From the course: Budgeting in Real Life
Find the problem
- As I work with clients on their budgets, a common response I hear is that there just isn't enough money to go around. In many cases, they can cover their monthly expenses but finding dollars to put towards their goals is super tough. In cases like this, I help clients determine whether they have a boulders problem a pebbles problem, or a water problem. You can use this framework too to pinpoint where exactly you might be facing challenges. Let me explain. Think about a stream. Your goal is to fill up the buckets at the bottom of your stream. Those are your goals. If there are too many big boulders in your stream, the water won't make its way to the buckets. If there are too many little pebbles in your stream, you won't fill your buckets either. And if there's just not enough water coming and if it's a drought, that might be the problem and that might be why you're not filling your buckets. Boulders are those big expenses in your budget? Think of things like your rent or mortgage, your childcare, private school, maybe student loan payments. The pebbles, those are the smaller expenses, typically under $50 a month. That could be subscriptions or coffee or other small expenses. The water, that's your income. And it could be that there's just not enough water coming down your stream. That there's just not enough income coming in. Identifying the actual issue is key to figuring out the appropriate solution. For example, if your boulders are the problem, like your rent is too high, then nickel and diming all those little expenses, your pebbles, trying to cut out your weekly coffee date, it's not really going to help you get to where you want to go and you'll probably end up super frustrated. If pebbles are your problem, then there's no need to rethink your childcare arrangements or refinance your student loans or move. You just need to be more discerning with your smaller expenses. And finally, if the water or your income is the problem, then the focus is less on reducing expenses and more on finding ways to increase your income. So think about the boulders, pebbles and water. If you had to pick one, where do you think the issue might be for you? By thinking about it through this framework, you might discover barriers or opportunities that you might not have seen before.
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