This week we’re going to be talking about creating an effective budget for your business. I know, most people hear the word budget and shudder. However a budget is a very effective tool that will allow you track your expenses, profits, taxes, and set a realistic salary for yourself. It will ensure that you actually MAKE money and I think that we can all agree that’s pretty important when you are in business for yourself.
I’m not sure what Curtis has shared about our personal financial journey so today to give you some perspective as to where this is coming from I’ll tell you a little bit about our life.
Over the last two years Curtis and I have been on a journey to improve our financial life in hopes of giving us more freedom to pursue our dreams and relieve the “pinch” that young families often feel.
When we started this journey in January of 2012 we had a mess of debt to clean up in the personal side of our finances. Curtis had been self employed for about 3 years at that point and his business had been growing steadily but it wasn’t what I would call flourishing. He pretty much owned his job.
A HUGE part of our journey and definitely the key to our success personally was creating then actually sticking to a budget.
We were both working full time and making decent money. Sadly we had little to show for it but a stack of bills and some fun toys. We had very little savings, no long term plan, and nothing to show for our efforts.
By learning to create a new budget every month then live within the numbers we committed to at the beginning of the month we actually “found” a huge amount of money that we didn’t know we had. That enabled us to eliminate our debt pretty quickly.
We’d been spending ourselves to death on little things here and there.
Our debt hadn’t grown in years at that point but it hadn’t decreased significantly either. We always paid cash for our purchases but we were still overspending in that we weren’t saving.
So what does all of this have to do with setting an effective business budget? Well, it was the starting point for us in a significant amount of change and growth; financially, personally, and as Entrepreneurs and leaders.
It was through our progress on our financial journey that we became aware of podcasts, blogs, and other resources that would help us become more successful in business. It got us started with goal setting, and motivated us to continue doing things that would move the needle. We saw that we could have a significant affect on our situation by being willing to roll up our sleeves and get to work. It has become incredibly motivating in all areas of our lives.
Over the last year Curtis has managed to more that double his business’ income. (**Note from Curtis: I wrote about my 2012 income in my January 2013 Income Report and my 2013 income in my recap.) This has allowed me to leave my full time job and be a full time parent to our two young children. It has also allowed me the privilege of being more involved in the day to day runnings of our business - it really has become OUR business over the last few months for me rather than Curtis’ job. I credit Curtis’ success in the last year to our family’s journey over the last two.
As I took on more tasks within the business over the fall it became increasingly obvious that while the business income had doubled so had the expenses (which he published. I’ve been the driving force behind the budgeting on the personal side of our life (always with Curtis’ input and consent I just happen to be the one that organizes the numbers because I enjoy it).
(Note from Curtis: I hate budgeting there are forms of invasive surgery that sound like they'd be more fun. Luckily I've got an awesome wife that likes budgeting. Who helps you?)
One day while we were discussing the steep rise in his business expenses this year it dawned on me that we were functioning without a budget. It was like a lightbulb came on. The reason we’ve managed to eliminate debt, build savings and have more financial freedom personally is because we’ve successfully lived within our budget. WHY haven’t we done this in the business too?
So this week we’re going to be talking about budgets. This may not excite some of you, but I think it’s valuable information. Tomorrow we’re going to talk about what a budget is and why you should have one.