You should still make a budget, even though being perfect is impossible. Why is budgeting so easily avoided for some people? Some think they won't have money left over for any fun or entertainment. Others think they are too young to plan for retirement, it being so far off.

These are just myths, and I will help you to dispel them in this text or rather to understand the truth.
 

Why is a monthly budget important?

The two main reasons to set up a budget are:
 

1. Get spending under control in order to avoid getting trapped in high interest debt. Lenders and our mass marketing culture are happy to lead you into debt.
    
2. Ensure a healthy savings rate. It is up to you and you alone to take care of your future self.
    

Why bother to save money at all?

There is an unfortunate back story to this. At one time, many American workers had what is called a pension plan. Under that system employers automatically set aside a large portion of workers' pay for retirement. It was as much as 20% of their total compensation. This was money workers never saw until retirement. 

That all changed in 1978 when the 401(k) plan was introduced. Retirement planning was turned upside down. Since then, the huge cost of funding lifetime pensions for a large workforce was shifted to individual workers. However most people didn’t understand the implications of this change. It was great for big corporations since they could pay a paltry 2-5% 401(k) match instead of the hefty 20% pension contribution. Since it wasn’t part of take home pay, many workers didn’t realize they were getting a bad deal. Those who did see the change realized they needed to start saving at least 15% - 20% of their income to have the same quality of life in their retirement years.
 

Various myths about the budget arising from the above:

Myth: I don't have time to budget.

Truth: You don't have time not to make a budget.

Two words seem scary to the letter "B" - and they are budget and bankruptcy. Would you rather plan your spending or put yourself in a situation where you have no money? 

The first is called the budget, and the second is called bankruptcy. If you want to avoid bankruptcy, take the time to make a monthly budget.

How is a budget created? Here are some budgeting tips:

• On paper first write down your income sources and required monthly expenses (rent, groceries, etc). Here is a simple budget template you can try.
• If you have a family, the monthly expenses are quite different. In that case, you create the budget together with your spouse.
• After the basic expenses, you can see how much you can allocate per month for discretionary spending (entertainment, eating out, maintenance, personal expenses, debt paydown, etc).
• This way you know in advance where every penny of your earnings is going.
• If you are really serious about taking this important step in life try out our home budget tracker.

Myth: I'm too young to worry about saving for retirement.

Truth: Many young people believe they don't need to save for retirement when they first start working. The fact is, the math of compounding interest is heavily in favor of young people. The sooner you start saving the less in total you need to save overall and the more your money “works for you”.

Myth: I break even every month, so I must be doing well with my finances.

Truth: Does it sometimes happen at the end of the month that you add up your expenses and see that you are where you started last month? In this case, yes you broke even, but you haven't saved anything for potential breakdowns or expenses like birthdays, holidays, vacations, school supplies, etc? There are many hidden costs in an annual budget vs a monthly budget. 

To prevent this from happening, track your expenses religiously for a year or more to see where you actually spent your money. When you track all purchases for an extended period of time, you will see where your money is leaking. 

The randomness of financial life has many hidden expenses that only come up once in a while. That is why building an emergency fund is important to cushion these unexpected or unplanned situations.

Myth: If I make a budget, there won't be any money left for fun.

Truth: It's not true that you won't have money for fun. On the contrary, if you plan all expenses well, you will have money for fun. The budget is used to see the pattern of consumption, needs, and desires, and if you allocate the money well, of course, you will have it for entertainment as well.

Myth: I don't make enough money to save.

Truth: In many situations, this is a lie, because people need to make choices about what to spend their monthly earnings on. Many believe that if they earn more, they will be able to save, but when they earn more, turn around and immediately buy more expensive things or blow money on unnecessary things. The key is to avoid lifestyle creep when you get a promotion, raise or bonus.

Conclusion: I hope that this article has helped you to better plan your budget and that you have seen the difference between the myths and the truth about the budget. Yes, perfect budgeting is impossible, but any budgeting is better than none.