The B Word - Budgeting
In our consumer-driven world, the idea of a budget is not very popular. So often, the word ‘budget’ leaves us feeling restrained and unable to enjoy life, making us accountable for every purchase.
But is that really the case? Why do people make budgets, and how can creating a budget be something that works for you.
Why have a budget?
Having a budget is often similar to deciding to lead a healthier lifestyle. When you make a goal of being fit and healthy, you enjoy eating healthy and exercising. It feels great!
You feel in control of the situation, and you have a sense of accomplishment because you worked hard. You see the results and feel healthier. While it may be something that you have to work at, you know that the end result makes it worthwhile. Pushing yourself at the beginning means a healthier life today, and in the future.
The same is true with a ‘budget.’ A budget helps you understand your financial situation more fully. It allows you to control when and where your money is going.
In the beginning, it may feel disappointing when the numbers are not what you imagined they would be. But by putting in a little bit of hard work, you can build your financial health.
Budgeting at Home
Making a budget for our personal life is crucial to help us prepare well for today and our future. Good spending habits are not something you can leave to chance!
Much like tracking your eating when beginning a new diet, the first step may be to track where our money is going. A coffee here and take-out here and do not seem like big purchases. However, it may surprise us to realize how much we are frittering away on small transactions.
These minor purchases pack a big impact. It stops us from being able to save or pay off debt.
We also tend to overestimate how much we make, and (of course!), underestimate how much things cost. One popular method used to be using cash envelopes. The process was to separate your earnings into various envelopes such as groceries, electricity, etc. However, no one uses cash anymore, making it is much harder. There are some apps that allow you to create a digital envelope system based on the same principles.
When we stop trying to fool ourselves about our spending, we empower ourselves to make better choces. We make educated decisions based on how much we actually have. This helps us decide when to make more significant purchases and how much we have available for smaller items. We are then in control of our situation instead of our habitual unseen spending controlling us.
Budgeting for Business
Having a budget for a business is an enormous advantage. It helps us make better decisions for the business. It reminds us of expenses that are coming up, or it helps know when there are extra funds available to reinvest into the business.
We have noted before about how how important it is to review your financial records on a regular basis. Not only are you aware of where your money is going, it is giving you the operational intelligence to make better choices for your company.
By way of example, creating a budget will allow you to see how much you should be spending on various categories of your business. However, a change in shipping costs may mean that a product is much less profitable. Having a budget in place will alert you to how much that change matters and prompt you to decide whether that product is still worth it.
Creating a budget that works for you
Creating a budget is very personal. Everyone has different priorities and a generic budget may not be practical. What one person considers as a need may be what another considers as a want. A specialized budget takes that into consideration.
Many people assume that they are not a “money person”, but we do not believe that to be true. We believe that when people take the time to familiarize themselves with their finances, they can empower themselves and gain control over their situation.
For business owners, we consider all of these factors in our “Money-Smart CEO Course” which has now launched! To learn more about how this course can help you handle your business finances like the CEO that you are, click here.
