Blog Invest Beyond Budgeting: How to Apply It to Your Financial Decisions

Beyond Budgeting: How to Apply It to Your Financial Decisions

date September 27, 2021 time 5 min read 415 views

If SMART goals and five-year plans turn you off, we’re the bearers of good news—they’re so last year. Beyond budgeting has laid out a methodology for the modern world, and it’s adaptable, flexible, and fast-moving. To learn more about its origins and principles and how to apply it to your financial life to achieve great results, keep reading.

Sound financial management all comes down to making sure you save plenty, keeping track of your spending, and looking over the books carefully—right? Actually, not exactly. The beyond budgeting methodology claims that being proactive and adaptable is far more important. 

As you seek financial security and investment growth, you might just find that the traditional approaches to budgeting and money management don’t really serve you. Although the principles of beyond budgeting are usually applied to businesses, they can be useful for a much wider array of scenarios and help the individual. Here’s how you can add it to your toolkit.

Explaining beyond budgeting

Beyond budgeting is a methodology pioneered to be more flexible and future-focused than traditional budgeting, allowing firms to adapt their methods to their actual situation and most pressing problems.

Going beyond the budget is all about finding the right balance between sound money management and coming up with bright new ideas.
Going beyond the budget is all about finding the right balance between sound money management and coming up with bright new ideas. (Source: Pixabay)

What’s so wrong with traditional budgeting, you ask? The key problems are that it focuses more on analyzing the past than adapting to the present, meeting fixed goals rather than controlling finances effectively, and devotes too many resources to low-priority tasks. 

Basically, budgeting was made for a world we no longer live in—one with long product lifecycles, limited technological advancement, and doing everything by the book.

Beyond budgeting offers something very different. There are twelve key principles, but since that’s rather a lot, we’ll split them into two categories: leadership and management.

And if you’re wondering what this has to do with you, don’t worry—we’ll get to that shortly.

Leadership

A bad leader can make or break a company, and managers who adhere to traditional budgeting often fall on the wrong side of the line. These six principles describe how a leader who goes beyond the budget acts.

  1. They rally their team around a greater cause rather than making them comply with minor budget goals.
  2. Similarly, leaders focus on a wider vision rather than creating lots of fixed rules that may be arbitrary.
  3. They ensure information is transparent and readily available to create a better work culture and encourage creativity.
  4. They give the people who work under them the autonomy to make their own decisions.
  5. Their organizational structure has minimal hierarchy and bureaucracy to enable everyone to collaborate.
  6. They make sure customers are at the center of everything.
Applying beyond budgeting principles in a business largely comes down to great leadership.
Applying beyond budgeting principles in a business largely comes down to great leadership. (Source: Pixabay)

Management

Leaders can only lead if they’re successfully managing their teams and environment. Here’s how they should do it in the beyond budgeting world.

  1. Run processes dynamically instead of following a rigid structure to ensure they can adapt to problems and concerns as they arise.
  2. Use targets focused on a general direction rather than fixed objectives.
  3. Make plans that aren’t rigid and which offer fair opportunities to everyone instead of feeding into office politics.
  4. Allocate resources along the way and where they’re needed instead of making these decisions blindly ahead of time.
  5. Evaluate performance by considering as many aspects as possible to encourage further development and not an over-emphasis on narrow metrics.
  6. Offer rewards for the team as a whole rather than to individuals who meet targets so nobody has to worry about who gets the credit.

Take your financial management beyond the budget

Even if you love the idea of going beyond the budget, you might be wondering exactly what this has to do with you and your investments. After all, you’re not a firm—you don’t have to worry about product lifecycles or how your employees are using their time.

But if you think things through, you’ll probably realize that your current situation isn’t a million miles away. Do you have to delegate your own time between different activities? Does your financial health change over the course of a year? Would you like to make financial decisions as you go along and not many months in advance?

If you said yes to any of the above, so beyond budgeting is perfectly relevant to your life. Here are a few ways you can start applying straight away.

Choose growth over saving

The traditional approach to money management is essentially conservative. Just imagine someone who invests all their energy into scrimping pennies but is too scared to invest any of it. This might seem sensible in the short run, but losing a little money here and there is nothing when you consider the advantages of compound interest and the perils of inflation.

Even if you’re a super-scrimper, you’re never going to reach financial freedom by saving unless you also happen to be earning a very high salary. (And even if you do earn a lot, you could make more if you make your money work for you.)

In other words, investing is way more important than saving.

How can you get there? The basic principles of beyond budgeting tell us that it’s essential to stay adaptable and open to new ideas. That leads on nicely to the next point.

Don’t be afraid of change

If you were to take a traditional budgeting approach, you’d probably identify the best investing opportunities at the start of the year and stick to your initial goals stoically. But why would you miss out on a better opportunity just because of an arbitrary commitment you’d already made?

Take inspiration from the chameleon by always adapting to your environment when applying beyond budgeting principles.
Take inspiration from the chameleon by always adapting to your environment when applying beyond budgeting principles. (Source: Pixabay)

Imagine if Elon Musk called you tomorrow and said he wanted you to quit your job so he could start a company with you, but you had to turn him down because you were already committed to saving 15% of your salary and putting it into the S&P 500. That’s an extreme example, but the point still stands.

In the digital age, there are more opportunities than ever, and the environment also moves faster than ever before. If you have some insider information about a fast-growing company your friend works for or you’ve spotted a trend that will make an upcoming cryptocurrency boom, there’s good reason to act on your intuitions (bearing in mind they involve some types of investment risk of course).

Go beyond the budget by investing with MyConstant

Ready to go “beyond” investing and really make your money work with you? We’re right there with you, and we think we could help.

At MyConstant, we try to apply the values of adaptability and proactivity to our own product offering—that’s why we offer a range of ways you can invest your money using many different cryptocurrencies. Whether you want to try earning interest on your cryptocurrencies out to other borrowers to earn up to 7% or depositing them into a multi-cryptocurrency wallet until another opportunity arises, we’ve got you covered.

Benefits include:

  • 4% APY, compounded and paid every second
  • No fees
  • Anytime withdrawals
  • Minimum investment just $10
  • No maximum investment limit

Sound interesting? Sign up for a free account today and start investing.

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George Schooling

George Schooling

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