Bill Tayler is an associate professor in the School of Accountancy at BYU. Here, he shares common budgeting myths and how to dispel them.
Myth #1: There is one right way to do a budget…you just need to find the secret method!
Truth: There are many, many ways to budget; and if you’re looking for the silver bullet or the one-size-fits-all, you’re wasting your time. If you’re like most successful budgeters, you’ll try a few (perhaps many) methods before you finally settle in on the method that works for you. Then you’ll look around at other people’s methods and think, “Really? That’s not how I do it…” Just remember, what works for someone else might not work for you, and that’s OK.
The key to success in budgeting…and this is very, very important…is that you keep trying. Sounds cliché, but it’s true. If one method isn’t working, try something else. There are several online tools available. Try a few. Ask your friends and family what they do.
Failure at budgeting is not when you change methods, it’s when you stop trying and just hope for the best. Hope is essential to happiness, but hope is not a financial strategy. Keep hoping, but keep budgeting, too.
Myth #2: You have to be an accountant to be successful at budgeting.
Truth: Anyone can budget…you just have to find the method that works for you (see Myth #1). Now, full disclosure: I am an accounting professor, so this claim may seem unfair. But it’s true—just about anyone that has the desire to budget can do it. I’ve met right-brained, not-even-close-to-accountants who are better at family budgeting than most professional accountants. It takes commitment, yes. But not a degree.
Myth #3: Budgets are all about restrictions…it’s like a permanent money diet.
Truth: Budgets bring immense freedom. Yes, there are constraints…you will set goals, and sometimes to meet those goals you’ll have to reign in some spending. But you’ll be surprised how often you realize, “Hey, we can spend money on this without feeling guilty, because we planned on it!”
Rather than being a constant servant to your paycheck and bills, you become the master of your finances. As you become more adept at budgeting, freedom increases. Comfortable savings, charitable and responsible giving, and worry-free spending will be some of the fruits of your budgeting labors.
Myth #4: Starting a budget is too hard.
Truth: If you can add, you can start a budget. If you’ve read this far, it’s time to get your hands dirty.
Again, there are many ways to budget (see Myth #1). But typically, the first step for starting a family or personal budget is figuring out how money is being spent. Dig up all your receipts, credit card statements, etc., and write down how you’ve spent your money. Don’t have any records? OK, start today to hold onto those records…you’ll need them for your budget.
You’ll want to create some basic categories as you track expenses (food, rent, utilities, etc.). I like to lump most of my miscellaneous expenditures into two broad categories of “wants” and “needs”…that way I know where I can cut back if necessary (wants) and where cutting back will be significantly harder (needs).
Once you know what you’re spending, you’re ready to make a budget. Your budget should be based on reality (what did you spend and earn this month?) and also on your goals (what do you want to spend and earn?).
Once you’ve got your first budget up and running, take a deep breath and recognize that this first attempt at a budget will be far from perfect. Remember that the most important part about starting a budget is not stopping—you will succeed because you keep trying.