The Importance Of A Financial Budget
To be effective, every plan should be a SMART
S – Specific
M – Measurable
A – Attainable
R – Realistic
T – Time-based
Integral to every business plan (and
preferable to any personal life plan) is a financial budget – it includes specific, measurable details and
assures you (and others) that the whole business or life plan is financially attainable and
what is a budget?
George W Bush said, “It’s clearly a budget. It’s got a lot of numbers in
A budget is a picture, painted in numbers, of how you estimate your position will be at some time in the future.
That future time can be anything from a month to five years. People do budgets for over five years and i would
suggest that, since the future is uncertain, anything beyond that is very tenuous
If it’s your first time doing a budget, I
suggest you do it for one year – do it for every month of that year. So, you estimate, as best you can, what
your income will be for January, for February, for March and so on. Then you estimate what all your expenses
(or spending) will be for each of those months. Take your expenses from your income and you can see whether
you have a cash surplus or a cash deficit, each month.
These surpluses and deficits will change
your bank account balance so your budget will show you what your bank balance will be at the end of each
US comedian, Jackie Mason, said, “I have enough money to last me the rest of my life, unless I
You budget so that you can afford the things you want in your life and in your business. It’s not there to tell you
what you cannot spend (as many people think) but to help you organise your life and business in such a way that you
always have money for the important things ... and when you want them.
also makes your income clearer to you and shows you the result of collecting your debts sooner and what other
ways of increasing your income are.
In a way,
your budget is like a chessboard – in front of you are all the pieces and you can move them any way you like.
Some moves will get you check-mated (bankrupted) and some will have you winning. So, once you’ve done your
initial budget, you’ve actually got something tangible to work with – you can move some expenses forward a
month, allowing you to purchase something else this month. It helps you realise what are the most important
expenses and what is less important and, from that, you can prioritise your
Author, Sally Poplin, said, “Some
couples go over their budgets very carefully every month; others just go over them.”
If you are consistent with monitoring yourself and your budgeting, you won’t go over your budget and you’ll still
have all you want to buy. Chances are, your budget will help you realise what wasteful spending you’ve been doing –
spending that stops you having the really not important things you need and
In a business, you’ll find yourself
spending on things that give a greater return – you’ll be less distracted by wasteful spending as you’ll be
able to keep your eye on the big picture, the goals and targets you’ve set and achieving
is the benefit of a budget?
Some people think a budget is just a method of worrying before you spend
money, as well as afterward. If you think that, you haven’t done budgeting the way it’s
Course in Miracles says that we can never be angry with a fact. We can only be angry with what we
imagine. A budget takes what you imagine and converts that to facts. With those facts, you then have the ability to
plan and rearrange your finances so they work for you, rather than you working for
For businesses, budgets have other advantages:
- You’ll know if particular projects or businesses are viable before you
invest your valuable money into them.
- Knowing what your cash flow is probably going to be, you’ll know what overdraft and/or loan applications you need
- When you show your budget to your bank (or possible investors) they’ll be much happier to provide the necessary
finance because you’ve done the hard work of working out your budget and preparing for your future. A budget is
probably the greatest sales tool for raising money
US Senator Everett
Dirksen said, “A billion here, a billion there – sooner or later it adds up to real money.” Whether
it’s a million or a hundred, it’s all real money and a budget is the best way to get real with
Get real, today and download yourFREE Financial Budget