Busting Budget Myths!

As the State Treasurer, it is my job to be a good steward of Mississippi’s money and to responsibly manage our state’s budget, but I’m also asked to help expand financial wellness to others across our state as well.

If you read my columns often, you’ll probably notice a trend. In nearly every piece I write about financial wellness, I advocate that families begin with a budget. I hate to break it to you, but I’m going to do that again today (I’m just a firm believer in it)!

Today, I wanted to bust through four common budgeting myths.

MYTH #1: Setting a budget is too complicated.
I mean it when I say that budgeting doesn’t have to be complicated to be effective. Some people love fancy spreadsheets that track every expense down to the decimal point. That’s not going to work for everyone, however. Try a bucket approach instead: Spending “musts” (aka rent, gas, food); spending “wants” (a new pair of shoes, dining out with friends); and spending “savings” (your rainy-day fund)! Check in once a month to make sure your buckets look about right. Then, recalibrate however you need to for the next month.

MYTH #2: I don’t need a budget.
If you want to get out of debt, you need a budget. If you want to save for retirement or a down payment on a house, you need a budget. If you want to pay off your car or your student loans, you need a budget. If you want to stop arguing with your spouse about money, you need a budget. Like I said above, it doesn’t necessarily need to be a line-item budget, but having a financial plan can give more purpose to your spending decisions, empowering you to save for the big things and spend responsibly on the small things.

MYTH #3: I can plan for retirement later on.
The truth is simple: The later you begin saving for retirement, the bigger the hill will be to climb. The Duncan Financial Group explains: “Consider this: If a participant begins saving for retirement at age 25, contributing just $2,000 for 40 years, they can achieve an ending balance of around $560,000 assuming an 8 percent annual rate of return. Let’s say they wait until they are 35 to begin saving for retirement, saving the same $2,000 every year, but for 30 years instead and assuming the same 8 percent annual rate of return. At age 65, they would end up with about $245,000 which is less than half the money if they would have started saving sooner!”

MYTH #4: Budgeting is boring.
I’ll admit it: this might be more difficult to convince you of. That said, there are plenty of free budgeting tools and apps that “gamify” budgeting. Some offer you a lottery ticket for every week that you save money. Others let you visualize your spending goals in interactive ways. I challenge you to Google “ways to gamify budgeting” and find an app that interests you!

For more tips and best practices, please visit Happy budgeting!