Every morning my wife listens to the weather forecast on our local news channel. If I happen to be talking, I might be shushed. Yes, she knows she heard it 10 minutes earlier, but maybe they discovered something new. I’m not so much of a weather addict. We’ve all seen cases when the forecast was way off. A 100% chance of rain instead brought clear days and a 10% chance of precipitation brought long periods of showers.
Budgeting as a Weather Forecast
We tend to think of a budget as similar to a weather forecast. This is not to be confused with cash flow, which is a past event. The first thing you should know is that the accuracy of both is approximately 74%. (We just made that up, but 22% of all estimates are made up anyway.)
When it comes to accuracy, here’s a concept to consider. The 10-day forecast is not as precise as tomorrow’s forecast. What if we apply that to budgets in a rolling revision process? In other words, we update everything on a routine basis. Since we are trying to predict the future, it takes a bit more effort than repeating the past.
Can we get all the data? Well, yes and no, but not really. And that’s where preparation and good judgment come in.
The Bishop and The Weather
You might recall the scene from “Caddyshack” where the bishop tries to “squeeze in nine holes” of golf right as storm clouds begin to roll in. He asks the groundskeeper, portrayed by Bill Murray, to serve as his caddy, which should probably tell you something about his judgment. The bishop’s game gets better and better as the weather gets worse and worse. He keeps playing through even when it starts raining in sheets. Right at his supposed moment of triumph, a bad putt and a bolt of lightning snatch defeat from the jaws of victory.
When the proverbial “perfect storm” comes your way, it can be financial chaos. But if you properly plan for the storms and “batten down the hatches,” you’ll be better equipped to ride it out.
Yes, you can layout all the possible bills and expenses, but just like the weather, a budget forecast should be updated as needed. This is what we aim to achieve with Budget Referee. Instead of one static solution, we designed Budget Referee to dynamically keep up with expected AND unanticipated bills, expenses, and income. The next time you’re thinking about your budget, know that there is a forecasting tool you can use to weather the perfect storm!
All sample photos courtesy of wikihow.com