"How To Budget For Success" is the 27th in my 2022 series of articles based on my real life experiences, professional insights, personal views and fun stories.
My hope is that in them you find joy and inspiration.
HOW TO BUDGET FOR SUCCESS
There are many people in business who are successful at making money but not very good at holding on to it! In other words they lack the ability to control their spending. While creating income is the first requisite of becoming wealthy, you must keep hold of as much of the money that you make as possible in order to stay wealthy. In order to do that it is necessary to create and implement a budget.
A budget is a forecast of your proposed future spending which you intend to adhere to. Simple in theory, less so in practice. Because the first requirement of good budgeting is self-discipline.
The second requirement is that you must write down your financial plan, your budget. As with all business plans unless it is first put in writing then there is no plan. Where to start?
First off, segment the coming financial year into months, weeks and days on your budget chart or spreadsheet. You're going to control your annual spending by reducing it to manageable smaller periods. I work on a daily basis. The next thing is to forecast how much your spending is going to be and exactly when you are going to incur it. There are two ways to calculate this.
The first is to look at your outgoings over the past and previous years and then, working from that, calculate which expenditures will recur, increase, decrease or not occur in the coming year; what additional expenses might arise and which ones you could actually eliminate.
The second way to calculate your spending is simply to start with a clean slate and think of every conceivable expense - and then some more - which your business could incur over the coming year. Don't forget taxation (though I'm sure you'd like to)! and include an amount for unforeseen expenses, contingencie. Remember too, one-off annual or semi-regular expenses. This should give you an absolute 'top line' for expenditures.
I personally calculate using both methods. I compare them and arrive at a projection which is a cross between the two. Then, whatever my conclusion, my aim is always, in operation, for my actual expenditure to come in under budget. Saving money against my budgeted figure is what I strive for. At every turn, on a day to day basis, I try to under-cut my estimated expenditures or not incur them at all. When I save money in this way I am adding to my profits and to my general well-being. It's 'a win' every time.
As well as working out what you will spend you should take into account when you will spend it. You need to know this so that, in conjunction with the revenue coming in from your sales, you can calculate your cash-flow. Cash-flow simply refers to the money coming into and going out from your operation. To maintain a healthy, positive cash-flow you want more money coming in than is going out - of course - but - You also want it coming in sooner than it goes out. Sounds simple? It is ... but don't be fooled! It's simple only if you are disciplined and make it happen.
The golden rules are -
* Create as much sales and income as you can - and then some more
* Get paid as soon as possible - always before you supply your goods or services
* Reduce expenses to a bare minimum - none at all wherever you can
* Pay out as late as possible - and never before cash has come in
Adhere to these rules and you and your business will be lean, mean and healthy. Sound a bit like a diet? Well it is in a way. Good budgetary management requires discipline and restraint. But that is the art of operating an effective budget. That is how to budget for success.
I am Tom Riach. I live and write in the sunny south of Portugal.
* SPECIAL OFFER! - Receive a FREE E-version of my 'Yes You Can!' book! Just CLICK HERE.
Or go to my Amazon store for Paperback or Kindle copies of - 'Yes You Can!' - when you Click on the image below.
'HOW TO BUDGET FOR SUCCESS' is an original copyright Tom Riach feature.
I hope you enjoyed this presentation and found it to be of value.
To learn more please visit me on my Author Page.
See you there! Regards, Tom.
Comments
Nice information and the Golden Rules are a must to remember. Thank you Tom for your post here. Another great one as always.
Thanks Terri. It's the 'simple' things that defeat most people - and it's the 'simple' things that raise great achievers to the top!
I broke every rule and tip in this post. It is called 'learning the hard way' and a scary option. Thank you, Tom. Budget for Success will save us time. money, mistakes, and pain, as well as make us more money faster. Experience is a wonderful teacher, but following in others' footsteps is a much easier option.
Well, a tough learning cycle stands you in good stead George, scary options have a certain attraction! But, as regards rule-breaking - stick to your own disciplines but rigourously challenge those imposed by 'authority' and outside agencies. The latter do not exist for your benefit.
Great info and thanks for sharing this.
Very insightful as always!
Thanks John. The essence of 'brilliance' or 'genius' is that it's remarkably simple. But what may seem simple to you or I may be anything but to others. What is difficult is applying yourself to the task, the discipline, and then sticking to it. That, and the temptations to spend needlessly, are what defeats most people.