5 Common Budget Myths

Don't fall victim to budget myths

For some reason, the concept of a budget seems to make people’s heads explode sometimes. If you made it through third grade math, you’re well-equipped to handle the numbers associated with budgeting. That’s part of the reason I consider money management issues a psychological and behavioral problem, not a math problem. To address some of the mind-games that budgets can play on you, you need to dispel some of the negative ideas people have about them. Here are 5 budget myths and why they aren’t true.

Budget Myth 1: Budgets are complicated

Fact: Budgets are 3rd grade math. They require fundamental understandings of addition and subtraction. All you need to do is make a list of the money you have coming in and the money you have going out. That’s all a budget is.

Of course, as you add tons of things to your list it can be messy to look at. But cluttered is not complicated; it’s just cluttered. If you’re struggling with wrapping your head around this, just keep things simple. Do you really need to itemize your coffee vs your general dining expense? You can consolidate groups to make things easier to look at and deal with.

If you want a super bare-bones budget, just stick with something like the 50/30/20 budget. You’ll have to have some degree of control, but if you don’t really care that you spent $14.35 on coffee this month and $23.74 on food at the coffee shop, then don’t bother tracking that specifically.

Budget Myth 2: Budgets hold you back

Fact: Budgets may act as guidelines, but they are designed to help you reach your goals. Budgets are simply rules that you set for yourself; they don’t hold you back. What they do is let you see where your money is going so that you can choose to direct your available dollars to the things you care the most about.

If you don’t have enough dollars to do everything you want, welcome to the club. It means that you’ll have to make a choice; that income restriction is what’s holding you back, not your budget. All your budget is there for is to assign and direct the money you have.

Budget Myth 3: Budgets are not flexible

Fact: Budgets change every month for a reason. Your goals might change one month (hopefully that doesn’t happen too often, though) and, mid-month, you decide to switch from investing into establishing a larger emergency fund so that you have a bit more padding to take the leap into self-employment you’ve been eyeing. Your budget looks shot because you’re not doing what you said you would, but hey…life happens.

If you screw up and spend some extra money on groceries this month, it’s no a big deal. You can course-correct mid-month or make adjustments and keep an eye on things the following month.

Budget Myth 4: Budgets don’t work with variable income

Fact: Budgets work with every type of income, including variable income and even periods of time with no income. You may need to employ different tactics depending on how you earn your income, but they definitely work with variable income.

If you work a seasonal job or do project-based consulting work, your months may be feast or famine. Freelancers have a particular interesting scenario as well. If your income is semi-predictable (but still variable), budgeting should be pretty easy. If, however, it’s a crapshoot then having a bigger cash savings to buffer the down months will be critical.

Budget Myth 5: Budgets aren’t necessary if you make a lot of money

Fact: Warren Buffett makes a budget every month. Even if you have a ton of money coming in, it’s important to understand where your money is coming from and going to. I’d argue that if you make a ton of money it’s more important to make a budget. Having a good sense of where your money comes from and where it goes to is critical. Not knowing how money is flowing across your accounts is a recipe for disaster.

Whether you make $1000 or $100,000 a month, knowing where every dollar goes and belongs will help you control that money instead of having that money control you.

Just Do It

Budgeting doesn’t have to be something that you dread. It’s not a difficult process, and it shouldn’t take a long time. Every month (or more often) sit down, review your progress, and put together a budget for the next month. You don’t need fancy software (though it’s kind of fun sometimes to mess around with it). A simple spreadsheet or even a piece of paper and a pen will do.

The key is to be honest about what your income and expenses will be, and to make sure that they align with your goals. If they aren’t, then it’s a good time evaluate how you spend your money and make some changes to better support your goals and values.


What are some of the biggest myths you have heard? How often do you budget?

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  1. The more I look at my budget, the more I enjoy messing with it. A long time ago, I too was afraid of budgets. I thought they’d only lead to disappointment when I couldn’t keep to them. However, over the past 5 or so years that I’ve had a true budget, I’ve learned that they give me life. I look at my budget often to make sure I’m following it. I will often change the budget mid-month and reallocate funds from one bucket to another, but I think that’s part of budgeting.

  2. Before I started budgeting your #2 statement – Budgets hold you back – was one of my biggest excuses of why not to. Now that I am several years in, I can see how freeing having a budget is. Money is so much more powerful when you see where it is going and direct it.

    1. I’m a big fan of cutting a percentage off the tip for savings. That minimizes the effects of growing expenses too much as income rises since you still save the same percent, but let’s you enjoy it a bit too! Even that I’d call a ‘budget’ even if it isn’t very detailed!

      Thanks for reading and commenting!

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