Debt Settlement and You Blog

Why Personal Budgets Just Don't Work

Sat, 27 Feb 2010 16:52:47 GMT

The other day as I was conducting my weekly internet talk show, a thought hit me square between the eyes. That thought was that personal budgets just aren't any good. When you cut through the clutter, all a personal budget is, is a spending calculator. Think about it for a second. If you do have a budget, what's its purpose? You look at what you've got coming in and use that as your starting point to determine how much you can spend. In my book, The Debt-FREE Millionaire: Winning Strategies to Creating Great Credit and Retiring Rich, I created a sample family of four (the Fortunado Family). This family has an $80,000 annual gross income. After paying normal state and federal income taxes, they take home about $4,600 a month. This is the starting point where they begin to see how much spending they can squeeze in. How much can they afford for housing, living expenses, and - dare I say it - debt payments? This is why I've been teaching about cash flow for so long instead of budgeting and other conventional personal finance "wisdom". When a seasoned business owner is trying to determine how much can be spent on anything, that spending is going to be either directly or indirectly related to profit generation. Contrast that with what a personal budget focuses on: spending, not profit. A cash flow mentality is opportunistic. It's not satisfied just to create positive cash flow. No, when positive cash flow is available, a cash flow mentality is focused on where that positive cash is flowing. If that precious positive cash isn't flowing towards a reasonable Return on Investment (ROI), it changes the direction of the flow. Like a seasoned, successful business owner, the cash flow mentality looks for ways to turn positive cash flow into more positive cash flow before asking "how much can I spend?" Of course, there has to come a time when the positive cash flow has to be paid out, and even enjoyed. But before the pay out takes place, all necessary bases are covered, and the pay out is made with true profits. This one extra step is all the cash flow mentality is about. The budget mentality typically takes positive cash flow (if there is any) and begins to run wild. And it's this kind of mentality that results in less and less positive cash flow. So, do yourself a favor, and begin to apply a cash flow mentality to your personal finances. I promise you wont regret it. By the way, if you want to tune in on my weekly internet talk show, just click on the link below.

Pat and Me

Wed, 24 Feb 2010 01:59:29 GMT

I was thrilled to be a guest on the 700 Club yesterday (Feb. 22) with Pat Robertson. The producers aired a "Money Monday" segment featuring my new book, The Debt-Free Millionaire. In fact, after the segment, my book was the number one "mover and shaker" on Amazon.com's sales list. Pretty exciting stuff. Check it out!

Just Venting

Wed, 24 Feb 2010 01:54:03 GMT

When the "experts" talk about spending, they typically mean us poor working folk throwing our greenbacks around at local or online businesses. So, it would make sense to me that if that type of spending is what we need then the plan that would stimulate our economy -- almost immediately -- would be for "congress" to keep their hundreds of billions of dollars in a large kitty, and use it to fund its own operation for a year or two. And then, give us a tax break so we have more of the money we're working so hard to earn in our pockets. Let me ask you a question. If the proximity of your gross pay and net pay were closer than they are now (which simply means, you take home more of what you make and pay less in income taxes) what would you do with that money? Would you pay your bills (or maybe actually have a chance to get caught up if you're behind)? Would you begin to spend more because you have more? To me, that sounds like the kind of spending all of the "experts" say our suffering economy needs.