Tom Gordon - The Penny Hoarder

Most people don’t really keep a budget, even though we know we should.

And if you do use a budget to track your finances, chances are it gives you only a rough idea of what’s going in and out of your bank account. Am I right?

That’s the boat I was in not long ago. I had a “budget” set up -- and I use that term loosely here -- but it wasn’t really helping me manage my money.

I had always believed that actually setting up and maintaining a good budget would be a huge project, one I didn’t have time for. But my wife and I could see we were heading toward a financial cliff, and really needed some help.

Without even realizing it, we were spending a lot more than we were bringing in every month. We were overdrafting our account at least once a month, and our credit card balances kept creeping higher.

I knew something had to change.

So I decided to dive in and give budgeting a shot, and I quickly realized budgeting isn’t nearly as bad as most people make it out to be!

A lot of the things I had believed about budgeting were either exaggerated or simply not true. And once I got past those misconceptions, I was able to use a budget to finally see our whole financial picture, identify where we needed to make improvements and come up with a plan to get us back on track.

Here are five myths I believed about budgeting that held me back from reaching my money goals -- and how to get past them.

Myth #1: Setting Up a Budget is Complicated

Does the idea of setting up a budget feel complicated?

Nothing could be further from the truth! Creating a budget can actually be simple: At its basic level, it’s nothing more than a list of the money coming into your life and the money going out.

While I use Excel to manage my budget, you’ll want to use a platform that feels comfortable for you. Explore other systems like Mint, EveryDollar or You Need a Budget. They all have free versions!

EveryDollar is my favorite, because it feels most intuitive and user-friendly. It also has a mobile app so you can track your budget on the go. You can pay for small extras if you want, but the main budgeting tool is free.

If those options sound daunting, it’s perfectly OK to use a piece of paper and pencil.

At the top of your budget, write your net monthly income (that’s your take-home pay after taxes), and underneath, write the expenses you have every month. BOOM! Just like that, you have a simple budget!

Now if you want, you can get fancy and start adding details like gross pay or credit card balances. You can add as many details as you want, and you probably will add line items as you go along and get more comfortable with your system.

But the truth is, none of that is really necessary. All you need to do is list your income -- what’s coming in -- and expenses -- what’s going out.

If you’re avoiding creating a budget because it feels scary and intimidating, do yourself a favor and keep it simple.

Myth #2: You Have to Be Good With Numbers

If you passed second grade math, you can set up a budget. All it takes is a little addition and subtraction!

Once you’ve listed your income and expenses, add them up separately. You’ll see your total income -- which is really only applicable if you have more than one job, or if your significant other also earns a paycheck and you combine your money -- and your total expenses.

After that, simply subtract your total expenses from your total income. If you end up with a negative number, you know you need to start cutting down on your expenses.

If you subtract your expenses from your income and come up with a positive number, congratulations! You’re already a lot further ahead than I was at this point, and that’s worth celebrating.

Myth #3: Budgeting Takes Too Much Time

The truth is, creating a budget does take a bit of a time investment… at first. When you start out, you’re not only learning how to budget, you’ll also need to really look at and record how you spend, which requires some thought.

But after the initial set-up, it will take very little time each month to update your budget, especially if you keep it simple as I’ve suggested.

I usually spend half an hour at the end of every month updating my budget, adding what I earned and spent that month, as well as looking forward to what I expect to earn and spend the next month.

That’s it! And that half hour has made a huge difference in my life. It has helped me learn to control my spending each month, which means less stressing over money.

Myth #4: Budgeting Means I Won’t be Able to Have Fun Anymore

Think budgeting means cutting out everything fun in your life, and living on just the bare essentials?

It doesn’t have to!

Instead, think of budgeting as planning how much you’re going to spend so you don’t run out of money before the end of the month. That way, you can spend money where and when you want to, without wondering whether you’ll have enough to pay the rent.

If you like to go out to eat every day, that’s fine! Just put it in your budget. If you want to go to the movies at least a few times a month, that’s OK, too -- just put it in your budget.

All you’re doing is setting the money aside to make sure it’s there for that activity.

Some people might complain, “But that takes all the fun out of everything! I want to be spontaneous!”

If that’s you, work some spontaneity into your budget. If you look back at your spending habits and notice you’ve spent around $200 a month on activities you didn’t expect, then budget $200 the next month to use for that “fun fund.”

The trick here is prioritizing. If you want to have that $200 a month to use however you’d like, it means you won’t have $200 to spend elsewhere. And if that’s $200 you need to buy groceries, you might have to scale back your “fun fund” a bit.

Knowing how much you have to spend and how you usually spend it will help you make choices in line with your priorities.

Myth #5: But… I Already Have a Budget

No, you don’t. Not if you set it up six months ago and haven’t looked at it since.

That’s exactly what I did before I truly began keeping a budget. It was a rough framework, yes, but not enough to actually help me control my spending.

Looking at your finances once isn’t enough; you need to update your budget every month for it to be effective. That’s the only way you’ll really be able to see where your money goes, versus where it should go.

It’s like financial guru Dave Ramsey says: “Tell your money where to go every month instead of wondering where it went.”

It’s not only effective, it also feels good.

Your Turn: What scares you the most about creating a budget? If you update your budget regularly, what used to hold you back from doing that?

Disclosure: We have a serious Taco Bell addiction around here. The affiliate links in this post help us order off the dollar menu. Thanks for your support!

Tom Gordon is a freelance writer and recovering spendaholic living in Las Vegas with his wife and three incredible sons. He has developed a passion for common-sense, real-world ways the average American can save and earn extra money, and wants nothing more than to share that passion with the world.

Let’s face it: Unless your last name is Gates, Bush or Trump, you probably don’t have piles of cash lying around with nothing to spend it on.

We all have expenses and a limited income to cover them, and sometimes we run out of money before we run out of month.

When my wife and I graduated from college last year, we had a pretty good idea of our income, but we didn’t expect how much our expenses would grow simply by moving on to the next phase of life.

The average new grad in my field was making around $50,000 a year, or just over $3,600 a month after taxes. With my income in college averaging between $1,000 and $2,000 a month, I figured we were going to be set.

However, I didn’t account for a few extra expenses:

  • Renting a house instead of an apartment: about $250 a month
  • Our kids started school and needed supplies, lunches, after-school programs, etc.: anywhere from $25 to $50 a month
  • A new health and dental insurance plan: $400 a month
  • More expensive car insurance because we moved to a new state. Nevada is ranked 25th nationally for average car insurance premiums. Not the highest, but a lot higher than #40, where we were before: $200 a month
  • Babysitting. We were lucky and rarely had to pay for it in college: $500 to $600 a month
  • And of course, the ever-present student loan payments: after the grace period, $400 a month

A few months after graduating, I realized things just weren’t adding up and started keeping a detailed budget for the first time in my life. What I found just about floored me: My paycheck was not going nearly as far as I had assumed, and our credit card debt kept climbing higher every month.

I immediately started looking for ways to cut costs. And to tell you the truth, I was actually a little surprised at how easy it was to cut some of the red out of our budget.

Here are a few of the easiest ways I found to cut costs, all of which you can do from the comfort of your own home, without even putting on pants.

1. Ask for a Discount

One of the first things I did was call my internet provider and insurance carrier. All I did was ask if they had any specials going on or if I qualified for any type of loyalty discount.

My internet provider knocked $10 a month off my bill, saving me $120 a year. And my insurance carrier discovered I actually qualified for a discount because of my driving record, saving me another $20 a month, or $240 a year. That’s a total of $360 a year in savings, just for making a few phone calls!

Cable, insurance, internet, cell phone, and other subscription-based service companies often offer poorly advertised promotions and loyalty discounts. All you need to do is sit down with your budget or a stack of monthly bills and make a list of every company you pay.

Then, start calling. It’s as simple as that. You never know what discounts you could qualify for, just by asking.

2. Shop Online

This idea can save you both time and money, and can be a lot of fun too. Retailers like Wal-Mart, Target, Shopko and Kmart offer free shipping for online orders over a certain amount, making your online order cost the same as a trip to the store.

The savings: You’re done shopping in 10 minutes, rather than an hour and a half -- plus you save travel time and gas!

I use this strategy primarily for household and personal necessities such as vitamins, shaving cream, batteries, toilet paper, light bulbs, shampoo, deodorant and diapers. I turned my four or five monthly trips to Wal-Mart into just one online order every month.

Now, to make this method work, you do need to plan ahead so you don’t run out of something (like the toilet paper) while you’re waiting for the order to come in. But keeping a running list of everything you’re almost out of throughout the month makes it simple and easy.

In addition to the time and gas savings, this strategy limits the amount of “impulse buys” that inevitably come with every trip to the store. You know, those items that are on sale or just otherwise seem like great deals at the time. Estimating conservatively, shopping online saves me an average of $20 to $50 a month, just by limiting impulse buys. That’s anywhere from $240 to $600 a year in savings!

If you’re not a fan of shipping delays, you can still take advantage of the benefits of online shopping without having to wait for UPS to show up at your door. Most stores actually offer some type of free “site-to-store” shipping option, and your purchases are often available the same day you make the order.

When you order online and select “site to store,” the store employees gather your purchases for you and hold them at an “Online Order Pickup” desk. All you have to do is show up, pick up your purchases from the desk and go home. It’s still a whole lot faster than walking around the store yourself!

3. Ditch Your Landline

We’d actually always done this one, and I’m glad we’ve been able to enjoy these savings. My wife and I have not had a landline in nearly 10 years of marriage. We’ve both always had cell phones and never really saw the point of having a third line that we would rarely, if ever, use.

Consider how often you use your landline, and whether simply using your cell phone would work. You could easily save $20 a month or more, depending on the cost of your service.

4. Get Rid of Your TV (or At Least Cable)

Are you staring at your screen in shock, incredulous that I would even suggest such a thing? Hear me out.

Not only were we spending way too much time in front of the TV, but we were paying for a lot of channels and services we weren’t using. We dropped everything: cable, Netflix and even going to Redbox. By the time all was said and done, we saved around $70 a month (about $840 a year), and suddenly had a lot more free time!

We started using online news sources to stay up on current events, and spending more time reading and (gasp!) actually talking to each other.

It was really, really hard at first, but has turned out to be the best thing we could have done for our marriage and our family. We plan to turn the TV back on after we’re completely out of debt (I’m looking at you, student loans), but even then, we still plan to limit how much we watch.

5. Quit Paying for Subscription Services

Services such as Amazon Prime, Shoprunner, gym memberships, unlimited data plans, or anything where you pay a certain fee for unlimited access instead of paying each time, may not actually be as good of a deal as you think.

These companies count on you to overestimate how much you’ll use their services, and then to never think about it again.

I understand the allure. I was a loyal Amazon Prime user for years and loved it. Every time I ordered something with free two-day shipping, I would think to myself, “I’m getting such a good deal! Look at how much that would’ve cost me!” I wasn’t thinking about the yearly fee I paid to get that “free” shipping.

When I broke down my spending, I realized I was spending a lot more on Prime than I would have on shipping, even if I selected the two-day option every time. So I (somewhat reluctantly) canceled my Prime membership shortly before it was going to renew, saving myself the $100 membership fee.

Take a quick look at your past purchases to see if these services are really helping you save money. Go back over the last 12 months and look at how much you’ve actually used the service. Whether that’s how many times you went to the gym, how many times you ordered from Amazon or used Shoprunner, or how much data you’ve actually used with your cell phone.

Then, add up how much it would have cost if you had paid each time and see if it really is cheaper to pay for the unlimited access. Most of the time, it isn’t. And if it is, congratulate yourself on being a wise and thrifty shopper.

Your Turn: What’s the easiest way you’ve saved money without leaving your house?

Disclosure: We have a serious Taco Bell addiction around here. The affiliate links in this post help us order off the dollar menu. Thanks for your support!

Tom Gordon is a freelance writer and recovering spendaholic living in Las Vegas with his wife and three incredible sons. He has developed a passion for common-sense, real-world ways the average American can save and earn extra money, and wants nothing more than to share that passion with the world.