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This post is a Multi-Step Approach to Creating a Budget for entrepreneurs, business owners and side-hustlers.
I recently explained the reason WHY you need a Budget for your Business and also for your Personal & Household expense tracking.
You can read that Blog Post here.
Before you start with creating a budget, download a basic budget worksheet and then follow the below steps.
You want to have access to any information about your income and expenses.
One of the keys to the budget-making process is to create a monthly average.
The more information you can find and gather, the better.
How much income can you expect each month?
Record this total income as a monthly amount.
Write down a list of all the expenses you expect to have during a month.
This list could include:
Use your bank statements, receipts, and credit card statements from the last three months to identify all your spending.
Fixed expenses are those mandatory expenses that you pay the same amount for each time.
Include items such as:
If you pay a standard credit card payment, include that amount and any other essential spending that tends to stay the same from month to month.
If you plan to save a fixed amount or pay off a certain amount of debt each month, also include savings and debt repayment as fixed expenses.
Variable expenses are the type that will change from month to month, such as:
TIP: If you don’t have an emergency fund, include a category for “surprise expenses” that might pop up over the month and derail your budget.
Start assigning a spending value to each category, beginning with your fixed expenses.
Then, estimate how much you’ll need to spend per month on variable expenses.
If you’re not sure how much you spend in each category, review your last two or three months of credit card or bank transactions to make a rough estimate
If your income is higher than your expenses, you are off to a good start.
This extra money means you can put funds towards areas of your budget, such as
TIP: If you have more income than expenses,consider adopting the “50-30-20” budgeting philosophy.
If your expenses are more than your income, that means you are overspending and need to make some changes.
If you’re in a situation where expenses are higher than income, find areas in your variable expenses you can cut.
Look for places you can reduce your spending—like
If your expenses are far above your income, or you have significant debt, reducing your variable expenses may not be enough. You may need to trim your fixed expenses and increase your income to balance your budget.
Aim to have your income and expense columns to be equal.
This equal balance means all of your income is accounted for and budgeted toward a specific expense or savings goal.
Once you have set up a basic budget, customize it according to your financial situation and profit goals.
Working on commission, you should be aggressive in saving to help cover periods when the market is slow.
When you have cash flow issues because you are paid only once a month, divide that payment by weeks, and keep the cash you planned to spend in the remaining weeks in a separate account until you need it.
Pay with a credit card only if you will be able to pay it off at the end of the month. Otherwise, you will owe interest on top of the price of whatever you bought.
Adjust your budget monthly if you find you overestimated or underestimated your expenses.
Keep an eye on large expenses that only occur every few months, such as repairs-&-maintenance payments.
If you tend to overspend in certain categories, use budgeting hacks such as switching to a cash-only budget.
Once your expenses are lower than your income, budget towards savings goals before you increase your spending. Take time to learn other financial management skills to improve your financial literacy and make your money work harder for you.
I share more about creating a business budget or financial freedom checkpoints inside my business membership. You are welcome to join my business membership, the B.O.S.S Society, where I teach all the ways you can start a successful online business, implement effective income strategies and learn how to build profitable funnels.
I also created a 6-Step Framework to help you create a game plan for your business.
See you online!