Three good links about budgeting. These are each about corporate budgeting/forecasting, and I’m trying to write more about personal finance, but the situations aren’t all that different as both personal and corporate budgeting try to establish a boundary of acceptable future spending habits, and both generally do it without much consideration for where true value comes from and how to create more value in the future.
Slow Leadership writes Forget the forecasts
Most managers are compelled to get into the forecasting business on a regular basis (it’s called budgeting), with no better results than anyone else in actual forecasting terms.
…Crazy expectations and inaccurate forecasts lie at the heart of our management malaise. The continual pressure from above to “make the numbers” fuels 99.9% of overwork, stress, and burnout.
Forthcoming (aka Thingamy) writes naivety scene
the finished budget is declared the map for the coming period, a dream designed into reality, stuff that a kid would appreciate.
Measurable results is [are] the cornerstone of the command-and-control structure, the rallying cry for “good” management. But measurable has no meaning unless you have something to measure against, thus the budget – the naivety scene of the future.
Real life corrective measures using a fictitious map – what value does that have? None whatsoever of course.
Worse, it becomes a pacifier, an ersatz reality, naivety embodied.
* It’s important to remember debits are on the left and credits on the right – nobody cares. Probably because the system was invented in 1494 and hasn’t changed since.
* ROI is an important concept – nobody cares. ROI calculations are something you do when you really don’t want to help your client but to demonstrate to him/her how important you are. For which read 2.
One major problem in each of these cases is a focus on the money and less on goals. Corporate managers are hogtied on the planning part usually, and have to translate the plan of increasing operational cash flow into the reality of the complex personal networks that makeup the work environment and its cost and income structure. Additionally, when your bonus is measured on such things, it’s hardly the manager’s fault when she focuses on the dollars.
Luckily, in our personal lives, we don’t think (or don’t need to think) in terms of operational cash flow, free cash flow, depreciation and amortization, or other things like diluted earnings. Who wants to wear a seal costume and get pummeled over the head with me? We also have complete control over the plans, and don’t have higher ups measuring our success and rewarding or punishing us based numbers that loosely relate to reality. However, lots of people still end up focusing on the money and their budgets get them almost no where except frustrated after lots of wasted time.
As many baby boomers have done with raising their kids, they looked at what their parents did and made the decision to do it differently. Even if you can’t see the way out just yet, look at what pains you and try something different. Don’t be fooled by a lot of fancy jargon and letters after a person’s name. Do what works for you.