“Budgets were originally designed as control mechanisms. As such they are traps …”
? Stephen Bungay (The Art of Action: How Leaders Close the Gaps between Plans, Actions, and Results)
As of 2018, there are over 44 million borrowers in the US burdened with nearly $1.48 trillion in student loan debt, which is more than half of the total credit card debt. That is a lot of debt to manage for students and those few thirty-something people who had recently graduated from college. Welcome to the real world, where one needs to lead both personal and professional lives on many factors, and finances being the most pertinent one.
People struggle to manage private student loans, credit card bills, mortgage, and auto loans as well as their daily living expenses, which if not cleared on a timely basis may result in debt snowballing. In order to accurately manage finances and debt, most set to prepare budget plans, which can be said to be the right starting point. But, as Stephen Bungay reasonably pointed out that though budgets are planned to create a control mechanism, they may end up being traps if not designed as per individual needs.
5 Common Budgeting Myths And Avoiding Them
Myth 1: Too much debt in student loans, try to clear it off early
Students graduating from private and Ivy league colleges often end up on a massive pile of debt in student loans. They start aggressively preparing a budget even before graduating with the sole aim of paying it as soon as possible by living minimally. The harsh truth is that life after graduating is different and trying to clear the debt at once is impossible, and look at mounting debt, and one often gets discouraged.
There are thousands and thousands of students around the world with the same amount of debt as you and the key point to remember is that paying off student loans is a marathon and not a 100 meters race to dust it of in short time. It will take time, but one can entirely reach that point with patience and dedication.
Myth 2: Only student loans do not account as the actual debt
We hear the above myth very often from friends and family, who usually try to encourage their peers without knowing the exact reality. Every type of mortgage is considered as a debt. Different types of loans (mentioned in the introductory paragraph), as well as any borrowed amount from your friends, are all examples of debt.
The current average student loan debt is around $17,126, which varies from $7K to 28K based on university attended and state. Though most students do not consider the amount to be humongous, the same can be seen as a massive burden after graduation due to increase interest rates and other living expenses kicking in once they start to work. One can decrease the rate of interest and refinance student loans based on the market conditions, which helps to save a couple of thousand dollars.
Myth 3: Only one right way to do a budget and that’s the secret every student is seeking for
If there is only one successful method to design a budget, most of the students end up not paying their debt in one lifetime. There are numerous ways to budget and stop looking for ‘one-size-fits-all’ kind of budgeting sheet on the internet. Moreover, do not ask your friends or copy their methods because it helped them to clear off their debts.
The essential point is that what works for others would not work for you. So relax and take time to create a single budget that revolves around your student loans, living expenses, and lifestyle. No budget is perfect from the start, keep altering, changing, and adding until it facilitates you in reaching the goal of clearing the debt. Our whole life is a ‘trail-and-error’ process, and so is budgeting.
Myth 4: Budgeting means living a simple life and giving up on favorite things
The most significant and ridiculous myth about budgeting is that most people think it deprives them of having all the fun of enjoying money after graduation. Most think budget as a sacrifice rather than a futuristic plan to lead a financially independent life, doing all the things they love with the burden of student loans.
Prioritize your spending while creating a budget and focus on the most basic needs first – food, rent, and utilities. Then budget for the things that you love do and those that make you the happiest.
Myth 5: Budgeting is a waste of time as unexpected expenses always crop up
Do not start to budget if you feel it’s pointless to waste your time to calculate the future. I do agree one cannot predict the future, but does it stop you from everything you had done in the past. One can always adjust the budget based on the unexpended events. For the fact, most people budget to meet the unexpended expenses with the money saved all along through budgeting.
Keep a watch on insurance premiums, healthcare bills, taxes, and home maintenance. One can add a new category of ‘future expenses’ to budget and save it on a monthly basis.
Every budget has a purpose, and the budgeter has to hope. Do not let the myths hinder your goal and hope of clearing your student loans. The few hours one spends on setting up the budget may leave a substantial impact on your finances in the future. Moreover, a ton of online tools are available to create a timely and straightforward budget for anyone.