Budget myths and facts
Do not let false information affect your financial decisions.
As an Extension educator for financial and homeownership education, I often hear interesting reasons why consumers fail to take action to improve their financial situation. These are the myths that I hear most often:
1. Myth: “I’m too young to worry about saving for retirement.”
Fact: Regardless of age, saving for retirement should be a top priority. It’s easy to push this off until later in life, only to realize that we may not have saved enough for the type of retirement we desire. To find a Ball Park E$timate™ of your retirement needs, complete this worksheet or visit www.choosetosave.org. You might be surprised at what you discover.
2. Myth: “I break-even each month, so I must be doing ok with my finances.”
Fact: When we break even each month, we are often failing to save for unplanned emergencies, as well as non-monthly expenses. Non-monthly expenses are things that we know will have to pay for eventually, but we do not receive a bill for them in the mail, so they are easy to forget about (i.e. school supplies, birthdays or holidays, vacations, car or home maintenance, etc.). The best way to find out where your money is going is to track your spending (every purchase) for 30 days and then add them up. Small purchases add up, so try to plug your “spending leaks” to find more money to save.
3. Myth: “If I do a budget, there won’t be any money left over to have fun with.”
Fact: The purpose of a budget is to help you balance your income, expenses and savings each month. The information you gain by doing a budget on a regular basis will help you identify your spending patterns, needs and wants, and areas where you can make adjustments so that you can achieve your financial goals. Remember budgets change, and will need to be adjusted from month to month.
4. Myth: “I don’t make enough money to save.”
Fact: In many situations, this is false. Many people think that if they made more money, they would be more apt to save. I often remind people that money management has less to do with how much money you make, and more to do with the choices you make, with the money that you have.
(However, in some cases, there truly is no wiggle room in a tight budget. In these situations, try finding ways to increase household income or accessing benefits designed to help low-income families. Visit your local Health and Human Services Department to learn more).
For additional money management resources visit Michigan State University Extension. Michigan State University Extension offers financial literacy and homeownership workshops throughout the year to help you become financially healthy. For more information of classes in your area, please visit either the MSU Extension events page or MI Money Health website. Additionally, you can take the Financial Health Survey at MI Money Health to access if you’re financially healthy and discover more ways you can improve your financial health.