Three Bad Budgeting Tips “Experts” Give the Middle Class
How so-called ‘experts’ keep people poor by limiting their financial mindset
The problem with conventional advice about money is that it’s not only conventional but also often wrong. In fact, much of the money advice out there is designed to keep you from becoming poor rather than to inspire a mindset to grow rich.
This month, we’ve been talking about the power of budgeting to make you rich (“Don't Resolve to Save More Money” and “ Budgeting Your Money Like a Business”). Why are we talking so much about budgeting? Well, because there’s so much bad advice out there!
A recent example I ran across was an article entitled, Top 7 Money saving tips for women who manage the family budget.” Author Obu Ramaraj gives the following advice to women who manage the home finances:
Live below your means
Cash over credit
Talk to your family about budgeting
Set an example
Write it down
Broadly, these can be condensed into three broad categories of bad budgeting advice that are foundational to members of the middle class.
Bad budgeting advice #1: See a world of scarcity
The classic mantra to “live below your means” is one of the most destructive things you can teach someone about money. It teaches people to think in terms of scarcity. You only have so much, so you must be careful not to run out.
Robert will often share the story of how growing up his poor dad would always say, “I can’t afford that.” Robert in turn heard his rich dad counteract this sentiment with the question, “How can I afford that?” One way of thinking, the poor dad way, sees a world of scarcity. The other way of thinking sees a world of abundance.
Rather than live below your means, how can you find a way to increase your means?
Bad budgeting advice #2: Set limits
When you live in a world of scarcity, you must find ways to conserve what you have. So, naturally you set limits. Not going out to eat, creating systems to limit spending, and doing everything yourself instead of hiring an expert are all ways those with a scarcity mindset set limits to “save” money. Unfortunately they sometimes don’t save money, and even when they do, they feel unfulfilled, stressed, and don’t get to enjoy the things they want to.
Again, there are many good reasons to limit things in life. For instance, maybe you don’t eat out because you want to control what is in your food or spend more time with your family. Or maybe you do a DIY project because you really enjoy learning new things. But not being able to afford them should not be the motivating factor.
Rather than set limits, the rich understand that limits are only a state of mind. If you see the world as one of abundance, the trick (and the fun!) comes in figuring out how you can tap into the abundance, not miserly protect the little bit you’ve managed to earn.
Bad budgeting advice #3: Set the wrong example
Ultimately, if you follow the advice of conventional money experts and model this behavior for your family, you’ll continue to raise generations who struggle to make ends meet financially. Worse yet, you’ll teach them to see the world as one of scarcity, limiting their mindset and potential in the process. Instead, take a leap and start to learn how you can achieve all that you set your mind to. Pass those lessons, both from success and failure, on to your children. They’ll be better off for it.