Debunking Myths On Personal Finance

Debunking Myths On Personal Finance

4 mins read

Many people think that keeping track of our finances is complicated and boring. In reality, it is not. The problem with those beginners is that they try to do everything in detail and focus too much on many minor expenses.

This could get them tired much more quickly and they may decide that home accounting isn’t really a thing that they are good at. It is more important for us to focus on those that really matter to us. As an example, we should separate our finance management into a number of categories, such as food, fixed payments, belongings, entertainment and unplanned expenses.

The latter two categories should receive our biggest attention, because they can be reduced and even eliminated. Entertainment may include movies, cables, broadband Internet, coffee and others. Unplanned expenses may include presents and gifts.

Reducing the amount of money on essentials is necessary, but not much. As an example, we could stop eating at fancy restaurants, but we can’t save on food expenses so much that we deprive ourselves of nutritious food.

Here are myths about personal finance that we need to be aware of:

1. We need to control and monitor every penny:

People who do this will quickly find personal finance as something tedious, boring and time consuming. In reality, it is much more manageable to split our expenses into a few major categories, as mentioned above. This myth should be easy to bust, if our categories can cover all the expenses.

Simply group our expenses based on different categories and a few more sub categories if necessary. This helps to control each category and subcategory. We can focus on costs that can reduce further and make sure that the entire expenses will not make our financial situation more difficult.

Beginners shouldn’t try to control each cent that comes into their pocket, because this will be counter intuitive and counter productive.

2. If we forget to add something, everything will go awry:

This isn’t true. Although you forget to add something, you will soon find out what’s missing. This kind of mistake could happen to everyone and we should be able to correct such a mistake very quickly. The most important thing is, we are able to have total control over our finances.

This is still a pretty good deal. Simple habits like counting the money in our pocket could also work quite well and this provides some amount of monitoring on how much money we have. Unaccounted items like beer, soda and chewing gums, can also be monitored much easily.

3. Home accounting requires us to record all expenses:

In theory, it is true, but not quite. What’s more important is to plan your expenses properly. Good planning prevents us from being completely penniless at the least inopportune moments. We should be able to plan everything. It is better to have crystal clear pictures of our situation than nothing at all.

Home accounting means that we will know how much money we have at the end of the day. We could use it for investments or put it in savings accounts. In fact, we can take a portion of it for the next summer vacation.

Regardless of our plan, home accounting may provide us with solutions that we never knew we have. Taking a loan for inessential expenses, such as vacations can be a serious financial mistake.

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