A STEP BY STEP GUIDE TO CREATING A BUDGET – YOUR ROADMAP TO ACHIEVING YOUR NEW GOALS

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We are living in a world that has been turned on its side - deaths, loss of jobs and heartache for many.  We still have to keep going and if we have decided that our business is something we want to continue, what do we do now?  It’s time to set new goals, create a plan for the rest of the year. and start to focus on getting back on out feet and doing all we can in light of what has happened.  The past is in the past and it is time to move on.  One of the best ways to set new goals and make a plan, is to create a budget. If you have not created a budget before, here is a step by step how-to for you to follow.

 

STEP 1 – STARTING POINT

Download into an excel spreadsheet your month-by-month 2019 Profit and Loss/Income Statement (select cash basis if downloading from an accounting software system such as QuickBooks). Download into a separate excel spreadsheet your month by month 2020 Profit and Loss/Income Statement Jan-April by month. Replace Jan-April 2020 figures with Jan-April 2019 figures and change the Row Headings to 2020. 

 

STEP 2 - EXPENSES

Review each of your expenses by month from May – December (January – April has already been paid for so they will be not be changed).  This is a good exercise your expense will fall into three categories - expenses that you have to incur to keep the lights on (these will be kept), expenses that are not necessary (it’s time to let these go) and expenses that have other options available in the marketplace and with a little bit of research you maybe able to switch and save money. Here are some examples:

Cell phone - this is definitely one that would be necessary and if your contract is up with one cell provider and a competitor is offering great deals, it may be worth your time to research your options and have a cheaper monthly bill with the same level of service.

Monthly dues for apps or software - are they all essential to your business at the moment? I often hear from my clients that they have apps that auto renew or are charged monthly that they rarely use – its time to get rid of these expenses.

Courses and Conferences - The conference you attended last year - is it essential to attend this year?

Meals and Expenses - these will probably be much less this year and again work out what you can afford to spend this year.

Marketing /Website maintenance- really look at what services are being provided and have you had the results your expected.  There is a wide price range for many marketing services.  Recently I spoke to a friend of mine who was getting quotes for Website SEO and was quoted anything from over $1,000/month to $350/month.  If there are high expenses in this category, reach out to your friends in your networking groups to see if they can recommend someone else and see if you can save money.

Insurance renewals - contact other agencies and see if you can get a better rate – I worked with Jän Simons at Foundation Insurance Services ( https://found-ins.com/) as my insurance was up for renewal and saved almost 15%!   It’s worth the time to review the expenses.  Once reviewed enter in your new figures for 2020. 


Budget Example - Your Budget Template

Budget Example - Your Budget Template

STEP 3 – NEW GOAL FOR 2020

What net income (Income less all your expenses) do you want for 2020 – this will be reflected as an increase in cash in your bank account.  Under the total column next to Net Income type in this amount in green and bold it

STEP 4 – TOTAL INCOME

Start with the Total Income for the whole year.  You know what your budgeted total expenses are for the year, you know what your GOAL Net Income is for the year.  If you add your GOAL net income to your TOTAL EXPENSES you will arrive at TOTAL INCOME you will need to earn in order to achieve your goal (based on the expenses that you have entered).  

STEP 5 – CALCULATE MONTHLY INCOME

January – April income has already been earned so we will not change those figures. Using the example below:

Take Total Income (62,520.66) – sum of January -April Income (14,665.36) = Income needed over the next 8 months (47,855.3).  Which is equal to about $6,000/month.  Looking at last year’s numbers May was less than the other month and as we are half way through the month we should be able to gauge what May might be.  Let’s say we are expecting to make $2,500 in sales this month and in this example as December was a strong month we will budget Income for December at  $9,500.  As you work with your numbers, give them a realistic value. When your budget is complete make a copy call it “Revised Monthly Budget”.  On your original spreadsheet you will delete the total column as you will now be using this spreadsheet to see how your actual income and expenses compared to your budgeted figures and your Revised Monthly Budget you will revise each month (if needed) so you can reach your GOAL

 YOUR BUDGET IS NOW SET UP

New BUDGET

 STEP 6 – COMMIT!! COMMIT!! COMMIT!!

If you are buying something during the month – REFER TO YOUR BUDGET, have you spent all you had budgeted already for the month. If the expense is NOT absolutely critical, ask yourself what is more important, something I don’t need now or my GOAL!   Halfway through the month look at your income earned – will you make your monthly goal.  If not is there something you can do NOW to make that GOAL if yes, take ACTION. Commit to comparing Actual Expenses against Budgeted expenses once a month. You’ve spent the time to create a budget but if you are not committed to working toward your monthly income and expense goals, reaching the goal at the end of the 8 months is unlikely to happen. 

STEP 7 – MONTHLY REVIEW

In your original spreadsheet insert a column after May 2020 and call it “Actual May 2020” compare how you did against your budget.  Do not be disheartened if you did not hit your goal for the month – you have taken the first step by creating a budget and now you have committed to the review process, these are both great achievements. Strive to improve next month. Open your “Revised Monthly Budget Sheet” replace the Budgeted Figures with the Actual figures.  This will now change what your goal income amount will be.  If your income was less or your expenses were higher in some categories, work through the rest of the months and sdjust those figures so you can still achieve your goals.  You now have a new set of goals to achieve this month.   Repeat this process at the end of each month.


STEP 8 – ACCOUNTABILITY PARTNER

In life no matter what we are trying to do, if we find someone to keep us accountable, we are more likely to follow our plan and succeed.  If you need an accountability partner over these next 8 months, or you need help creating a budget, please reach out to me and I would be happy to help you over the next 8 months to reach your goals.

Julie Callahan