Simple can be harder than complex. You have to work hard to get your thinking clean to make it simple. But it’s worth it in the end because once you get there, you can move mountains.”
Steve Jobs — BusinessWeek interview, May 1998

How to Make Personal Budgeting
and Money Management
Invisible in Your Life

Have you ever received a notice from your utility company offering a “level-pay plan”?  This bill-paying solution was created to help customers manage the dramatic ups and downs of heating and cooling bills over a year’s time. The level-pay plan allows you to pay the same set amount each month all year long, even if your actual expense fluctuates.

By leveraging some simple math, the utility company averages out the month-to-month cost variability over the year for you, and keeps everything in sync with a periodic review. This method is called “mean-based budgeting” and it’s very similar to the innovative concept that MoneySlinger is built on.

By comparison, virtually all other personal budgeting systems today use what’s called “zero-based” or “zero-sum” budgeting. This method of budgeting means you must continually adjust for random expense variability. You’re required to be an accountant, regularly allocating every dollar of income received, by adjusting parts of your budget upward or downward to continually net a balance of zero. Seems reasonable, but the downside is the detail-oriented nature of the system, and constant maintenance requirements, requiring you to continually make adjustments to your budget, and then of course, your lifestyle. You have to ask yourself, in this situation, are you managing your money, or is your money managing you?

MoneySlinger™ is Mean-Based Budgeting on Steroids

There’s no reason why you can’t take the labor and time saving benefits of mean-based budgeting for a single expense, as used by the utility companies, and create a complete cash flow system to manage your entire personal budgeting needs. Doing so puts personal budgeting in another world. So much so that it deserves its own name: Speed-Budgeting™. You’re not doing what everyone else is doing faster, you’re actually doing 90% less work than everyone else. You’re reaching a reduced level of effort that’s impossible to achieve using traditional, zero-based budgeting methods.

 Living Below Your “Mean”

Take a look at the chart above. The thin solid lines represent income and expense variability through the year. The dashed lines represent the same data, but now the income and expense amounts are averaged through the year. If you’re looking to have all this data help you make financial decisions, which pair of lines in the chart (solid or dashed) shows you most easily if you’re spending more than you’re earning…and that you’re living below your mean? A further explanation of averaging can be found here.

Managing Your Personal Budget
Using Averages Changes the Rules

Mean-based budgeting turns personal budgeting on its head, and along with it, all the preconceptions about the “normal” things you had to do for personal budgeting. On top of that, what you thought you couldn’t do before, well, now you can do. For instance,

Absolutely no need to download/import/reconcile/log into your bank accounts

Let’s break RULE #1: MoneySlinger is a “big picture” personal budgeting application, not a bank account reconciler. These two functions are night and day (forest and trees). Traditional zero-based budgeting applications require continuous bank account reconciling in order to function…or they fail. There’s absolutely no need for this when using MoneySlinger (or the potential security risk and lack of privacy).

Eliminate 90% of your calculations forever

Let’s break RULE #2: Mean-based budgeting doesn’t require you to chase expense variability all year long. Since your working with averages, MoneySlinger pre-calculates 90% of your personal budgeting figures for the entire year, producing a few key figures which are routinely used every month…all year long.

Manage your personal budget using the same, single calculation all year long

And what about the other 10% of your calculations? MoneySlinger has that refined down to one single, elegant calculation. You repeat this same calculation twice a month and MoneySlinger tells you exactly what to do.

And how many expense categories do you really need?

Let’s break RULE #3:  No more category hell. Once you average each of your individual expenses into fixed monthly costs, you come to the realization that there’s no reason why you can’t combine these costs and manage them as one expense. So MoneySlinger groups all your expenses together into only one of three category types:

• Fixed Expenses (Blue Account)
• Flexible Expenses (Red Account)
• Miscellaneous Savings (Gold Account)

Once you’ve put your expenses into one of these three accounts, MoneySlinger determines a fixed, average monthly cost for each account.

You mean I’m only managing three expenses then?

Yes. When we said you’re managing the forest and not the trees, we meant it. Let’s review…

So far:

• You’ve eliminated the need to routinely download, import and reconcile your bank account data in order to keep your personal budget perfectly on track.
• You’ve also eliminated 90% of your personal budgeting calculations for the entire year.
• The remaining 10% of your calculations are done using the same single calculation twice a month.
• You’ve consolidated all your individual and variable expenses into only one of three accounts.
• And you’ve pre-determined the average monthly cost for these three accounts—for the entire year.

So you’ve eliminated what’s normally a tremendous amount of personal budgeting effort over a year’s time. But at this point it’s all on paper. So how do you manage these three expense accounts in real life when they actually consist of many individual expenses that are all due on different days? First, let’s take one step back…

You’ve Been Managing
Your Money From Behind

Before we take the next step, it’s important to realize that when using zero-based personal budgeting methods, you’re managing your money from behind.  This means you’re continually required to figure out where you were, so you can figure out where you are, so you can figure out where you’re going…with your money. This is the necessary process cycle of zero-based budgeting. The point being: you can’t move forward until you resolve the past. And why do you have to keep resolving the past? Because in zero-based budgeting, the past is always different.

Using MoneySlinger™ the Past is Always the Same

Using MoneySlinger, you’ve created your own level-pay plan by averaging your costs over the entire year. In contrast to zero-based budgeting, you always know what your costs were last month. You know what they’ll be next month, and you know what they’ll be six months from now: the same. They’re exactly the same every month (this is the reason you’re not dependent on reconciling your fluctuating bank account statements). Working with averages is a complete game changer…and therefore, a rule changer.

But we just don’t break rules: we’re going to make a few too (this is where the steroids come in).

How Do You Go About
Managing Your Personal Budget Using
Your Own Level-Pay Plan?

Well, remember we totaled and averaged all your expenses into one of three accounts? Even though each account may hold individual expenses due at different times of the month, you have to consider again, you already know what the average monthly cost is going to be for each of these three accounts. Yes? So…if you already know the monthly cost for each of these expense groups, wouldn’t it be nice if we could pay all of these expenses at one time? How?

NEW RULE #1:
Your bank deposits become your
expense account payments

Yes. You pay each of your three expense accounts, in full, by making deposits into three individual bank accounts. Each bank account is dedicated to one of MoneySlinger’s Blue, Red or Gold accounts. In essence, you’re paying in advance all your budgeted expenses by simply filling out three deposit slips.  A few obvious benefits are:

• Your expense money is “protected”: By making a pre-calculated Blue, Red and Gold category payment into a dedicated bank account, you’re physically separating all your “budgeted expense money” from your “other” money.
• You’ve technically paid 100% of your individual expenses: Sure, you still need to write a few checks, or pay them online or set up auto-payments, but that part’s a cinch since there are virtually no calculations needed to determine what to pay or when, and you now have the money set aside to pay every bill.
• Expense variability is neutralized in each bank account: You’ll find that while a few expenses might increase, others decrease, in any one month. This positive versus negative expense variability in a dedicated bank account automatically cancel each other out, resulting in a surprisingly stable running balance. You simply and routinely “resupply” each account every month with the same “averaged” deposit amount.
• Your bank account balance actually means something: Your bank account balance now plays an important roll in you understanding your financial state…and will effect your spending decisions moving forward without a single calculation.

Let’s review again:

You’ve consolidated and averaged all your expenses and costs for the year into three category accounts, and set up physical bank accounts for each into which you’ll make your “expense deposits”. But there’s still one last issue to tackle, and that is scheduling. Exactly when do you do all this great stuff?

NEW RULE #2:
Create your own cash flow schedule

So far, everything we’ve just tackled only has to do with your expenses, or the cash that’s flowing out the door. What about the cash coming in, your income? The ultimate benefit of MoneySlinger comes when you manipulate and streamline your income and income schedule to be in complete harmony with your expense schedule.

You might be saying right now “how can I manipulate my income schedule when my income schedule is out of my hands” or “my income has no schedule”. First, like the single bank account that you normally plop your income into at random times without thinking twice about, it’s time to rethink that again.

Who says that when you physically get paid, that you have to inject that money into your life or bank account immediately?  Who says you can’t collect and hold that income to the side, and then bring it into your life on your own, self-determined cash flow schedule? The answer is, if you truly have control of your cash flow, you can. And with MoneySlinger, you do.

So what’s the ideal cash flow schedule?

The best compromise you can make between weekly/bi-weekly/random income schedules and monthly expense schedules, is to create your own “in-between” schedule. This turns out to be a half month, normally called a semi-monthly schedule. So twice per month, you’ll be managing your money using the system we just described. MoneySlinger calls these two periods per month “Sessions”.

During each Session you make your pre-calculated deposits into each of your Blue, Red and Gold accounts, you log your income and Blue expense payments, and then pay all your bills for that Session. Done. Each Session sets you up financially until the next Session. You don’t have to do a darn thing until the next Session except collect and hold your checks and bills until the next Session…and then repeat. This simple activity repeats like clockwork every month and becomes routine and predictable…and fast. Very, very fast.

Fast is one thing. Invisible is another.

It may be hard to comprehend the benefits or where you’ll be in your money management efforts after putting in the time to first get your MoneySlinger budget set-up. But a few key points are this: After your initial set-up, the simple activities you execute for Session 1 (deposits and bill paying), and the activities for Session 2 (deposits and bill paying), are virtually the same every month. These become predictable, repetitive and memorable routines using the same few figures all year long.

After you’ve practiced your Sessions a few times over a month or two you’ll have a routine as well as manipulated little odds and ends into “your” schedule. At this point, more likely than not, you may get a nagging feeling that your missing something that you should be doing. You’re not missing anything beyond something else to do with your time. You’ve just passed the point of system set-up and practice, and have just reached a level of speed and skill unattainable using zero-based budgeting methods. Congratulations! You’re now officially Speed-Budgeting™, where money management becomes inconspicuous and darn near invisible in your life.

Enjoy and have some fun!

PS: I realize these are new concepts. If you’re interested in a one on one question and answer session…please contact me and we can set up an online meeting. You’ll be able to see my screen on your computer and I can walk you through the entire application and answer any questions you may have.

By the way, MoneySlinger is FREE to all U.S. military personnel