Budgeting can seem completely overwhelming, particularly when people succumb to myths about saving and believe they have to sacrifice their lifestyle. As a ‘wealth psychologist’ I focus on the psychology of spending and how every client differs when it comes to the challenges they face in saving. Here are the first five of my top ten common myths about budgeting, and why they are just myths – we’ll go through the other five next week:
Myth 1: I’ll have to give up everything that makes life worth living
This couldn’t be further from the truth. I divide all expenses into ‘essentials’ which we need to survive, ‘desirables’ which are things we’d like to have but do not need, and ‘sanity savers’ which are those non-negotiables. When I was struggling with debt at university, my sanity savers were one beer and one DVD a week. They differ for every person but they can range from a coffee each morning to a holiday once a year. The worst possible thing you can do is deprive yourself of what makes you happy
Myth 2: I have to be good with numbers and I barely passed tenth grade maths
This is a fallacy and it’s a concern I hear time and time again. That’s what people like me are there for. Even setting up one consultation with a budgeting expert will help you see the numbers for the trees and set you on the right track
Myth 3: Budgeting creates tension between couples because you end up arguing about what each other spends
Unfortunately this can happen, and usually happens without a budget anyway, but it can certainly be avoided. Many couples find that budgeting is actually a relief and can ease tension in the relationship, because both parties feel in control and they know they have an allotted amount each week/month/year for ‘desirables’ and ‘sanity savers’.
Myth 4: I already know what I’m doing with my money
If this is really the case, fantastic! However, I meet a lot of people who think they know what they’re doing with their money and still aren’t in the financial position they want to be in. One common complaint I get is that people can’t see any other ways they could be minimising their spending. The only way to get around this is to physically record everything you spend money on for a fortnight or a month and to go through it with a fine tooth comb. If you don’t face the monster, you will never see how small he really is.
Myth 5: Budgeting is just for people who are struggling to get by
Every single person who is earning money should be budgeting in order to reach their financial goals. There is no two ways about it. My clients’ incomes range from 30k to 300k+. The approach differs but the concept is the same. It’s the only way to ensure you gain maximum enjoy of your life both now and in the future!
To be continued next week…
Kristina Plimer, coaching and mentoring service, The Wealth Tutor
