Helllllllllllllllllllllllllllllllo digital travelers,

Welcome back to adulting! Grab your cup of coffee (or preferred beverage of choice) and let’s get into it.

Today we are continuing from last week when we talked about why we need a budget and how to make one. If you missed last week’s email feel free to check out our site to read it. This week we are going to go look at the deeper psychological effects of our subtle adult budget.

The waterfall of budgeting

What do I mean by a waterfall?

The waterfall effect is a term used to describe the way in which changes or disruptions in one part of a system can have cascading effects on other parts of the system. It's called the waterfall effect because, much like a waterfall, the effects of the initial disruption of flow affect each subsequent layer or component of the system.

One example of the waterfall effect can be seen in supply chain management. If a supplier experiences a delay in delivering goods to a manufacturer, this delay can cause a ripple effect throughout the supply chain. The manufacturer may be forced to delay production, which in turn delays delivery to retailers, who may then experience a shortage of goods on their shelves. Thanks, COVID for really engraving that lesson into my biology.

Budgeting allows us to be mindful of our spending habits as well as save for future purchases. But how does budgeting affect us when we fail to save or when we have a ton of liquid cash?

We are now entering what I like to call, the feedback loop of dinero (that’s money in Spanish).

What is the feedback loop of dinero? Well, it’s simple:

See?

Simple. (Side note: this is a great debate topic to have with a close friend or family member. Choose a side and argue your case.)

Within the feedback loop of dinero, there are two ideologies:

1. Money is good: people love money and believe it is necessary.

2. Money is evil: people hate money and believe it is there to chain us.

The act of budgeting or not budgeting defines which idealogy we fall under. Which in turn has a waterfall effect on our:

• Emotions (the way we interact with ourselves)

• Relationships (the way we interact with others)

• Behavior (the way we interact with the world)

Here is the breakdown:

Money is Good vs. Money is Evil

Emotions (the way we interact with ourselves)

Money is Good

I’m so excited to buy that new computer! I am so proud I have been saving for so long! It’s so cool that companies make these products. What a time to be alive.

Money is Evil

I can’t afford that computer. Why did I have to spend so much money at the bars? Why do they have to make it so expensive? The world is so messed up.

Summary

Our emotions are the first step into our perceived reality. They can fluctuate depending on our life’s environment as well as upbringing (our mindset). Money directly impacts our environment. It allows us to live in nice apartments, eat healthy food, and utilize the benefits of modern society. It also can allow us to live in poverty, divulge in addiction, and victimize ourselves. Budgeting gives us control over our money, hence giving us control over our environment. Without it, we can accidentally fall down a self destructive path.

Relationships (the way we interact with others)

Money is Good

I am responsible for my life and you are responsible for your life. Because of this, I trust that you can make the right financial decisions for yourself. I want to form a mutually interdependent relationship with you where we can support each other.

Money is Evil

You are responsible for taking care of me and my life. I cannot be trusted to make the right financial decisions so I need you to bear the weight of that responsibility. I want to be dependent on you when I go into debt.

Summary

Our relationships are the next stepping stone into our perceived reality. You are the average of the top five people you spend your time with. You can either choose to create mutually interdependent relationships (healthy) or dependent relationships (unhealthy). Budgeting makes us take ownership of our finances, which waterfalls into us taking ownership of our needs.

Behavior (the way we interact with the world)

Money is Good

Wow! I cannot believe Joe is making $100K / year in passive income. I am so proud of him he worked so hard to get there. I’ll get there one day, I am so close to buying my first house.

Money is Evil

I can’t believe Joe is making $100K / year in passive income. He doesn’t even deserve it. I’ll never make that much.

Summary

Behavior is the final stepping stone into our perceived reality. If you can’t stop yourself from spending money at the bar every weekend, how are you going to create that startup you have been telling everyone about? Wealth isn’t created overnight or in one giant leap (F%!# you crypto). It is made through consistent small steps forward. We can either gun for the big lift-off and judge everyone along the way. Or take small decisive actions every day toward our goal, while cheering on others doing the same. Budgeting is the first step to generating wealth. It is small, but it waterfalls into our daily habits, thus into our daily lives.

The feedback loop of dinero is called a feedback loop because we can flip from Money is Good to Money is Evil in a split second. It is a balancing act. You choose which one to feed based on your daily habits.

The waterfall effect reminds us that small changes can have a significant impact on our lives. By identifying the behaviors that are holding us back and making consistent small steps forward, we can create the reality we want and achieve the success we desire. The first small step to positively impact your emotions, your relationships, and your behavior begins with budgeting.

✌️Closing Time

So, take action today, and start moving toward your goals one step at a time. If this inspired you, feel free to reference last week’s newsletter about how to make a budget. Talk to you soon.

Cheers,

Mike