You’ve got this major project that you just “know” you are going to sign in the next couple days/weeks, so you go out and celebrate by upgrading your fridge. It was on its last legs, or so you told yourself, so you needed a new one. You had a project that was a lock, so you went ahead and bought the fridge.
The problem is that “for sure” project was with a company that got acquired, or perhaps they had a contract they were anticipating fall through, and they never did end up signing with you.
Now you’ve got that fancy new fridge in your kitchen and no associated revenue to support buying it. You are going to have to leave that fridge sitting on your credit card for a couple months, so that great deal you got is now blown up with interest charges for the 2 months it’s sitting on your card.
I know, I've been there.
I use the new fridge as an example because that is the exact scenario that happened to me. My situation was worse though because the old fridge had actually died, so I had to buy the new one when I did. I guess I could have repaired the old one, but it was 17 years old, so I made the calculation that it wouldn’t be worth fixing, besides, I had a new client that was coming “any day now” that was going to totally cover the fridge and have plenty left over.
And then that project fell through and I was on the hook for the new fridge without the revenue to balance it out.
That hurt.
I hadn’t properly planned for the fridge to die when it did (which I should have since it was 17). I used expected future revenue to cover that lack of planning.
Pre-spending expected revenue comes with the risk of that revenue not coming in as expected, so if you stop pre-spending, you can eliminate that stress.