We are all unique and different when it comes to so many aspects of our lives. In recent years, I have learned that financial education truly does differ. Not just simply based on race, but so many other factors play into how people treat money in their personal and business lives. In order for your business to thrive you need to understand how to manage your money in a way that works for you. What works for one might not always work for others.
Tools you will need to figure out your budgeting style:
- Household bills and expenses
- Bank Statements
Consistent Income Budget
If you still work a salary 9 to 5 job you make a consistent income every month. With bonuses coming maybe two to three times a year. However, many people who have consistent incomes live paycheck to paycheck. If you have a consistent income, budgeting should be way easier for you to do. Determine how much you make every paycheck. Most months you should get paid twice a month and a couple of times a year you may get an extra paycheck a month. You will base your budget on your lowest pay month, that way you can live in your means not outside of them. So if you make $4K 8 months out the year and $5K 4 months out of the year, you will determine your budget on the $4K a month salary.
Freelancer Income Budget
This style of budget is becoming more common for many of my peers who are taking the leap into the entrepreneur arena. As mentioned in the consistent income budget section, we will be budgeting on the lowest income level for your company. Something that you need to do if you have not is determine how much you need to make to live. I highly recommend reading “My So Called Freelance Life”. It guides you on how to create a freelancer life that works for you. It is the number one book I can refer to anyone thinking of launching their own business.
Several of my friends are on the “Zero Down Budget” that Dave Ramsey created. Basically, every month after you calculate all of your bills and expenses, and everything is spilt into the categories, set up leaving ZERO from your check. Every penny is virtually spent. Others are on “Spilt Down Budget”. This is where you break down all your expenses and break your checks down to center them around your bills. Most of them have all their bills due at the first of the month and the first check goes to all that stuff and the second is the “free check”. Personally, I believe there should be an even balance. If you have $2K worth of bills, spilt them during the month. Half on the first of the month and half the second part of the month. Helping you keep money in the bank.
One important tip for budgeting is make sure you pay yourself first. Meaning 10% of your income should go to a savings account each month. This will help when/if emergencies arise.
What style of budgeting do you do? How are you taking control of your finances?
Image by Ken Teegardin