[Music] It is about budgeting versus cash flow management. It's from the Peter B. He says, I recall hearing the guys talk about graduating from budgeting to cash flow management. Any details or advice for making this transition? We lean heavily on our budget, but our probably in a financial position with savings on autopilot where we don't need to be so granular. Thanks, so Bo. Um, full confession, I budget right now. Okay, fair enough. You cash flow manage. I do not budget. That is correct. So, I'm curious um, what the difference is to you, and then also what has that experience been like for you? Yeah, so when I was just starting out, like at the very beginning of my journey, I tracked every single cent. Like, I could tell you to the penny how much I had spent in every category. I had everything. At the time, I think I was using Mint. This is like many, many, many years ago, or originally it was a spreadsheet where like do the thing, and then it was me, and I could tell you like very granular how much was going into

every single bucket. Well, what happened for me is that, uh, one, I got married, and so there were two different people that were now part of this equation, and the number of transactions that began happening in our household sort of ballooned. And while I loved being able to see, okay, how much is going here, how much is going there, how much is going here, it became logistically impossible for me to continue to do that. I was spending, maybe this is hyperbole, but I was spending hours each month, like, categorizing and recategorizing. And then what I was noticing is that even when we had the budget built out, we said, okay, this is going to be how much we spend on groceries, and this is going to be how much we spend here. We weren't doing a great job of, like, after-actioning it, like, are we actually doing this, are we? And so what I found that works really well for our fam is I don't really have to think about how much do I spend categorically because I know that if I'm

saving in the right buckets, and I have my money automatically going where it needs to go. I've got, you know, money going into the 401K and money going into the after-tax brokerage account, money going to the different places that it needs to go. I don't have to think so much about the spending, about the bottom line. Some people maybe even call this like, uh, reverse budgeting. I kind of work through the savings, then I back into my expenses. So does that mean that budgeting is bad, or you shouldn't budget, or you should aspire not to budget? May it never be. I think budgeting is absolutely wonderful, and we have tons of clients. And I actually walked around. I did an informal survey of the whole team, asking, Hey, you budget? Do you budget? And a lot of like very successful people, really astute financial minds, still budget. So if that's something that like works for you and your household, I think that it's great. Uh, if it's something though that becomes so difficult and so arduous that you're not actually getting

any value out of it. That's why I think it's time to maybe think, All right, maybe budgeting isn't perfect for me. Like, right now, if I asked you, Hey, can you tell me how much you spent at the grocery store? Yeah, I can get pretty darn close. You can tell me exactly what, and that's awesome. Like, that's valuable, right? And it's working for me in this season. I think similar to you, like, I'm married. There's two people who are wanting to spend on things, who are wanting to save towards certain things, who are looking at the money, and right now, it's just the best way to communicate about it. And I think I've shared before too, um, you know, sometimes I think, Well, maybe we could cash flow manage. Like, that would be nice, but um, we have, like, I think it would be too easy for us with our personalities and our current system, like, to just spend a little extra on enough things that we didn't save exactly what we wanted. It's

not like we're going into debt. It's not like our emergency fund is, you know, tanking. But it just means that, like, when we need to buy a car next 'cause we think we will need to buy a car in the next couple of years, like, we might not have the cash that we would have liked to. There's certain things like that. Or, like, if we know we want to take a trip, like, well, we have to be disciplined enough to save up for that. And the budgeting and actually tracking it forces us to talk about how we're going to spend our money. And so, that's really the biggest pro to me, is that it is making us communicate. And, uh, both a pro and a con is sometimes it's a little bit of the cold water that I personally need. Like, maybe we got another gig or a bonus or household income went up a little bit. And so, you think, Oh, well, now I could get the, I can spend, make, or whatever, like, whatever the thing is that you think, or, Oh, now we

could do that thing, and maybe you could, but then you actually break it down and put the categories how you know that you're going to spend. Like, well, we have to spend this much on groceries, we have to spend this much on gas, and then you kind of see, like, oh, well, maybe I don't want to do that yet, and that's okay. And sometimes that is, like, the lame part of budgeting, but it's actually a really helpful part of budgeting too. So, that's why I budget, and it is working for us in this season. But I was sharing with Bo, I think that a lot of the time, I see, you know, like, you guys doing cash flow management, hear other people doing that, and I think that would be great. And I think, like, that will be, like, a milestone or a next step or a next level, some goal, like, now I'm, like, successful or I've reached this point. And I think I reject that because it's, like, like I said, like, my, our lives have changed a lot since

being married, but this is still the system that really just works for us right now. And um yeah, like I'm okay with that. It's really about knowing what works for you 'cause like you said, you were like pouring all this time into something that wasn't really serving you guys as a couple. That's right, so like why would you do that? That's exactly right. And the other, like I totally get that. The other thing that happened for me specifically is like budgeting it the way that I was doing it kind of broke down because there'd be some months that okay, we have like an eating out budget, right? That was one that we did. But if we traveled and we went on a trip somewhere, well then have all these transactions that like we're eating out that okay, well how do I categorize that? Is that a travel thing? Is that eating out thing? And what I recognize is the mental gymnastics required to make the budget work. It just I had the muscle me like you know.

There are three ingredients to wealth creation: discipline, money, and time. Well, discipline is the thing that you have to have down well. If you're disciplined and you can budget in a disciplined manner, then that's great. Do that. But if you want to have a cash management plan where you define, Here's where I'm going to save, here's where my dollar is going to go, it doesn't matter how much I spend eating out versus how much I spend on groceries versus how much I spend on clothes, so long as I kind of have a general idea of where my savings is going. You have to make sure you remain disciplined 'cause you just said something. If you have extra income or like if you're like me and your income fluctuates, you know, month to month, then it's important that you make sure you do actually stay true to where your savings should be going. But if you can do that, then you can kind of spend freely. And now it's really interesting, and this is the last thing I'll say about it.

We're asking some of the content team, Hey, do you feel like budgeting is restrictive, restricting, or freeing? And it was wild. A lot of them said, You know, the fact that I budget actually allows me to spend more money 'cause now I know I'm no longer curious, okay, can I spend this money, can I go do this thing. I think cash flow management can do the exact same thing for you, but you have to be true to yourself, know what works for you, what works for your season. At the beginning of my journey, budgeting was the key. Now cash flow management is the key. If you budget forever, I think you're going to be great, right? I think there's nothing wrong with that. I think that sometimes, like if you're behaving, if you know you're either a spender or if you are having a certain mindset, like maybe you're like kind of discontent and looking to spend more money and looking to be at a certain threshold or just like if your communication is out of whack with your

spouse or something like that budgeting or cash flow management one or the other other isn't necessarily going to fix that. That's right. It's just like which one is actually going to work best for you and help you on your journey to get your mindset right to get your behaviors right to get your relationship right. Love it. And so yeah I think that's our answer and I think that was interesting to hear you talk about the transition from budgeting to cash flow like it was a little bit natural like it kind of happened over time like it wasn't an immediate it wasn't like a decision I made. It just another thing somebody said in the comments they said oh you know what you shouldn't have to worry about any of this just look at your net worth statement. That will be the true tell all and while we love the net worth statement and by the way if you're not doing it you should be. You can go to learn.money.com and check that out. It's kind of like a golf swing like right you

can't just show up at the course and be a scratch golfer. You have to put the reps in, develop the muscle memory. So, I think that the net worth statement will show you if the decisions you're making are sound ones. But if you're relying on that and that alone, and you're not actually thinking about how you're managing your cash flow on a week-to-week, month-to-month, quarter-to-quarter basis, I think you're not going to develop that muscle memory that's going to really allow you to be a financial mutant over the long term, right? So, in short, know yourself, do what works for you. Cash flow management or budgeting is not a step in the foo; it's just a mechanism to help you along your journey.

How to Transition from Budgeting to Cash Flow Management

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How to Transition from Budgeting to Cash Flow Management

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