Part II: Making a budget
No business operates well without a budget. Your budget should be a realistic set of spending parameters. The more control over and security around your finances, the freer you’ll feel when it’s time to be creative.
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- Track your spending. Every time you make a purchase, write it down. Make a distinction among all the various categories of spending – sundry items, groceries, meals out, entertainment, business supplies, household supplies, health insurance, car insurance, etc. At the end of each month, add up all your totals, ideally keeping track of income and expenses in an excel spreadsheet or Apple iWork Numbers, or using software like Quicken or Quick Books. Track your purchases for at least 90 days. This will make sure that you have a fairly exhaustive sample of all the categories of spending involved in keeping you and your business running.
- Continue to refine your data, letting your budget evolve over this 90-day period. You will begin to see patterns of expenditures.
- Do not judge yourself. For now, this is just information.
- Begin to set ideal limits for each category as determined by your expected revenue and your cash reserve goals.
- Continue to analyze the numbers. Are there ways you can save? Barter? Are you spending more than you earn?
- Be honest with yourself. Knowing what it really truly costs to live and produce your work is the only way to become a true master of your financial situation and to make plans for the future.
