Have you ever wished you had an extra $200.00 a month? I know I used to wish that. The moved buffer theory is the theory that you should be putting the buffer in your budget at the ‘top’ of the budget rather than in each category. A buffer is an excess amount of money that is put in place to deal with a greater demand on your finances than is normal. If you’re familiar with “emergency funds” then you might describe the buffer as a preventative emergency fund built into your plan. If you are like me then you originally set up your budget with the buffers into different categories so that each category could absorb fluctuations in the category.

Evaluate the chart above representing a traditionally buffered set of categories. Can you see that the categories with buffers are theoretically more likely to use the buffer? By giving yourself access to more money you are more likely to absorb the buffer. The problem is that you should have some buffer somewhere because in real life all of the numbers are not known ahead of time (unless you are super lucky). By setting yourself up with a ’safe’ budget you are more likely to overspend potential savings (which is not the same as blowing out every budget category in overspending).

Instead, I would propose that you actually calculate a conservative amount for each budget category. What would you say to cutting each category by 20% and moving that buffer into its own category that goes untouched and your target for expenditure is reduced? That way if you over-spend in a category (or the water bill shows up and you find out you took showers that were too long, or watered the garden a wee more liberally than you had expected) you have a buffer category with funds for paying the water bill, but you don’t find yourself likely to spend a lot more in each category. The weakest link in your budget, the category that you’re overspending on, is dealt with, and you can review it for next month to see if it needs more funds, but you don’t just feed all of the categories excess money each month.

There is little doubt that real life will happen, and the potential for surprises is great, but by taking out some of the waste where it didn’t appear to be in the first place, you may save yourself a lot more money in the long run. If you can save $50.00 a month in reduced buffer excess and put it into an investment fund, pay off debt, or possibly grow other areas of your life, its worth considering! I have begun to see a several hundred dollar a month buffer that I didn’t know existed because before I was spending it. Consider your choices as you budget. This method may not work for everyone, but for us, it has been a real relief.

Note: The Moved Buffer Theory Budget is based on the Theory of Constraints by Eliyahu M. Goldratt - only applied where I haven’t seen it applied yet. You might consider checking out Critical Chain, a book that applies the Theory of Constraints to business management.

If you want to be successful in life then there is one principle you must learn first: Learn principles. What makes a chef great? They know the principles of cooking and flavors and how they balance and then they can take unlikely ingredients and mesh them together into a signature dish. What makes an engineer great? They learn principles and then take those principles and apply them systematically to their work. What makes money managers great? They learn principles, apply them and keep their finances in order and grow their net worth.

Elementary school and primary school, and unfortunately some college classes tend to be about rote memorization. The best teachers I ever had were the ones who took the principles behind the things I was memorizing and taught me those instead of merely cramming data into my head. As a web developer/programmer I have memorized a lot of coding things, but I didn’t begin to think as a programmer until I learned the principles behind smart programming (sometimes called ‘patterns’). My finances were a mess even though I had heard good personal finance bits and pieces, but it wasn’t until I learned the principles behind sound personal finance (influenced by blogs like the Simple Dollar, NCN, and Dave Ramsey’s “The Total Money Makeover“).

Smart, successful people will be able to think with abstraction. They’ll be able to identify the principles that make up great process and then merge those principles, where they apply, to their different areas of expertise. Recently I read a book called, “Critical Chain” and it had lots of good principles in it. It is how I run my budget (which I posted a bit about before, but I’m going to write a further detailed article later), but it wasn’t how I ran my budget before reading it because I hadn’t clearly seen the principle. Once I learned it, I was able to see how it could apply to other areas in my life.

Learn principles, learn how they can be applied across broad scopes of your life, and then forget about rote memorization. It could save you thousands of dollars, millions of dollars, your life, or a few minutes time here and there, but get past the short term rules and start thinking bigger.