Tuesday, June 25, 2013

Creating A Budget - A Necessary Evil

Creating an effective budget can be challenging to say the least. Let's face it; budgets whether for personal or for business use can be exhausting, intimidating and they require a lot of attention. A budget is an essential component of any company or family's healthy financial plan. Don't give up on your budget. Reap the rewards:
  • Achieve your goals
  • Improve financial communication
  • Get control of your finances and tell your money where to go
Your budget is the rock upon which your financial life is built, think of it as your foundation. It's your plan for spontaneity and for the unplanned financial roller coaster life hands you. It's a process, there's no such thing as a failed budget, just failure to plan and follow it. This is your pathway to financial success.

  • Write down your financial goals
Having goals is essential to tracking your progress. Maybe your goals include debt freedom, building savings, or giving extravagantly. Whatever they are, take the time to think about your short term and long term goals. Write them down. These will be your financial motivators.

  • Record every single purchase you make, no exceptions
No dollar should escape accountability; underestimating your spending is one of the great budgeting blunders. Knowing your spending habits will put you on the right track. Those daily trips to Starbucks or Dunkin Donuts for coffee can really add up quickly and don't forget those dreaded bank fees for using another banks ATM.

  • Create your spending categories
Here's where you will give your dollars purpose. In addition to the apparent categories, list all larger non-monthly expenses (birthdays, car repairs, business trips). Think of those large expenditures that occur that you can plan for (property taxes, holidays, car insurance, and employee bonuses). Don't forget a "fun money" category or miscellaneous and giving yourself breathing room.

  • Hold a budget meeting
It doesn't matter if you're creating a personal or business budget, there should be a meeting of the minds. It's about healthy negotiation, compromise and respect. Here is where you will agree on how many dollars should be allocated to each of the spending categories.

  • Tweak your budget every month
Be adaptable and flexible. Budgeting should be a lifelong habit. Don't quit. Both individuals and companies need to live and work within their means. Finding financial peace of mind in your family and your business life will help create an environment that is more rewarding for everyone.

 Do you have any tips for our first time budgeteers? Share them with us in the comments!