Tuesday, September 27, 2011

Budgeting Misconceptions

Alright, I have been living on a budget for almost 18 months now and I have finally felt the need to straighten out some of these misconceptions people have about budgeting.

1.  Budgeting = being cheap or broke

This is not true.  Budgeting = telling your money where to go before you spend it.  This is a much more appropriate statement.  Once people hear that we are living "on a budget" they tend to stop inviting us to do things because they assume we are either cheap or broke. Neither one of these assumptions are true.  Like I said before, budgeting is telling your money where to go.  If you think about it we all have X amount of bills (mortgage, insurance, groceries, cell phones, etc...); it is the money above and beyond those things that typically needs to be given direction.  If you have $1000 leftover each month after all your set bills are paid then that is what you have to work with.  If you don't give it direction it will likely be wasted; this is where a budget really comes in to play.  If you want to budget $600/mo for eating out and entertainment, for shopping, etc... that is certainly up to you.  You see, just because you live on a budget doesn't necessarily mean you are frugal, cheap, or broke.  You can choose to live frugally, but you live on a budget so you won't be broke.

2.  Budgeting = goodbye fun

Again, this statement is FALSE.  It is up to you where you spend your money.  If going out and having a good time is important to you, then budget your money appropriately.  The need for a budget is so you don't go into (more) debt.  If you have $1000 left over to use but you end up spending $1500, you are living above your means and that is NOT sustainable.  If all of your necessities are met and you want to use all the "extra" going out, I don't think that is financially smart, but it is certainly your choice.

3.  Budgeting = no impulse purchases

Not at all.  We budget "blow money" for each of us every month.  We each get X number of dollars at the beginning of the month to use for whatever we want.  If we want a Starbucks coffee, we can buy it, if I see a cute shirt at Target I can't pass up, I don't have too.  You see, budgeting is not living a life of "thou shalt not buys"; it is you being in charge of your money, not the other way around.

4.  Budgeting = no more big purchases

No!  Have you ever heard of delayed gratification?  If you're an American under the age of 30, then possibly no.  We have the "swipe the plastic" now mentality and pay for it later.  Do you realize that by the time you pay off that big, nice, shiny, new (fill in the blank) that you put on your American Excess card it is probably been given away, thrown away, or at the very least no longer shiny and new.  How sad.  Most of the time you can save up for a couple of months and come out with your shiny new whatever and no payment.  So, no budgeting does not mean no more big purchases; it just means planned for big purchases.

The major thing I have learned about budgeting is that it is all about prioritizing.  Retirement savings, kids college savings (after retirement), family vacations, and quality time together are what is important to our family so those are the categories that get the most "attention."  If we focused more on luxury cars, designer labeled clothes, and eating out 10 times a week, our budget would look very different.  Anyway, my point is, no matter where you choose to spend your money it should be YOUR choice.  Money is a tool to be used; nothing more.

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