Budgets get a bum rap. Hearing the word tends to make people want to run in the other direction. Possibly while screaming.
I know better. And I’m here to show you the light.
It's time to change your thinking and learn to love budgets!
Ok. Love might be a strong word, but you get the idea. There are so many benefits that most people don’t see because of a mindset issue. Once you understand how big of an impact a good budget can have on your life and business; I promise you'll see the light as I have.
To start, let’s define what a budget is. A budget is simply a set of ground rules for your income and expenses for a specific time period. It’s what you expect to earn and spend through the year.
Below is a list of just a few of the benefits that will convince you that a budget is right for you and your business.
**I do want to mention that while I am speaking (typing) specifically about business budgets, these advantages can easily apply to your personal life/finances as well.
Plug leaks
More than one ship has been brought down by a small hole. The key to survival is to catch it early. Setting a budget forces you to sit down, review your financial information on a regular basis, and compare it to where you want to be.
Have you ever signed up for a service, maybe with a free trial, and forgotten to cancel it for waaayy too long? A budget can stop you from throwing money away. Which is what this amounts to. Paying money for a service that you don’t need/use is the same as just throwing it directly in the trash.
The key to plugging these leaks is to know exactly how much you want to spend per week/month/quarter on your specific expenses, while also making sure that those expenses are worthwhile.
You work hard for your money. Knowing where it goes is ensures that every step forward is on the right path.
Make decisions easier
Are you a decisive person? If you took more than 2 seconds to answer that, then the answer is probably no. It's incredibly important to evaluate your options to make informed decisions, but indecisiveness can become paralyzing.
What if you had a guideline? A framework to tell you the answer for every decision, big and small. This is what a budget provides.
Think of all the time you could save! Rather than dithering around second guessing yourself, you can spend that time doing something useful. Or not. It’s your time; do what you want with it.
Once you know your goals and create the budget, then you can assess each choice based on what your business needs. This allows you to make sure that all your business decisions are leading you where you want to go.
Set goals
We all set goals. Unfortunately, those goals are normally something like I'm gonna eat better! Or I'm gonna save more money!
I want to tell you something important. Those are not goals. Those are wishes. A goal has to be something quantifiable and reachable. You'll never reach your goal if it's just to make more money. How could you? Finding $5 in the street isn’t generally a life changing event (although it is very exciting). You have to set a specific amount you want to earn and an end date or time period in which to earn it.
You need to know your goals on order to make a budget. Goals help guide you. Where do you want to be in 6 months? 1 year? 5 years?
Set your goals, write them down, then create a budget to help you reach them.
This can be scary, but keep in mind that it's not the end of the world if you need to make an adjustment. You can push out a date or revenue goal. This does not mean you have failed and should give up.
I want to repeat that. Missing your goal does NOT make you a failure. It does not mean that you should give up and go live a hermit life in a cave. It just means a re-evaluation is in order. Why didn’t you meet the goal? What can you do to change that?
Pick yourself up, brush the dirt off your bum, write down your new and improved goal, then adjust your budget as needed to make sure you get there.
Reduce stress
As a business owner, you carry a lot of weight on your shoulders. You have lots of responsibilities, day after day. Now, what if I told you that the burden could be at least partially relieved? You’d be all about it, right?
Having a budget helps you to account for trends over time. For example, a landscaping business in MI may find that some months are a lot slower than others. Knowing when that slow season is likely to arrive, and end, lets you plan for it ahead of time. Financially, you can prepare for it and spread your expenses/income out in order to smooth that transition.
All of the above are great benefits of a budget, but the best part is what they give you. Which is a less stressful life. Once you know your goals,and create your budget to help meet those goals, you are well on your way to the life you want to live.
An important note now. Creating the budget is only half the battle. You have to actually USE it in order to see results. It’s no use if you go through the effort of putting together a budget only to put it in a drawer. Never to be seen again.
A budget is only a guideline for your business. It’s up to you to stick to it. Nobody can make you do that, except you.
Once you see the benefits in action, you’ll wonder how you ever did without it.
Need help creating a budget and sticking to it?