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March 26, 2010
Financial Spring Cleaning: 5 Budgeting Myths
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Many myths exist about budgeting. For example, you may think budgeting will take too much time. But, you can successfully budget in just a couple hours each month. And that time could end up saving you hundreds or even thousands of dollars each year.
Let’s debunk 5 other common budgeting myths:
- My income isn’t large enough to budget. Budgeting provides security—especially if your income is low. With a budget, you’ll know how much you’ll need to pay the bills and be prepared for any unexpected expenses.
- I don’t need a budget because I’m not in debt. Budgeting isn’t just for those in debt—it’s for anyone looking to take charge of their finances. Budgeting can help you start an emergency fund, save for serious investments, and find room to splurge.
- I’ll be able to save more when I earn more. Your ability to successfully manage money has nothing to do with how much you earn. Sometimes having a higher income takes the focus off budgeting and money management—and leads to wasteful spending.
- Budgeting means not spending. Budgeting organizes what you do with your money, including how you spend it. Once you know exactly where your money is being spent, you’ll know exactly how much you can spend on fun “extras.”
- I don’t have the financial skills to create a budget. You don’t have to be a math whiz or financial planner to set up a simple monthly budget. Here are 2 resources to get you started: an interactive budget worksheet (pdf, 0.34 MB) and a budget calculator.
One thing that is true about budgeting: you need to stick with it to be successful. Unrealistic expectations are a big budget killer. If you set your sights too high, you can become discouraged if you fail to reach them. One way to avoid this is to start with short timeframes.
If you create smaller goals—like saving for a new TV or a weekend getaway—you can see how likely you are to accomplish them. Once you tackle those smaller goals, you can set your sights higher. This is a great way to stay motivated and keep your goals manageable.
Student Loans on a Budget
Once you have a budget in place, you might want to consider putting some extra money toward your student loans. Paying more than your monthly minimum can save you thousands of dollars in interest.
On the other hand, if your budget shows that your student loan payments are too high, consider an alternative. There are many different loan repayment options. Choose one right for your situation.
