Budgeting Tips

Balance vs Equilibrium


Conventional budget management stresses balance. In other words you must make sure you already have a dollar on hand for each dollar you plan to spend. On the other hand, Budulator emphasizes equilibrium. This means you must make sure funds continuously flow into your budget just as fast as they flow out of it. For example if your budget consists of a $50 per week gas line, then your income needs to be $50 per week. If you then include $1000 per year for electricity, then your income needs to be approximately $70 per week ($50 per week for gas plus another $20 per week for electricity). If we then add in another $1000 per year for vacation then your income needs to be approximately $90 per week ($50 for gas, $20 for electricity, and $20 for vacation).

With Budulator the primary objective is to determine the required flow rate for your entire budget, and then make sure your income flow rate matches that amount. With Budulator there is less emphasis on how much money you have on hand right now, and much more emphasis on the flow rate of the budget. The primary goal is to make sure that funds are continuously flowing into your budget at the required flow rate.

Of course there's more to it; but this simple explanation describes the basic principle behind Budulator. Ultimately this method is much more effective than the conventional method. The true benefits will be revealed in future blogs.

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