You can never expect reach your financial goals without first developing a plan for your spending and saving. Fortunately, there are a few simple steps to help you start a budget.
Many business owners (and individuals alike) can’t keep their finances in order simply because they don’t know where they stand. It’s not easy establishing a budget and sticking to it, but it’s something all business owners must do. Here are a few simple steps on how to start a budget to save money for you and your business.
1. Set your financial goals
First, decide what you want to financially accomplish in a certain amount of time. It doesn’t matter if it’s 6 months, 1 year, or 5 years, you have to know your goals if you want to create a successful budget.
2. Determine income
Calculate what your take-home, or net pay, is for a given month. A general rule of thumb is to not include overtime, so you don’t rely on that as regular income.
3. Track Expenses
Track your expenses for a few months. Record every purchase so you can get an idea where your money is going and how to best allocate it. It is best to continue this for a few months, rather than just one month to see any patterns in your spending. Many personal finance programs offer features to help you track expenses with a budget, such as Xero budget manager.
4. Create your budget
When creating your budget you first want to calculate your fixed expenses such as rent, insurance, or car payments. These are easy since they are the same every month.
Next, use your past expenses to help calculate your variable expenses. These include bills, clothes, food, and anything that changes month to month. This is when tracking expenses from the past months is helpful because you can get an idea of how much you spend in each category.
5. Save what you can
If you want to know how to save money you should get in to a habit of putting excess money into a savings account. However, don’t feel the need to sacrifice your typical lifestyle just to put a few extra dollars into savings. Just remember a successful budget will typically include about 10% of your income put into your savings.
Learn more tips for following a budget and much more in our free Guide to Better Budgeting, available through the link below.