The New Year is a great time to reassess saving and spending habits and put new goals in place. To do so requires creating a formal process to succeed—and that means developing a budget. You may already have a budget, but are you taking full advantage of it? Chances are it may need a little dusting off or refresh. If you’re budget-adverse, read on to determine if you’re buying into any the following myths and how to get out of the budget rut to free up cash flow for savings and other important goals.
Before we jump into the myths, think about what a financially secure future looks like for you. A comfortable retirement? Owning your home free and clear? College for your children? Travel? A vacation home? Having a goal in mind will help you move your budgeting in the right direction. You work hard for your money. A new year is a great time to start taking steps to make your money work for you!
Here are the four myths that most likely sideline financial progress, and tips on how to return to reality.
Myth #1: I don’t need a budget because I already track everything I spend.
Tracking is a great start – but it’s not a budget! It means looking back instead of ahead. And simply keeping track doesn’t help you move on to larger goals and greater security. Once you are in the habit of tracking your spending – including that latte on Saturday morning – the real work of financial security can begin by using that information to create a budget.
Return to Reality: Sit down and start to think about goals for your financial future – for one year, five years, and 10 years. Once you have two or three ideas, you can start to see how a formal budget can work for you to help achieve those goals.
Myth #2: I keep a budget in my head.
You may be one of the rare people who can keep track of everything you earn and everything you spend without needing to write it down, including incidentals and one-off expenses. But face it, you’re probably not keeping track of everything, even if you lead a relatively simple life with few obligations or investments. Start with a simple budget, using one of the many online tools available – or even just pencil and paper in a notebook.
Return to Reality: Track what you spend on paper or in an app for your smartphone or computer and sit down and start to think about goals for your financial future.
Myth #3: Budgeting is too complicated and time consuming.
Nope – it doesn’t have to be! There are a wide variety of online and electronic resources available, many of them at no cost. Mobile scanning using a smartphone makes it easy to save and track receipts in one place. Here’s where the time you spend up front to begin budgeting will pay big dividends. And yes, you can start with something easy, and once you get the hang of it, move to more sophisticated budgeting tools. Look at budgeting as one of your core investments: investing time to reap a more secure future.
Return to Reality: Use one of the many online tools or smartphone apps for tracking spending, budgeting for now and for the future, and even scanning receipts. When you find the one that works for you, it will be easy to use regularly. And by having an app pick up information from your online accounts, you can skip that tedious data entry step. Don’t forget to add entries for occasional expenses like car registrations, haircuts and pet care!
Myth #4: A shared budget is impossible to control.
Start with a “budget date” where you sit down, and just talk about your goals. It’s true that savers and spenders are often attracted to each other. This article from The Balance on “How to Budget as a Couple” even has advice for when one partner resists combined budgeting.
Return to Reality: Set up monthly budget dates, let kindness prevail over being “right,” and focus on your shared goals. Using these strategies, you can make it easy for both of you to track your income and spending together, begin the process of budgeting, and stay focused on your important future goals.
Soon you will begin mastering your budget and making sure the money you work for is working for you. If you have questions about strategies for financial goal-setting or managing your budgets for investment or other future goals, please contact our office today at 414-431-0488 to schedule time for us to meet.