpected surprises.
c. Don’t have a savings Goal: This is a problem usually put in by young people, who have not learned the value of budgeting from their parents. So they don’t know this option exists out there. They are oblivious of the term “Emergency Fund”, and its value. The medical emergency, unexpected termination from work, or a big expense which your car demands. If you don’t have a particular savings goal, then at least be prepared with an emergency fund. Simply put, you’ll always be better off with savings than not having any.
d. Don’t have a lot of money: How many times have you heard “Boond Boond Se Ghada Bharta Hai” (Drops of water fill up a pot). I wish to argue that if you have less money, the more important it is to budget your expenses. As an example, if you are a student, chances are you don’t make a lot of money and your expenses are minimal as well. However, the total number of transactions you do are few. So it becomes easier to note where your money is spent. By the way, we made our App for students and people who have just got their first job. We can help drip feed your investments for long-term returns.
No matter which situation you are in, it should be clear by this point that you cannot grow your wealth by not knowing about your expenses. No one got rich by spending money.
Myth 5: If you Budget, you’re Cheap!
Perhaps the worst myth around budgeting is that it equates being frugal to being cheap. That’s like saying that if you wear seat belts, you’re a coward.
A conscientiously maintained budget is a very good guideline to achieve your goals. Budgets are tools you can use to achieve your financial goals. If your budget every day, that means you are smart about your money. If you have clear goals, and you know what your core values are, focus on those expenses and leave everything out. This is how you’ll spend on things that make you happy, instead of things that neither matter, nor you need.
Don’t let anyone tell you that you need to cut certain things out of your budget unless you’re in dire financial straits. The easiest way to make budgeting work for you is to focus on your values and strip everything else out. This way, you’re spending on the things that make you happy and not spending on the things that don’t matter. Get past that fancy smartphone, flashy cars and things that people think you should have. You’ll feel much less deprived, and far more satisfied in your being.
In the end, all I can say that budgeting is an acquired skill. Something like time management, which is something we aren’t the best at, are we? But the truth of the matter is that we don’t spend a lot of time planning our time. It’s just a guideline, and the habit to keep a track of your expenses and money saved.
If you want something, you need money for it. You either earn it, or you save it. A budget helps you monitor that data. Without data, you’re just a person having an opinion or guessing.