During one of my presentations I made a startling discovery. As I was discussing seven steps to creating a professional in-home training business, I asked, “How many of you have a budget?” Out of more than 60 attendees, only five or six people raised their hands! Why no budget? Maybe these people were making so much money that they could not possibly conceive of being able to spend it all in one month, or maybe they were operating out of fear or denial of what their checkbooks actually said. Perhaps they were never taught how to create and use a budget.
If you don’t have a budget, you can create one now. You can gain control of your money before debt controls you. When you face your finances, create a plan and follow it, you greatly reduce stress and anxiety. How do you do this? By scrutinizing last year’s expenses, creating a realistic budget and practicing living in reality.
Scrutinize Personal Expenses
The first step in creating a budget is by far the most time consuming, yet it yields all the essential information you need to build a budget that works. Look at all of your personal expenses for the last year. What you find can be quite revealing. For your household expenses (any expenditures that are not business related), get out your checkbook and credit card statements for January through December and write down every dime you spent in every spending category for the year. Then create a monthly average for each category. (Divide the yearly total for that category by 12.) Following are some category examples:
- doctor visits and prescriptions
- medical insurance
- taxes and insurance
- cable/satellite TV
- home repair/improvement
- gardening/lawn care
- Internet subscription
- all phones (including cell)
- car payment/lease
- car maintenance
- car gas
- dry cleaning
- pet care
- miscellaneous (Try not to put too many expenses into this category. Creating accurate categories will help you see exactly where you are spending your money.)
Examine Business Expenses
If you own a business, repeat the same exercise as above for your business expenditures. Calculate your average monthly expenditures in each category. Following are some category examples:
- leased equipment
- all phones (including cell)
- Internet subscriptions
- website hosting and design
- liability insurance
- business promotion (including gifts)
- training and office supplies
- conferences and education
- retirement contributions
- income taxes
- professional services (accountant, attorney, assistant, etc.)
After you have completed this exhaustive process, reward yourself with something inexpensive ($10 or less) and prepare yourself for the next step.
Generate a Realistic Budget
Now that you are armed with the facts of your actual spending habits for both business and household expenses, it is time for some fun.
1. Get out two pieces of paper, one for creating a household budget and one for creating a business budget. On the left margin of each paper, write the category names you used to examine your expenses. Draw a line down the middle of each paper; on the left side write the heading “Actual,” and on the right jot the heading “Goal.”
2. Begin filling in your actual monthly expenditures on each sheet.
3. Use a third piece of paper to record your average monthly income. In the health, fitness and wellness business, income can fluctuate quite a bit depending on the season. In spite of this, you should be able to figure a minimum average income per month based on last year’s income. Use the low number to create your budget. For example, if I know I can bring in $4,500 every month, but I often bring in $5,000 to $5,500, I’ll use the $4,500 figure to create my budget and set aside the extra in a temporary savings account that I can draw from in slow months.
4. Compare your take-home pay to your actual expenditures from 2004. You may have spent more than you made last year, adding to credit card debt. Vow to yourself to do this no more. You will dig yourself into a hole you can never crawl out of.
5. Create your “goal” budgets by adjusting your actual expenses to your real take-home pay. Start with your business budget. After you figure out your minimum business expense needs per month, you will know exactly how much you have left over for your monthly household budget. 6. Look over your numbers. When finished, you should have two budgets that match rather than exceed your income.
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