One of the most critical components to running a successful business is to create a successful budget. For a business budget to be successful it must include all facets of the business, both income and expenses. If a business fails to include critical expenses such as a major one like marketing or advertising, the business will spend more than it earns and could ultimately fail.
Much like a business runs on a budget, a family must adhere to a budget to be successful. Most people who do this will learn to become financially responsible.
The first step to creating a budget is to know where you spend your money. make a list of all of your monthly expenses and payments. Here are a few questions to help you. What is your house payment or rent payment? What related bills do you have to your home? Do you pay electricity, water, waste, phone, pest control or other utility services? Do you have a car payment? What about auto insurance? Some of these are expenses most people will have on a monthly basis. Before adding up all of your payments you need to create a list of your other expenses. For example, how much to you spend on gas, or groceries? Do you buy gifts for family and friends? do you go to the doctor or have prescriptions, and how much to you spend on entertainment each month? Once you have a complete list you need to add them up.
The next step is to identify all of your income. For most people this is pretty simple because they are receiving a paycheck or two each month. Don’t forget to include things like interest or dividends you might get from your investments and any other monthly income you might have. Once you have all of your income put it on the list above your expenses and subtract your expenses from your income.
The results are now in. If you have a positive number this could be a good starting point. If you have a negative number you are in trouble. You are spending more than you are earning and need to make some changes. You have 2 choices. First, you can increase your income. This sounds easy, but getting that second job in this economy is difficult not to mention the stress that it causes in your current lifestyle. The second option is to reduce some of your expenses. This sounds hard at first but after taking a closer look at all of your expenses, usually you will be able to find items that are not critical that could be cut. Keep reviewing the process until the end result is positive. Once it is you have a balanced budget. It’s really not that difficult, you just need to keep working at it until you have it.