#004 Dough Dialogue - Why Budgets Suck

And Why You Shouldn’t Use Them

Some of you might know about my more recent endeavor, buying small businesses, and as I review deal after deal an annoying pattern has emerged.  There is a small business structure that is quite popular - a husband starts a business, often times in the trades where he is the owner, boss, and CEO, he then “hires” his wife to be the bookkeeper.

It’s not much different than corporate America, to be honest.  Ownership and leadership belong to the men, while management is delegated to the women. It’s the glass ceiling of finance - middle management money skills vs the bold boss moves that get people to the C-Suite, or rich AF.

It’s a pattern I see in financial education as well, and the way financial literacy is marketed to women. Money management teaches you to budget what money you have, pay down debt, and save whatever is left over. It has an underlying tone of, grip your money tightly because once it’s gone, it’s gone. 

Money strategy, on the other hand, teaches you how to invest (read: spend) in a way that makes your money multiply.  It’s teaches you that it’s okay to let that money go, in fact, letting it go is a good thing because it will come right back to you in multiples.

Now I’m not here to bash on budgeting and money management, (well, maybe I am) but I will tell you that I don’t do it. Not anymore. Not when I’ve experienced the results of analyzing finances in a better, more strategic, way.

So let’s talk about why budgeting sucks.

Besides the obvious tediuousness of budgeting, on a philosophical level, budgeting and saving come from a scarcity mindset.  It’s a little nagging voice that encourages you to count pennies the way you might count calories, of which obsessing over can become equally disordered.  That’s the great paradox of money, and many things in life, frankly. The more tightly you grip onto it, the more likely it slips away. I mean, when was the last time you clung to that person you were dating and that situation ended well. Budgeting encourages you to focus, and stay stuck in, your present money state and excepting that as your financial reality, rather than envisioning a future filled with more zeros in your bank account than you ever thought possible.

A more empowering way to view money is in its ebb and flow - or quite literally called “cash flow”.  Rather than money micro-manager, you take the position of patient money observer and wise influencer.  Witness too much money flowing out, you make adjustments to gently steer the ship back on course.  Want to see more cash flowing in, take strategic actions and watch the money tides change.  Money is the ocean, sometimes it rises high, sometimes it pulls back.  You are the moon, watching from above, influencing the direction the tide takes, and understanding that the ebb and flow is a natural part of the process. You don’t panic when the tides recede. You understand this as the natural way of the world. And you don’t panic when certain seasons of life cause money to make a momentary pullback.  Budgeting, on the other hand, is like running around with a leaky bucket, desperately trying to capture more rain drops than are dripping out of the bottom.

You might be thinking, okay, that’s a lovely analogy, but I have real bills to pay and I need to make sure I have enough money, so what do you suggest I do?

That’s where two key documents come into play - an income statement and a balance sheet.  Combined, these documents give you the birdseye view of the moon.  When harmoniezed, money flows in, money flows out, and you don’t need to give it a second thought.

So let’s dive into the document of all documents that will replace your budget forever - your Personal Income Statement.