Get on a personal budget!
Many people, including business owners, don’t have or stick to personal budgets. That’s too bad, and often because they look at them the wrong way. They look at them primarily as restraints they don’t want to have or be kept to…
Instead, they should look at them for what they are… tools that enable people to financially succeed and that ensure priorities are realized. And while this is true for “regular” people, this is true on steroids for business owners who must balance both personal and business finances!
True story about the benefits of budgeting… when my wife and I bought our first home, we had lots of priorities for how we wanted to improve that home. But we didn’t have enough dough to make it all happen right away.
So, we listed out and prioritized everything we wanted to do, and got to the most important things first and spread out the improvements over about five years’ time. By the end of that period, we had made some great improvements to our home. Checked off every box on our list. Took on zero debt doing so.
And here’s the kicker: when we later sold our house, multiple buyer’s agent realtors remarked to us about how well it showed and stood out from others in our area… which was proven by the multiple competing bids we received that led to a sale well above our asking price.
This was a particularly favorable financial experience, and not every budgetary discipline will pay off as well. Yet, our story does demonstrate the key benefits of budgeting…
- Budgets help ensure priorities get met
- Well-focused budgets “pay off” over the long run by creating more value, more freedom, and more financial ability
I’m no budget bully. It’s a free country, and if, like most people, you don’t want to be “boxed in” to experiencing those benefits, that’s you’re call!
Just know that if you don’t follow some sort of personal budget you are likely choosing for yourself the opposite of what you think. In the long-run, you are choosing less freedom and more restrictions in relation to those that have and stick to budgets.
Short-term pain (aka patience). Longer-term gain!
This is How You Do It
For all of you who would like to be “boxed in” to more freedom and less restriction, I’m going to let you in on these secrets of a good budget and how you can best make one work for you!
1. Like New Year’s resolutions, lots of budgets get set. Very few get tracked or kept. So, don’t waste your time doing one unless you have plans and the commitment to hold yourself to it as time goes by. Track your progress every month, and make corrections to stay within budget when you drift off course. That is by far the most important part of “budgeting.”
2. People most commonly overspend on the following categories. So, pay closest attention to these expense items:
- Eating Out
- Electronics, Tools and Other “Hobby” Items
- Drugs, Alcohol and Tobacco Products
- Impulse Purchases
3. Everything matters in budgeting, but not everything matters to the same degree. Nobody ever solved a $10,000 hole in their budget by saving $100 a year by shopping around on car or life insurance. Big budget holes are solved with either more income or less spending in the “big” categories. On the expense side, that typically means houses and cars.
4. It’s your priorities after all! Remember that. Nobody can dictate to you what your spending priorities are. If you want to live in a shoebox so you can go on lots of vacations, by all means do it! Having a budget does not mean it must reflect someone else’s priorities.
5. But nobody can have it all! Most people – particularly owners of growing businesses – cannot live in a castle, aggressively reinvest in their business, and go on endless vacations. So, have realistic expectations, set doable plans, and keep your priorities in proper order.
6. It is the total numbers that matter most. I know plenty of good “budgeters” who “budget” simply by spending less in total than they make in total income. They don’t budget every spending category to the penny or even have a written budget. They simply know how much is coming in and make sure they spend less than that. While this not an effective method for ensuring priorities are met in the desired order, it is effective at keeping people out of mushrooming debt and bankruptcy court!
At PERFORMIDABLE, we don’t specialize in personal budget management. But, as evidenced by this commentary, we do believe it is an essential factor in financial success for business owners. Therefore, below are links to a few helpful tools you can find online to get started on a personal budget.
Personal Financial Management Software
With a personal budget, discipline, and persistent follow-through, you can over time achieve your priorities, gain more freedom, and experience less financial restriction!
Long live small business! Long live small business owners!
Jim Smith, Founder, PERFORMIDABLE, LLC