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Working with A Budget

Posted by Admin | 3 months ago | Filed Under Entrepreneurship

A budget is an estimate of income and expenditure for a set period of time. Simply put a budget is a plan of how you intend to spend your money. This spending plan allows you to determine in advance whether you will have enough money to do the things you need to do or would like to do for your business.

WHY IS IT IMPORTANT TO HAVE A BUDGET?

Having a budget allows you to create a spending plan for your money, it ensures that you will always have enough money for the things you need for your business and the things that are important to you. Also, following a budget or spending plan can help to keep you out of debt.

HOW TO CREATE A BUDGET THAT WORKS

  1. SET YOUR GOAL: deciding what your goal is, makes it easier to stick to your budget, and also acts as a way of measuring your success or failure in meeting it. Why are you going on a budget? Maybe you want to start saving for a new office appliance, or a new employee, your business needs to expand in the next year.  Whatever the case, make sure you set a SMARTER goal (a goal that is specific measurable, achievable, relevant and time bound, evaluated and reviewed regularly) to improve your chances at success.
  2. CALCULATE HOW MUCH MONEY YOU MAKE: start by taking note of what you bring home each month- your income after taxes and other deductions; any money that comes into your wallet or bank account. This is your income.
  3. CALCULATE YOUR EXPENSES: knowing your monthly expenditure makes planning your budget much easier. So what sort of expenditures do we mean?
    •  Fixed expenses. These are expenses that remain relatively stable from one month to the next. These will include items such as your rent, loan payment, utilities, insurance etc. a fixed expense that people overlook but should not really be overlooked is savings. You must pay yourself first (this helps protect you during times of financial hardship)
    • Variable expenses. These are items that fluctuate from one month to the next such as repairs, emergencies. Products, etc. This will be the first place to make cut-backs if you spending beyond your means.
  4. DIVIDE YOUR BUDGET INTO BASIC CATEGORIES: for example, “savings” payment” “repairs” “emergencies” “miscellaneous, “electricity” etc
  5. DECIDE ON A METHOD TO KEEP TRACK OF YOUR BUDGET: You can use a old fashioned ledger book, or computer programs like Excel or Microsoft money.
  6. MAKE ADJUSTMENTS: in order to have a balanced budget and meet your goal, your income must be greater than or equal to your expenses. To find this out, you need to subtract your fixed and variable expenses from your income. If your income is the same as your expenses and you have extra funds, your next step should be to make sure that you put your leftover funds to work for you. If you are spending more than your business is making, you should start by examining and adjusting your variable expenses.  Relax on the spending by cutting items that are not necessary. It is important to make alterations to your budget from time to time to enable reach your goal 

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