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> Companies have budgets because they are necessary, and because they do work. This is a joke, right? Have you seen how companies do things? Have you not heard

> Companies have budgets because they are necessary, and because they do work. This is a joke, right? Have you seen how companies do things? Have you not heard of projects going over budget being the norm? I work in a large, successful company. The only budget they reasonably stick to is compensation. Otherwise, it's quite common for projects to exceed budgets. The company accepts this because: 1. There is a large buffer between expenses and revenue. 2. Someone will always convince leadership that the extra increase in revenue will offset the budget excess (obviously not always true). 3. They cut back on other projects and people. Think of the equivalent in a family ("Sorry Johnny, no dinner for you because Timmy wanted a new IPad, and we all know he's the smart one who'll make more for himself than you will." 4. (Edit) And oh, companies take on debt all the time, and don't pay a heavy price for it.

Apocryphon 4y ago
Not to mention, companies can issue corporate bonds and do all sorts of things that families can’t.
- manmal 4y ago
  Families can get interest free loans from relatives, mortgage their home etc.
  - BeetleB 4y ago
    > mortgage their home The one they don't have? > Families can get interest free loans from relatives Some can, some can't. I'd wager it's a lot easier for companies to get loans than poor families.
    - manmal 4y ago
      I agree. The same applies to companies, not every company’s bonds would sell, and not every company could get a loan.
deleted 4y ago
[deleted]
manmal 4y ago
So, budgets are too tight at your company? They could be increased. Is that not possible?
- BeetleB 4y ago
  If they're increased whenever it is convenient, would it still be a budget? I really want that new IPhone - let me see if I can stretch the budget.
  - manmal 4y ago
    One way to do it is to allow budgets to change monthly. And have piggybanks (sinking funds) to either save up for future known expenses, or for unexpected expenses. But yeah, since it’s impossible to forecast all expenses, budgets can’t ever be correct. But individual correctness is IMO not the point. They are valuable even if you just calculate mean values over a certain time period. We use budgets to allow the following: - Identify blind spots in our spending (“omg we are spending _this much_ on XY??”) - Ensure sufficient room for error in total (= having enough cash around for “known unknowns”) - Having to track expenses does really reduce them (that which is measured, improves). I scan every single receipt to iCloud, and the simple act of doing that makes me conscious of not buying unneeded BS. Which leaves more money for things we consciously desire. - Ensure we can afford new fixed expenses. Just looking at bank reports wouldn’t give us this info because the accounts are not clean: They contain all kinds of buffers, accumulated savings (some of them set aside for certain things) etc.
    - BeetleB 4y ago
      I tried keeping a fine grained budget for years and I always failed - things would always be off budget. Over the years I made it coarser and coarser until I finally settled on what would work: 1. Budget for saving (retirement, investments, etc). This gets taken out of paycheck immediately. 2. Long term budget for only a few items (house repairs, new car, college fund, that's it). 3. Everything else is just one bucket. No separation between clothes, vacation, food, etc. This worked, but even juggling 2 and 3 was quite difficult. I had to settle with: Bonuses and RSUs will be used exclusively for 2, and paycheck will be for 3. It's just convenient that this separation works with the numbers I have, but if it didn't, it would become a mess. I do keep track of all my expenses (entering into finance software), and I needed to have that data to decide on the strategy above. However, my guess is only 10% of the population can reasonably keep track of this - regardless of wealth level. It's very labor intensive, and requires a lot of control over one's time. And in the case of families, requires buy-in from the spouse (he/she needs to either track it or give you all receipts in a timely manner - the majority of spouses won't agree). I have the time, money and skills to make a budget and try to stick to it. And even then it took years of tweaking before it worked. For the average family, I don't see much hope in their doing it. It's much simpler to simply be in permanent frugal mode, which is far from optimal and cuts off most avenues of increasing your wealth. Keeping a budget works, but is likely not the easiest, nor the best, strategy. Even for me, having finally figured a budget out - it did not contribute much to increasing my wealth. Changing jobs/getting a promotion did. And this is why when you get to upper middle class, none of my peers keep a budget. I literally no know one amongst my peers who do it. And they all do well financially because they focus on finding ways to make more money than bean counting. At the end of the day, I do bean counting simply because I like the data, not as a means to manage finances.

Apocryphon 4y ago

Not to mention, companies can issue corporate bonds and do all sorts of things that families can’t.

manmal 4y ago
Families can get interest free loans from relatives, mortgage their home etc.
- BeetleB 4y ago
  > mortgage their home The one they don't have? > Families can get interest free loans from relatives Some can, some can't. I'd wager it's a lot easier for companies to get loans than poor families.
  - manmal 4y ago
    I agree. The same applies to companies, not every company’s bonds would sell, and not every company could get a loan.

deleted 4y ago

[deleted]

manmal 4y ago

So, budgets are too tight at your company? They could be increased. Is that not possible?

BeetleB 4y ago
If they're increased whenever it is convenient, would it still be a budget? I really want that new IPhone - let me see if I can stretch the budget.
- manmal 4y ago
  One way to do it is to allow budgets to change monthly. And have piggybanks (sinking funds) to either save up for future known expenses, or for unexpected expenses. But yeah, since it’s impossible to forecast all expenses, budgets can’t ever be correct. But individual correctness is IMO not the point. They are valuable even if you just calculate mean values over a certain time period. We use budgets to allow the following: - Identify blind spots in our spending (“omg we are spending _this much_ on XY??”) - Ensure sufficient room for error in total (= having enough cash around for “known unknowns”) - Having to track expenses does really reduce them (that which is measured, improves). I scan every single receipt to iCloud, and the simple act of doing that makes me conscious of not buying unneeded BS. Which leaves more money for things we consciously desire. - Ensure we can afford new fixed expenses. Just looking at bank reports wouldn’t give us this info because the accounts are not clean: They contain all kinds of buffers, accumulated savings (some of them set aside for certain things) etc.
  - BeetleB 4y ago
    I tried keeping a fine grained budget for years and I always failed - things would always be off budget. Over the years I made it coarser and coarser until I finally settled on what would work: 1. Budget for saving (retirement, investments, etc). This gets taken out of paycheck immediately. 2. Long term budget for only a few items (house repairs, new car, college fund, that's it). 3. Everything else is just one bucket. No separation between clothes, vacation, food, etc. This worked, but even juggling 2 and 3 was quite difficult. I had to settle with: Bonuses and RSUs will be used exclusively for 2, and paycheck will be for 3. It's just convenient that this separation works with the numbers I have, but if it didn't, it would become a mess. I do keep track of all my expenses (entering into finance software), and I needed to have that data to decide on the strategy above. However, my guess is only 10% of the population can reasonably keep track of this - regardless of wealth level. It's very labor intensive, and requires a lot of control over one's time. And in the case of families, requires buy-in from the spouse (he/she needs to either track it or give you all receipts in a timely manner - the majority of spouses won't agree). I have the time, money and skills to make a budget and try to stick to it. And even then it took years of tweaking before it worked. For the average family, I don't see much hope in their doing it. It's much simpler to simply be in permanent frugal mode, which is far from optimal and cuts off most avenues of increasing your wealth. Keeping a budget works, but is likely not the easiest, nor the best, strategy. Even for me, having finally figured a budget out - it did not contribute much to increasing my wealth. Changing jobs/getting a promotion did. And this is why when you get to upper middle class, none of my peers keep a budget. I literally no know one amongst my peers who do it. And they all do well financially because they focus on finding ways to make more money than bean counting. At the end of the day, I do bean counting simply because I like the data, not as a means to manage finances.