Learning how to handle the financial aspect of your life (and business if you have one) including how to create a budget for your home business can be one of the most difficult tasks to take on. It has taken me years of trial and error and multiple systems to figure out how to create a budget for my personal expenses and home business so I can track my income and expenses as well as make sure I am making a profit or saving more than I am spending.
You have to treat your finances like a CEO of Me if you want your income to grow or your business profit. If you are afraid of making money or do not manage your money properly then you will quickly lose any money that you do make. (I speak from experience.)
Today I am sharing a few methods for handling your finances. As an entrepreneur I have had good years, great years and bad years financially. Once I got in the right money mindset and took control of my business finances, I was able to enjoy more income and much less stress.
The first thing you need to do is figure out how much money you need to make for your personal & household expenses on a monthly and annual basis. This should include your monthly regular expenses, annual expenses , surprise and emergency expenses as well as bonus items you would like to be able to purchase this year.
1. The first category to consider is your regular monthly expenses: rent or mortgage, utilities, insurance, cable, internet, cell phones, household supplies, savings, credit card payments and any bills you have due every single month.
2. The second category to consider is for your annual expenses. This would include any bills you only pay once or twice a year. For instance, if you pay your car insurance every 6 months or 12 months, or your annual property tax, even money you want to put aside for an annual vacation.
3. The third category is for any additional expenses. This could be something you know is going to be an expense this year (tires for your car, fixing the back deck, re-doing the bathroom floors…) or an expense you would like to be able to afford this year (re-modeling your kitchen, taking a second vacation, having a certain amount built up into savings).
Once you have everything listed, take your monthly total regular expenses and multiply it by 12. Then add that total to the totals for your annual expenses and additional expenses.
For instance, lets say your regular monthly expenses are $2500. $2500 x 12 = $30,000
Then let’s say your annual expenses (bills you only pay annually or every 6 months) is $5,000
And let’s say your additional planned expenses for the year are $12,000
Your total minimum annual income would be: $47,000
Next you’ll want to divide your annual income by 12 to figure out your minimum monthly income goal. In this example that equals = $3,916.
Hopefully that makes sense. 🙂
When I first went through this process I was really surprised at how much higher my monthly income goal was than what I had been budgeting for in the past (and sometimes made in the past too).
Now if you have your own business, you can follow that same process for your business expenses and income goals.
By doing this Business Budget Sheet I found out that I was spending more on my business than I thought I was. I also realized there were some expenses I could cut back on. It was really helpful for me to set aside a salary for myself each month as well. Once I have made enough to reach my salary goal and business expense goal for the month, any extra money that I make is either put into savings or is used to reinvest in my business in some of the bigger or extra purchases.
In the past, I would just make money and spend money and repeat. That mindset and process did not really get me anywhere other than breaking even.
Once you have your budget figured out, you can use online tools and apps like “You need a budget” or “Wave Financials” or create a Google Drive spreadsheet or use a notebook and start tracking your expenses each month for your personal / household and your business.
When you are self employed and your income changes from month to month it can be really difficult to budget and control your spending. I have been really resistant to budgeting and really crunching the numbers because it felt restrictive to have to control my money and greedy to be thinking about how much money I needed to make too. It has been a big mindset shift for me and because of budgeting like this and setting up a salary for myself, I have seen my business and my income and final profit really grow. I now feel in control of my money rather than it controlling me which is amazing!
One of my affirmations I have in my office says “Money does not define me, neither lack of or excess of”. No, it is not all about the money, it is about serving others and making a difference. However, you have to manage your money and a good steward with it to be able to prosper.
If you are looking for tips on paying off debt and getting more in control of your money, check out this post here.
I hope these tips are helpful to you as well! I would love it if you would share them on social media and leave a comment below with your thoughts!