Despite being a Certified Financial Planner, I have a bone to pick with personal budgeting…
It’s not that I don’t believe in a personal budget, however, I believe there is a fundamental flaw in how we approach budgeting. Let me explain.
The problem is, everyone has been told how important it is to budget, yet very few of my clients actually enjoy the task of tracking all their expenses daily or monthly. I have even heard people call it the “bane of their existence!” Over the years, I have had less clients than I can count on one hand who arrive at our work together with a neatly organized excel budget tracker. My inner numbers geek totally appreciates these clients, but I know they are far from the norm!
During introductory calls with new clients, I intentionally reframe the question from, “Do you keep a budget?” to, “Are you the type of person who likes to budget?” No matter how I frame it though, I always hear the guilt arise when most people tell me that they “know they should, but they don’t keep one.” I even had one client tell me that the question is equivalent to going to the dentist and the hygienist asking if you floss every day.
If you are feeling stuck and down about your lack of a budget, or you constantly guilt and shame yourself because you are “bad at budgeting,” here are 5 myths of budgeting that I bust to help you develop a better relationship with your money!
The 5 Biggest Myths of Budgeting
1. You are bad with money if you are bad at budgeting.
You are not bad with money, you just were told there was only one way to budget, and it doesn’t suit your style! In fact, I know plenty of people who have achieved great things with their finances but admit to the fact that they do not keep a detailed budget. It is absolutely possible to have a great financial picture and not be the best at traditional budgeting!
2. You need to track every expense, separated by categories, in a detailed spreadsheet.
Traditional budgeting says you need to track every dollar you spend into many categories – groceries, entertainment, housing, transportation, etc. While this might be a good exercise to do once in a while to find areas of improvement in your spending, there are budgeting techniques that don’t require this level of detail that can be tedious and difficult to sustain for most people in their busy lives.
I have seen people simply track the total amount of what comes into their bank accounts against the total amount of what goes out – no categories or Excel sheets required!
3. You should look at your budget monthly to stay in control of your finances.
Traditional budgeting says to track your expenses monthly, but I believe that being in control of your money means not being intimidated to look at your bank account and having a better relationship with your money on a day-to-day or weekly basis.
If you only look at your bank accounts once a month (or let’s be honest, every few months), you are more likely to be scared to look and have spending snowball out of control.
4. A budget is the best way to determine your financial health.
Ultimately, I believe that a budget is a means to an end - to ensure you are saving for your future self. The truest indicator of your financial health is not a budget, it is your net worth statement. A net worth statement is easier to build than a budget and will take you MUCH less time to track.
If you are wondering what your net worth is, you can download a FREE net worth statement builder at our website. You can also listen to our Instagram Live on this topic to hear why I believe a net worth statement is a better place to start with your finances than a budget.
5. There is only one way to budget.
There is not enough discussion happening publicly about the MANY different ways to budget or manage your money. Different budgeting styles are appropriate for different situations – are you a freelancer, are you single, do you budget for your whole family, are you a business owner? There is no “best” way to budget that will suit every person and their financial habits.
Although there may be several techniques that resonate with people, ultimate the right way to budget is one that fits your lifestyle. Don’t be afraid to experiment with different techniques to see what works the best for you! Your budgeting style can grow and adapt as your life does.
I love to compare budgeting to working out. If you hate to run, you don’t have to become a runner.
You can choose many other ways to keep up your physical fitness. The best workout is the one you will do. The same goes for managing your money. Do not get stuck on budgeting.
I hope that busting these myths have helped you realize that it is possible for you to break past the budgeting barrier and develop a better relationship with your money… even if you hate to budget!