5 Budgeting Myths That Stop Financial Success

You don't need to be a math whiz to track your cash.


Budgeting carries an ugly reputation among many people. It's easy to look at budgeting as the process of preventing yourself or your family from spending money, and that's part of the problem. Budgeting is perceived as a negative approach to building finances, and most people would prefer to work on positive approaches, like earning more money, even if that can be more difficult and less rewarding.

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It is important to grow earnings, but viewing budgeting as a process that takes away the spending and the objects and experiences that spending provides is not the best approach. This is a misunderstanding that will prevent otherwise responsible spenders from growing their net worth to the biggest extent possible.

Here are five myths of budgeting that once avoided will help you improve your finances and grow your high-yield savings account.

Myth #1: Budgeting is designed to prevent you from spending.

Rather than viewing budgeting as a subtractive process, consider that developing a spending plan will allow you to spend your excess income in any manner you like. Creating a budget doesn't necessarily mean that you must cut all that is fun from your life. While a family living paycheck-to-paycheck would have the biggest problem justifying spending on anything that isn't necessary, the budgeting process itself could reveal opportunities for unexpected fun.

Myth #2: You need to be a math expert to create a budget.

The numbers are the easy parts of creating a budget. If you can add, subtract, and divide, you can handle the mathematics. It is more difficult to take an honest look at your spending and decide which categories can be reduced to increase savings. If the numbers stop you from budgeting, consider using free spreadsheet software to take the difficulty out of the math. The benefit of software is you have the option of viewing your budget as a graph, and visualization can be a great advantage.

Myth #3: Budgeting requires expensive software to be effective.

A number of companies sell specialized software designed to help families create, and perhaps maintain, a budget. Unfortunately, some of these software programs are not designed for families on a budget; they are expensive options for a process that can be completed well for free. My first budget started on the back of an envelope, written with a pencil, and this guided me through a financially difficult period of my life.

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Myth #4: A budget must be strict.

A flexible budget is more effective. While the basis of any budget should prescribe amounts for certain spending categories or regular bills within a time frame such as a month, life often prevents a family from staying within the budget 100% of the time. A flexible budget allows categories to "borrow" from other categories within one month. For example, if you need to spend more on food one month because of unexpected travel, you can transfer some of your money set aside for entertainment that month.

You can also designate your budgeting excess in a category at the end of one month to be available in that category during the following month. If this is a regular occurrence, consider revising the budget to more accurately reflect your spending requirements.

Myth #5: Budgets are only for poor people.

If you don't have a lot of income, or if your spending is currently beyond your means, budgeting is imperative. That doesn't mean that people who spend less than they earn shouldn't create a budget. Even families with high incomes benefit from budgeting because it requires an honest analysis of spending habits. There are almost always options to save, earn, and invest more money. The process also helps families with a surplus after saving and investing decide how they want to spend their excess cash.

Budgeting doesn't have to be a chore. Add a personal touch, find a method that works best for you, and consider that it is a plan for allowing rather than preventing spending.

Luke Landes writes for Consumerism Commentary, where he encourages discussions about money and consumer issues. Consumerism Commentary regularly tracks and reviews the best online savings accounts and other financial products.