A budget is one of the most powerful tools anyone can use to achieve their goals. Whether we like it or not, money is one of the central concerns of most people’s lives and managing your funds to align with your goals, whether for your small business or  you personally, is virtually impossible without a plan that you believe in and can stick to – so in the quest for success, a budget is vital.

But where do you start? The task might seem overwhelming at first, but it is really very simple if you break it down into five basic steps.

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Start with your dreams

This might sound cheesy, but stay with me.  What is it that you really want to do?  And I mean for real – what would you do if money wasn’t an issue?  Whatever it is, write it down.  Congratulations!  Once you write it down, it’s no longer a dream, it’s a goal.  It’s something that can actually happen.  Whether it’s live on the beach, open 10 new stores in the tri-state area, take a year off to travel, quit your day job and work on your idea for a start-up, or buy your first home, there is no wrong answer – there’s just a goal.

  1.  What does all of the stuff you already have cost and how much of it do you actually want?  We all manage to accumulate things over time – and the term “things” includes more than physical objects.  How many recurring charges automatically hit your credit card or bank account each month that you don’t really care about or use?  I’m talking about things like gym memberships  and weight loss program subscriptions, tanning club subscriptions, magazine and newspaper subscriptions, and the list goes on.  Make a list of all of your cash out-flows each month – your household expenses, credit card balances/payments, and any other items like student loan debt, then add up what you are obligated to pay out each month.  Once you have that done, go through the credit card bills for 3-4 months and break out what you’re spending by category (restaurants, clothing, groceries, etc.) so you can see where your “swiped money” is going.  After you have your lists compiled, go through and highlight the things that you know you can live without or are willing to commit to spending less on.
  2.  Take your list from #1 and circle the things that you’re unwilling to sacrifice.  The results of this step will, just like the others, be different for each person.  Be honest with yourself and don’t commit to something if your heart isn’t really in it.  If you love your new Audi, that’s okay – you just have to remember that YOU set a goal at the beginning of this process, so keeping an item like a luxury vehicle might mean that you have to make deeper cuts elsewhere to facilitate reaching your goal.
  3.  What are your current resources and what do you need to get where you want to be?  A good approach to this step is working through a net-worth calculation.  Figure out what you’ve got in the bank and what your equity is in any assets versus the debt you carry.  As you begin to get a clearer picture of your current financial situation, begin brainstorming ways to redirect your resources to align with your goals.  This is a good time too to think about ways to bring additional income into picture – did you know that the average millionaire has at least six sources of income?  Take stock of what you have and find ways to hustle.
  4.  Put a plan together in writing.  Using the information you collected in the previous steps to come up with a realistic time line to achieve your goal.  Break it down into measurable achievable milestones that have deadlines.

Here’s a simplified case study:

Sally’s goal is to open her own dog grooming business.  She currently has no dog grooming experience, owes $120,000 on a $200,000 house ($1,400 per month mortgage), and has $20,000 in credit card debt and $10,000 in the bank.  She owns her car outright and doesn’t have any other debt.  Sally’s take home pay each month is $4,000.  Sally has decided that she is willing to sell her house and work a second job for $200 per week.  When she starts dog grooming school, she wants to be able to go full-time and is unwilling to work during that period.

So in 1 year and 8 months, Sally can afford to pay off all of her credit card debt, continue to build equity in her home and bank an additional $32,000.  Sally was willing to sell her house, so between the equity, she has in her house and the cash in the bank, she would have enough to live off of and pay for her dog grooming courses, which last six months.  If she waited another 14 months to quit her job and start grooming school, she would have $36,000 more in the bank which would give her some extra capital to start her business.


As you can see, this is an exercise that requires you to work through the details of your situation and make conscious decisions about your priorities.  While it may seem like a daunting task, I encourage you to dig in and work purposefully to come up with a plan that will empower you to achieve the goals you’ve set.

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