Okay, the title of this article has another crazy idea from me.
And I'll bet it has you asking, "How can the most boring topic in the world, budgeting, lead to incredible success? Have you gone nuts, Pam?"
Well, here's a fact we sometimes like to ignore - budgeting is one of the most vital elements of your business. In fact, it can make or break it!
And here's another fact: Great budgeting leads to great success!
But if budgeting is so vital, why do we ignore it so much? In my opinion, there are three reasons.
Reason #1
Often, we ignore budgeting simply because we don't have specific goals for our spending. We go merrily along thinking, "Well, I've made good money this year so don't need to know the expenses. Who cares about them?"
Often, we ignore budgeting simply because we don't have specific goals for our spending. We go merrily along thinking, "Well, I've made good money this year so don't need to know the expenses. Who cares about them?"
You can guess where this attitude leads you - straight to out-of-control spending because you don't have the "brake" of a budget to keep you on a secure financial road.
Reason #2
We simply don't know how to budget! We were never taught how to do it by our education system (a criminal shame, in my opinion)! If I had my way, budgeting would be a mandatory subject in every school in the land!
Reason #3
In our consumer-driven economic system, we've all been taught to spend and not save! Every day in every way on the media (TV, radio, print, etc.), advertisers urge us to spend, spend, spend! Needless to say, this is financial insanity!
So how do we, restore the sanity for ourselves? You already know the answer, don't you? With plain old, boring, yet essential budgeting.
Action Step 1 - Set a Goal
Believe me, goal-setting is one of the most important skills you can possibly learn, no matter what field you're in!
If you talk to any entrepreneur about how they were able to achieve their success, I guarantee you that one of the first things they'll tell you is, "I set goals, and then I commit to them."
Action Step 2 - Keep Separate Personal and Business Budgets!
My recommendation is to keep separate checking accounts - one for your business and one for your personal life. And never mix funds from the two. You'll end up happier, and so will the IRS!
Action Step 3 - Live Frugally (for a Set Period of Time).
Here's a simple fact: it's much easier to save $1,000 by cutting expenses than it is to make $1,000 in income.
A key to budgeting is that you have to be willing to make sacrifices for a definite short period of time (not forever). It's actually an investment in your financial future!
As Dave Ramsey, author of The Total Money Makeover, says,
"Live like nobody else today, so you can live like nobody else tomorrow."
In other words, practice financial discipline and accountability today, and you have the potential to achieve incredible financial success in the future!
Action Step 4 - See Where Your Money Is Going!
CUT THE UNNECESSARY SPENDING!
CUT UP THE CREDIT CARD YOU DON'T NEED!
Action Step 5 - Set Up "Minimum Work."
"Minimum work" is a phrase I use to refer to how much money you need to make to cover your fixed expenses. Here's how it works:
First, add up your "have to" (fixed) expenses; that is, mortgage payments, phone bill, utilities, etc.)
Second, figure out how much you need to make per deal to cover those fixed expenses.
When you complete these two tasks, you then know the minimum number of deals you have to make per month to pay those expenses.
Of course, anything beyond that is profit! So, go out and make more deals!
Action Step 6: Plan Your Spending Carefully!
Right now, you're saying, "Okay, Pam, I get the point! I need to budget and budget well on a consistent basis. But, how exactly do I allot my dollars so I cut spending and increase my business at the same time?"
An excellent question! Although every individual situation is different, I recommend that you follow these guidelines:
Guideline 1: Live off 60% of your "take home earnings."
Guideline 2: Give 10% back to God. Guideline 3: Use 10% to pay off debt (over and beyond your minimum balance).
Guideline 4: Place 10% in investments (stocks, mutual funds, etc.).
Guideline 5: Put 10% back into your business for marketing expenses!
Here's an example of how the application of these guidelines looks in concrete figures. Let's assume you earn $10,000 a month in income. The budgeting breakdown would look like this:
- $10,000 a month take-home
- $6,000 (rent, utilities, etc.)
- $1,000 to God
- $1,000 to debt
- $1,000 investments
- $1,000 marketing
One final piece of advice: Nothing helps your budget out more than earning more money! So, I urge you to get back to basics. Set aside time every week to study sales techniques! Buy a book on closing strategies. Attend a seminar on making presentations! Buy a DVD or CD on handling doubts and objections.
In short, do whatever it takes to become the consummate salesperson! And, of course,...
BUDGET! BUDGET! BUDGET!
