10 Budget Lies Holding You Back
Dear Rich Lifer,
A recent survey conducted by the popular budgeting app, Mint, asked 1,500 Americans how much they spent last month.
Sixty-five percent of participants said they had no clue how much they spent.
The irony, nearly half of those same participants listed money as their number one source of stress.
What’s going on?
Many people avoid examining the full picture of their spending habits for fear of what they might find. It’s easier to bury your head in the sand than stress about a budget.
Others feel they don’t need to budget, maybe because of a high household income. Despite this, Americans still overspend an average of $7,500 each year.
Whether you have the means or not, turning a blind eye to money is never the right choice.
So, the million dollar question remains…
How can you get your budget to stick?
Setting up a budget and tracking your finances is not hard. There are dozens of apps and spreadsheets you can use to create a budget.
The real issue is letting go of the lies you keep telling yourself about budgets. These are what derail even the best laid financial plans.
Today, we debunk 10 of these budget lies holding you back from achieving financial security:
Budget Lie #1: Budgeting means no more eating out!
Having a budget doesn’t mean you never get to go to a restaurant again. You just have to budget for it.
Add a line item in your budget for eating out. If you’re used to eating out most meals, you may be surprised how quickly you blow through your budget.
Don’t stress. It might take a few weeks to cut back, but ideally you should learn to cook a few staple meals that you like and are easy to add to your meal rotation.
There’s nothing wrong with eating out, you can have line items in your budget for all your favorite spots. But the point is, make sure you have room for those expenses in your budget before you spend any money.
Budget Lie #2: Budgets are too restrictive
This is one of the biggest misconceptions around budgeting. You don’t have to give up your morning Starbucks if you don’t want to. As long as it’s in your budget, you can indulge.
What if you don’t have room in your budget? Then isn’t your budget too restrictive?
That’s the wrong way to look at this. Budgets actually give you the freedom to spend! By sitting down and looking at where your money goes each month, you’ll start to see what things are truly important to you.
Once you know what you can’t live without, you can begin cutting down on expenses that don’t bring you the same joy. This will leave you with guilt-free spending money for the things you love.
For example, maybe you don’t care whether you have the latest iPhone or drive a brand new car. Good. You can save money holding on to an older phone and used car and spend some of those savings on the things you do care about.
Budget Lie #3: Now is not a good time for me to start a budget
At some point, everyone uses this excuse. The truth is there’s never going to be a good time to start a budget.
Often, people use this excuse because a birthday or holiday is coming up and they don’t want to feel restricted with gift giving. This is exactly when you need to have a budget.
A budget will help you know how much you can safely spend on holidays and anniversaries. Since those dates never change, why not start budgeting now for the next one.
Budget Lie #4: I make good money, I don’t need a budget
If you think making a budget is only for people who have trouble making ends meet, think again. Even the rich make budgets.
Give every dollar a job. Otherwise, you’ll become one of the 65% of people who are clueless to where their money is going.
Plus, lifestyle creep is not some made up phenomenon. Be diligent with tracking your spending so you know if your spending is increasing over time.
Budget Lie #5: There’s Always Unexpected Expenses, Why Even Bother?
It’s funny how quickly our brain forgets the so-called unexpected expenses in life.
If your budget is constantly being ruined by unexpected expenses, first start keeping track of these expenses. Maybe your car brakes need to be replaced or the roof is leaking?
Although these expenses might seem like a surprise at the time, they’re fairly predictable when you think about it. On average, car brakes last between 25,000 and 65,000 miles. Asphalt shingle roofs should last anywhere from 15-20 years, if you’re lucky.
Although these time horizons are longer than you’re probably used to budgeting for, they’re as predictable as paying for your car insurance or renewing a membership fee once you start paying attention.
Budgets can be a great place to track these unexpected expenses. As that date approaches, you can start ramping up your savings for when the inevitable happens.
Budget Lie #6: Tracking all my expenses is as good as a budget
If you track all your expenses, that’s great! However, it’s not the same as following a budget. Half the battle is knowing where your money is going.
The other half is assigning a job to every dollar that comes into your bank account. This is where a budget helps. If your goal is to retire in 5-10 years, how will you know if you’re on track if all you’re looking at is spending?
If you spent $800 on groceries last month, you won’t know if that’s within your budget or not. It’s like driving someplace you’ve never been without a map. You have no clue whether you’re heading in the right direction. A budget is your map to financial security.
Budget Lie #7: I don’t have time to budget
It’s true, budgets take time to set up. But what else are you doing with that time that’s more important? Netflix? Happy Hour?
If your finances are lagging, setting aside a few hours to set up a budget should be your number one priority. Once you take control of your money, you’ll be surprised how much time you can free up to do the things you want to do.
The hardest part is getting started. Once you spend a few hours tracking all your expenses and building your budget, it’s smooth sailing. Every month plug in your numbers and in 5 minutes you should know whether you’re on track or not.
Budget Lie #8: I’m not good with numbers, so I can’t budget
Don’t be intimidated by fancy spreadsheets and complex formulas. Budgeting should be simple. If you can do third-grade math, you can budget!
To get started, forget about excel or google sheets, simply write down on a piece of paper all your expenses and how much money is coming into your bank account each month.
Add up all your expenses and subtract them from your monthly income. This will tell you if you’re spending more than you’re making. Do this every month and you’ll start to see how much you’re actually saving.
Once you know where your money is going, you can start to influence its flow by setting up spending targets for each category. As you spend throughout the month, see whether you’re within your targets or not.
Budget Lie #9: I can’t get my spouse to budget with me
The secret to getting your significant other on board with budgeting is to lay out the big picture. Where do you want to go? How will you get there and how much will it cost? Once your partner can see the gap, they should be more responsive to budgeting.
If there’s still some resistance, carry on anyway with the budget best you can. As small wins start to build up, your partner should feel more compelled to keep the successes coming.
Budget Lie #10: I can budget in my head
Unless you’re Rain Man, you probably can’t budget in your head. This is just another lie keeping you stuck in your old ways.
Let this self-limiting belief go and do your finances justice by setting up a real budget. No matter how bad things might seem, you can’t improve what’s not being properly measured.
It’s a shame so many people go without a budget because of these lies. Budgets are not meant to suck the fun out of life. They’re meant to give you the freedom to enjoy life by spending within your means.
To a richer life,
The Rich Life Roadmap Team