Whether you are a business owner or running a household, it is important to know how to set a budget!
Even more important, and more difficult, is sticking to said budget!
So, how do you set a budget and what would an accountant recommend?
Part of our Profit First System is based on setting up different accounts to better organize what part of your budget the money you’re making is allocated for.
This includes an account for your profit, bills, payroll, etc. This way, when money comes in, you put it into each account and you have a better idea what is left over.
Let’s take “bills” as an example, as this is something that applies to everyone, whether you are working on your personal or your business’ budget.
To start you would take the money that comes in (income), such as member dues or your paycheck. Then, you would take the percentage of that money you need for bills and put it in its own account.
The purpose of this is to get it out of your main account, so there is no chance that money will be spent on anything else. This helps prevent overspending and being late on your bills.
For more info on setting up those accounts and removing temptation from your books, check out THIS blog post!
Another important recommendation for maintaining your budget and paying your bills on time is setting up allocation days. I usually recommend setting up those allocations days for twice a month (10th and 25th).
During those 2 days a month, you would sit down and work on your books. You would use those days to transfer money into the appropriate accounts and pay any monthly bills or do payroll. That way, you aren’t constantly juggling money around and scrambling to remember whether you paid something this month or the month before.
My final tip for today would be to learn to live within your means. If you set a budget for something (like equipment upgrades or payroll), try and make sure to stick to that budget.
Don’t get in the habit of pulling from one account to cover another, as it can become a slippery slope into chaos.
Looking for even more tips for paying your bills? Check out THIS blog post.
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