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Are you on a journey for financial freedom? It’s something many of us want. Are these five budgeting myths holding you back?
In a world where information is at our fingertips, we end up with a lot more misinformation. We end up listening to people who pose themselves as professionals when they have no qualifications except their minimal personal experience and their egos.
It’s leading to a lot of budgeting myths out there. It’s also leading to a lot of investment myths. These myths are holding you back on your journey to financial freedom.
5 budgeting myths you need to watch out for
There are five budgeting myths* in particular that have become a problem for a lot of people. Some of these are gained from advertisements on TV to promote particular products, while others are due to memes that have no educational backing at all.
It’s okay to fall into the trap of the myths, but you need to pull yourself out. And I’m not saying that you need to talk to me about how to do it. I just want to make sure you understand how the myths are holding you back.
1. I don’t need to write my budget down
You know the money that you have available. Whether it’s a fixed income from a pension or an income from commission that fluctuates, you have an idea as to how much you’re getting each month. You pay your rent/mortgage, and then you get to spend the money in the way that suits you.
The problem with not writing a budget down and setting something up is that you end up overspending. Sure, you may not yet overspend your paycheck, but you don’t have the money to put in your savings account. You end up spending more on luxuries than you initially wanted to.
You end up living paycheck to paycheck without even needing to. It’s time to sit down with a budget and figure out the money you have coming in and the money that is going out.
2. Retirement is years away
I got stuck in this myth for a while. I didn’t budget to save for retirement, and now I have to save more each month to reach the goals that I need. If I’d have started saving earlier, I could have been closer to the goal already and I would have spent less each month.
Don’t fall into the trap of thinking that you won’t retire for another 40 or 50 years. Those years come up on you fast. And you can’t rely on the pension that people are getting right now. Plus, there’s the issue of inflation and how pensions don’t go up to match inflation all the time.
You need to make sure you’re setting things up with time to grow. Pay yourself first so that you have something for the future.
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3. My job is secure and my pension is good
I know so many people who tell me that their jobs are secure. Unless you have tenure, there isn’t a secure job out there. Everything is at risk right now. You just have to look at how some of the biggest, most profitable businesses are laying hundreds of people off right now.
There are always things that can happen to disrupt the job market. Right now, a lot of people working online jobs are worried about AI. During the pandemic, a lot of businesses were closed and then had to completely close down. Inflation going up means fewer people are spending money in stores, and that’s leading to more businesses closing down.
Arguably, the only jobs that are “safe” are people working as electricians, plumbers, and mechanics. Even they’re not 100% safe, though. They’re just safer than some of the other jobs out there. So, you need to stop thinking that your job is safe and make sure that you have that emergency fund* just in case.
And as for the good pension, companies can change their pensions and benefits at any point. Plus, if you don’t have that job anymore, your pension is affected. Don’t rely on someone else to set up your future.
4. I don’t have any debt
Just because you don’t have debt now doesn’t mean that you won’t in the future. I know a lot of people who were debt-free except student loans before the pandemic. Then the pandemic hit and suddenly there were a lot of issues with businesses laying people off and stores being closed. Suddenly, people were struggling to put food on the table and they ended up with credit card debt just to get through it all.
Your budget will help you avoid a problem like this. You can set things up to have an emergency fund just in case something happens. Then if you do end up losing your job, you’re not relying on credit cards to get through the patch.
On top of that, you just never know when the car will break down or when the boiler will go. You need to have a fund that will cover the costs of those, and that means setting a budget to save for that first. Otherwise, you suddenly find yourself in debt.
5. I can do it all myself
With apps like Questrade that help people invest on their own, a lot of people are turning away from mutual funds and investment managers. They don’t want to pay the 2% fees each month. They want the full 12% of an investment instead of 10%, for example.
The problem is Questrade has you doing everything yourself. You need to get disciplined in putting money into these accounts on a regular basis. You need to understand the way of volatile markets, and you’ll need to research the different funds available. You’ll want to keep an eye on the stock market and keep track of how financial situations are going.
Sure, there are people in Facebook groups and other places online that are offering their own advice. They want people to get away from paying the 2% fees, viewing them as ridiculous. However, even before I started working with mutual fund companies, I preferred to pay the 2% fees. The mutual fund companies kept an eye on everything that I was invested in, helping to limit my losses. During the pandemic and the start of the Ukraine war as many people were see large dips in their investments, I saw a tiny one that rebounded quickly. It’s worth the 2% for me.
I do encourage people to do a trial-and-error thing. Try it by putting half in Questrade and half with a mutual fund company that does it all for you. If you’ve made more with Questrade, then go for it. You clearly do have an understanding of it all. However, the majority of people will take money out at the wrong time and won’t have a setup to make sure they pay themselves first, and they end up losing money.
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Get in touch to find out how I can help you avoid the budgeting myths and start your journey to financial freedom.
