Hard to believe that Friday is already here! Heading into the first weekend of existence for Money Forge, here’s a collection of some of my favorite posts and stories from elsewhere in the financial blogosphere:

Lazy Business Owner has a great post on how to make your business look bigger than it actually is. One of the barriers to starting a small/side business is overcoming your customers’ perception that small=inexperienced and risky, and LBO has some good tips.

If E-Trade’s recent ups and downs have made you a bit uneasy, Jonathan at My Money Blog and Jim at Blueprint for Financial Prosperity talk about SIPC insurance: what it is, what it does, and how to know if you have it.

Also in the investment vein, Free Money Finance has a quickie on why index funds are great investments. I couldn’t agree more.

Trent at The Simple Dollar just finished reading 52 personal finance books in 52 weeks, along with reviews and rankings to help you decide what to read first. Very useful!

Finally, with the holidays approaching (is Thanksgiving really next week!?), five cent nickel talks about ways to reduce the financial pain of buying so many Christmas presents. Our family uses the “draw names” technique, but there are certainly other options!

Also in the Christmas theme, Free Money Finance talks about how to maximize gift cards while five cent nickel cautions against giving gift cards at all. I’m with five cent nickel on this one.

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For many people (including me), the effort to take control of their finances started with a budget. I added up my income, categorized all my expenses, and allocated a certain amount to each category. Then keep every receipt, track every penny, and voila: no more climbing credit card balances and bouncing checks.

Sounds great, right?  

Well…not so much. Why?

1. Self-imposed limits are easy to break

Your behavior is what put you in debt in the first place. Do you think that simply making a nice budget spreadsheet is going to break years of bad money habits? $920 billion in revolving debt suggests that self discipline is not exactly common, at least in the US. I know I am no exception.

2. All stick, no carrot

Budgets intrinsically punish failure (which is inevitable). When I would spend too much, whether from a moment of weakness or a truly unforseen expense, the red ink on the budget spreadsheet was demoralizing. And once I knew I was over budget, the impulse was to say “screw this” for the month and spend even more.

3. Sets impossible ideal

Taken together, #1 and #2 combine to establish an impossible standard for financial planning. I tried hard to follow our budget, but after failing for enough months, I pretty much threw in the towel.

4. Ignores supply to focus on demand

Pretty much by definition, a budget focuses only on reducing expenses to fit your (fixed) income. The implication that your income is set and outside your control is the biggest reason that I think budgets do more to keep you broke than make you rich.

So…Now What?

While I am obviously not a fan of budgets, there is no doubt that managing and limiting expenses is important. Knowing how much you really make and where it goes is critical. Minimizing waste and keeping lifestyle inflation at bay is a requirement for financial success. Breaking down every expense category and following every penny, not so much.

With the time and energy you save by not budgeting, focus on the other side of the equation: making more money. Successfully living on a $25,000 income is great, but achieving wealth and financial independence is probably not going to happen without move up a couple tax brackets and saving bigger chunks of cash.

What do you think? Is sticking to an exact budget worth the effort, or is a “high level” income and expense overview good enough?

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