Welcome back to our fifth and final edition of debunking common money myths! I hope you have enjoyed the entire series, and that you have been able to put them towards some pratical use. For the last article I want to let you know what I consider to be the most common of all money myths, that a budget is absolutely necessary. I’m n0t saying that a budget can’t have it’s benefits that it certainly helps some people more than others, I’m just saying that you can do just fine without it.
I find too many finance experts touting the necessity of setting and maintaining a budget. My number one reason for debunking the budget myth is the time spent on creating and maintaining one. People get so caught up in the nitty gritty of creating a budget they don’t realize how their time could be better spent researching smart investments, or adding another form of income to their revenue base. I’m a finance blogger, a corporate finance professional, and I have never bothered with making a budget. Every hour I spend on a budget would be one less hour spending time with my family, or spending time blogging and making money.
Another reason I’m not a fan of budgeting is that it leads you to live by it’s rigid rules, and often budgets are inaccurate as it is. Forecasting your monthly revenue isn’t that difficult, but trying to forecast expenses is a whale of a job. You might be able to stick to $100 in monthly entertainment spending, but try budgeting in the sudden expense of a blown water heater or a kaput furnace. It simply cannot be done, unexpected expenses are bound to come up often. Don’t waste your time living by the rules of a self created budget, just use common sense when dealing with your expenses.
So, if creating and living by a budget isn’t a necessity then the question is what to do in its place. My suggestion is to spend less significantly less than you make! Yeah, it really is that easy. Use some common sense when spending money and you will be surprised at how much time you will save, and comparatively how effective that can be. Save enough money to cover routine expenses in case of a job layoff, invest significantly to outpace inflation, avoid costly forms of consumer debt, and you will find yourself racing towards financial freedom.