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Do you have a burning desire to achieve in a sport, hobby, talent or business venture but you never seem to have the time or money to achieve it?

Today I am going to talk about the importance of budgeting in relation to goal setting. For years and years I have set goals but I never used to fully fund the goals.

Before I had a home loan it was pretty easy actually, I would make a list with my family of all the things we wanted the following month. The purchases were prioritized and purchased as funds became available each week. Once I had a home loan, which obviously was one of the goals on our list, I found that our finances were a lot tighter than what they were before and it became a lot harder to set aside funds for the other things our family wanted to have and do.

So what tended to happen was the money was consumed immediately and for longer term goals there was no funding whatsoever. One of my goals was to go motor-racing, and there always seemed to be something more important to do than to put aside money for a go-kart, for example.

It took me years and years to get around to actually buy a go-kart; we would buy this or that or there was something else which needed doing. To actually have a lump sum available, $4000 or $5000 to buy a go-kart never seemed to happen. I think I ended up getting it from a tax refund.

However, what we do now is set aside some money on a regular basis for our longer term goals. Even if this does not fully fund your goal, let’s say you wanted to buy a go-kart for $5,000, maybe you put aside $100 a week and in a year, you’ve got your $5,000; maybe you can’t afford $100 a week, maybe you can only afford $50 a week, then at the end of the year you’ve got $2,500, and then you go and finance the balance of $2,500 some other way.

Without putting aside funds, things go from bad to worse and your goal will never happen. Let’s say your objective is to get to the national championship of your sport and that every week without balancing your budget you find that you run out of money. Most people will start doing overtime for example, to make more money. If you start doing more overtime, then you might have less time to put towards your sport or your hobby. So instead of training five nights a week on your sport or talent, all of a sudden or it could be practicing a musical instrument or that, you find that you start cutting your time down and spending less and less time on your goals and more and more time on trying to make ends meet.

Wouldn’t it be better to have a balanced budget in the first place, to make sure that you have got enough money coming in to cover your expenses, and sure you might have a national trip coming up and say I need $6,000 to go on an overseas trip to go to the international championships and maybe you debt finance a part of it. Still, we are talking about planning and spending as opposed to spending and planning.

Since we’ve started having a balanced budget, I have found is that it is a lot easier to hit those goals that we’ve been aiming for, and still have enough for all those things like Christmas and holidays and replacing cars and all that sort of thing.
In fact, my wife told me the other day that she’s made $500 of interest on the money she’s spent this year. It goes to show that once you get your budget balanced, that money can start working in your favor instead of against you. Now that’s not an overnight thing and I don’t promote the idea of just going to try and pay off your credit card all in one hit, or pay off all of your debts in one go.

It is more important to get the habit right than to get the actual debt paid off because it really takes some discipline and practice to establish the habit and you really need to set aside the funds that you need so that when your bills come in, you can afford to pay for them.

Once I set up my automatic payments for my big goal, I also set up high yield interest earning accounts and set aside funds for other known events such as holidays and gifts, car registration and repairs and I set up automatic payments for those things that my family uses weekly such as utilities. My wife and I have separate card accounts for day to day things and I know that I can spend all of the money in the card account without blowing the budget and my big goal.

Disclaimer: This document is educational and should not be considered advice. If you are in financial difficulty please get professional advice.

Glen Smith aka Glen The Goals Guy has been running goal setting courses for 13 years. Visit
http://GlenTheGoalsGuy.com or http://BillBanisher.com

The thought of putting yourself and your family on a budget can often feels overwhelming for many. The truth of the matter is that not having a budget, operating with financial blinders on, is much more overwhelming than creating and sticking to a budget.

Before you even get started thinking about a budget, you’ll probably want to spend some time assessing your attitude to money. Money is not an evil or a bad thing. In fact money is wonderful! Money enables you to have a roof over your head, to feed your family and pets, to keep you and your family healthy, and to wear the clothes that help you tell the world who you are and what you’re about. Money buys education opportunities, cultural experiences, and money enables you to help others in need. Think positively about your money. You certainly wouldn’t think money was bad if you were giving it to Katrina victims or the parents of a child with a debilitating disease.

Once you’re ready to approach your budget with a smile on your face, here are a few steps to get started:

Step 1. Find a pre-formatted budget worksheet. You can find these online. They generally include the basic expense categories like:
1 Home
2 Utilities
3 Food
5 Family
6 Medical
7 Transportation
8 Debt
9 Entertainment
10 Pets
11 Clothing
12 Miscellaneous
13 Investments and Savings
14 Donations

Step 2. Spend a few minutes reviewing the categories listed in your budget worksheet. Do they make sense for your lifestyle? What categories can you eliminate? What categories will you need to add? You can find this information by reviewing your credit card statements, checkbook register and your bank accounts for the past three months. Take a look at each category that is right for your lifestyle and add sub-categories. For example, under “Entertainment” you might have the following sub-categories:
1 Movies
2 Dancing
3 Books
4 Bowling

Step 3. Determine your income! If you receive a regular pay check, go ahead and calculate your monthly take home pay before taxes. You’ll account for your taxes in your budget and this information will help you at year end when you’re doing your taxes.

Step 4. Before you jump in and begin a budget, take a month or two to track your spending using the various categories you’ve already determined. This means keeping track of all your spending, keeping receipts and not letting any dollar go untracked. This is the most important aspect of starting a budget; you need to know how much you spend on everything. You need to know where your money goes. The point to this step is to gather information, not to limit your spending or spend less than you normally do. If you normally go out to dinner three times a week, don’t all of a sudden go out to dinner just once a week simply because you’re tracking it. Doing so will set you up for budget failure and we want you to succeed.

Step 5. After tracking your expenses for one to three months you’re ready to set some goals. A budget won’t do you any good if you don’t have some financial goals. Do you want to save money for a vacation? Retirement? College fund? Financial goals are two part: how much time do you have to save the money and how much do you want to save?

Now you have absolutely all the information you need to create a budget. It is important to know that a budget isn’t set in stone. If you find after a month or two that you’re spending more on utilities than you expected but much less on food, then adjust your budget. The most successful budgets are budgets that reflect your life, are realistic and are easy to access. To keep an eye on your spending and make it easier to stick to your budget, keep your information in a location that is easy for you to access.

Eddie Lamb owns LiveMortgageFree.com a website devoted to helping homeowners, first time buyers or tenants. You’ll get your own exclusive access to the program and bonuses that will get you on the road to living Mortgage Free. For more information visit: http://LiveMortgageFree.com/

To borrow a line from the Police, it might seem as easy as your a-b-c’s, but there’s a lot that goes into effective financial modeling. For the past 8 years with Practice Technologies, and going back some 10 years before that, financial modelling has always been central to the analysis I’ve relied upon to evaluate a business’ health or justify an investment in its growth.

There are several important steps to follow in developing a financial model which will serve your objectives as an entrepreneur, whether you’re trying to manage what you have or raise capital for what you could. This is particularly true for newer enterprises, as the discipline associated with identifying and thinking through the key business drivers is invaluable to the early planning process.

1. Figure out what you’re trying to accomplish.

As an entrepreneur, you have a number of competing objectives. Depending on how established you are, you may have a business to run on a day-to-day basis, and it’s hard to find the time to plan, build and manage against a set of financial models. You may be tempted to build a simple income statement-type spreadsheet that lays out revenue assumptions and backs out costs.

But effective financial models can and should be used for so much more. Using them, you can look six to sixty months down the road to plan for organic growth, evaluate opportunities to enter new markets or take on new sources of capital, or anticipate liquidity problems.

I highly recommend taking the time to build a model which will generate a consolidated set of financial statements that will provide a more comprehensive picture of your business. And the sooner you identify the range of scenarios, the easier it is to plan and build your model to accommodate them.

2. Plan, and then plan some more

A rule of thumb in traditional software design and development is that for more complex projects your engineering team may spend half of the overall project timeline in planning and design. In my view, that’s overdoing it for financial modelling, but not by much. Key planning considerations include:

Breaking down the key business drivers and assumptions, and how they are all related (more on this below)
Determining the level of detail / drill-down capabilities
Building a simple map of how your supporting sheets will roll up to your consolidated financial statements
Determining what type of sensitivity analysis you want to model and present

3. Identify the key business drivers and assumptions

Particularly if you’re looking to raise capital, breaking down and modelling your key assumptions and drivers is the most important aspect of building your projections, and one of the most important elements in presenting your business. It will reflect your understanding of your market(s), growth opportunities and drivers, operating requirements, and what it takes to pull it all together. It is also an opportunity to demonstrate that your aspirations are firmly grounded in the reality of reasonable expectations about time to market, delays, cost overruns, etc.

So if you’re modelling a new product roll-out, it’s not sufficient to say you’ll sell X Widgets each month for $Y per and multiply the two numbers. Instead, you need to model out what drives unit sales, what are the elements of pricing (including discounting, upsells, bundling, etc.), how each of these elements might change over time, and then pull it all together.

As you gain more information and market experience, or if you simply want to run some scenario analysis, you’ll be able to tweak each of these variables and watch it flow through the analysis. This holds true for almost every revenue and cost driver - wherever possible, use formulas to do the work on clearly identified sets of assumptions that can be easily updated without needing to reformat the sheets manually.

4. Do the Sanity Check

Far too often, reasonable assumptions accumulate to generate unreasonable outcomes, particularly when the financial model is extremely sensitive to changes in key variables or if compounding effects occur in the revenue streams. For example, in modelling an e-commerce business line recently, seemingly minor changes in the conversion rate of site visitors to paid subscription accounts (from, say, 0.75% to 1%) had a dramatic effect on the cumulative revenue stream over the 36 month forecast period.

So it’s essential that the model pass the smell test. If the compounded growth rates are not credible, it is frequently a reflection on your judgment as an entrepreneur, and it can negatively affect your access to capital. Putting “dampers” on your model, such as by decreasing growth rates once you achieve a certain market penetration, or simply adjusting your assumptions downward at various stages can help present more reasonable outcomes.

5. Put together a range of scenarios

You’ll want to generate downside and upside scenarios to complement your base case view of the business. Again, this requires judgment to put the pieces together and determine which scenarios make sense and which ones are a perfect recipe for disaster by showing a complete business collapse or a path to unlimited growth.

6. Take a step back and figure out what it all means

Frequently, someone will present a set of numbers who hasn’t taken the time to figure out what they really say or how they stack up to comparable companies. Understand and communicate, in plain language, what your margins are, where your forecast business is most sensitive to breakout opportunities or potential setbacks, and what your overall level of comfort is with the forecast.

Of course, the sad fact of model building is that no matter how careful you’ve been to lay everything out, you’re going to be, well, dead wrong. It’s simply not possible, particularly in a newer (or even pre-revenue) business, to predict what’s going to happen with any level of precision. But the process of building out the model will not only test, and then shore up, your understanding of your business, it will give you a sound foundation to measure your results, analyze them relative to your expectations, refine them, and continually improve your ability to plan for your business’ growth.

John Siegler is a co-founder and CFO of Practice Technologies, Inc., creator of RealDealDocs.com. RealDealDocs.com gives you insider access to legal documents drafted by top Lawyers in the US. Search over 10 million documents and clauses for Free at http://www.RealDealDocs.com.

In this day and age, it is easier than ever to spend money - just whip out your debit card and buy whatever you want. The problem with these nearly frictionless transactions is that it is difficult to keep track of your money. When most people wrote checks for every day purposes, at least they had transactions recorded in their checkbook. Every time a check was written, the person writing the check would be forced to write down the amount and see how much money was left in his account (assuming the person kept his checkbook balanced). Nowadays, it seems like very few people use checks for anything but monthly bills and very large purchases. Meanwhile, cash gets drained from their bank accounts while they use their debit cards without discretion. If this situation describes you, then you should pay close attention to the cash-based budgeting system discussed below. A cash-based budget can go a long way toward helping you get your financial situation under control.

In a nutshell, a cash-based budgeting system is one in which you take cash from your bank account for cash transactions and then divide that cash into categories. Each cash category receives its own envelope to hold the cash. That is all of the money that you are allowed to spend in that category until the next budget cycle begins.

To begin the process, you need to decide what your spending categories are going to be and how much cash you should allocate to each category. Common categories would include groceries, clothing, eating out, and entertainment. To decide how much to allocate for each, it will be helpful to look at your past spending patterns. You will probably be surprised at how much you spend on non-essentials, so it is very likely that your budgeted amount will be less than you have spent in the past. This will free up money for saving, giving away, or paying off debt. At the start of the month, withdraw the required amount of cash and divvy it up among the category envelopes.

Now comes the hard part. During the month, when you find that all of your cash for a particular category is gone, you cannot spend any more on it. If you find that it is impossible to get by on what you have budgeted for particular categories, then you need to adjust your budget for the next month. But until the next month begins, do everything you can to avoid spending more money on the category. If you have excess cash in other categories, then you can move money from one envelope to the next. The one thing you do not want to do is use your debit card to get more cash. That throws this whole system out of whack.

There are some items that will not fit into a cash system, mostly monthly bills that require a check for payment. But if you can get to the point where all of your bills are paid with check or on-line, and all other spending takes place in the context of your cash budgeting system, you will find that you have much more clarity and control of your finances.

The reason this system helps to control spending is that seeing your pile of cash disappear has much more emotional impact than using your debit card to make payments. You will be much less likely to over-spend. Even in the twenty-first century, when most transactions are done electronically, cash is still king. It is probably going to take some time to adjust to your new system. You will probably fall off the horse a few times. But if you force yourself to be disciplined and stick with it, eventually you will become a money managing machine.

ClearOne Debt Relief (http://www.ClearOneDebt.com) is a full-service debt management company providing debt settlement services such as credit card debt relief to hundreds of thousands of customers.

Sit amongst a group of friends and associates and mention the word budget, and suddenly everyone has somewhere else they need to be. Usually no one wants to talk about budgets, no one wants to think about budgets, and no one wants to follow a budget. However, when looked at with open eyes a budget is actually a fantastic thing. Here are three reasons why budget may become your favorite word:

Reason #1: A budget puts you in control of your money instead of your money controlling you. What did you spend your last $100 on? You may not remember. Maybe it was a pizza, or stickers for your children, maybe it went to piano lessons or a new pair of boots. The point is, many people have no idea where their money goes. When you set, and follow, a realistic budget your cash is freed up so you can spend your money on things that are important to you and your family rather than spending it on purchases you won’t remember buying ten minutes later.

Reason #2: A budget can improve your relationships. There’s little worse than the stress money can cause. Debt causes tremendous stress and so does the fear that you won’t be able to pay your bills. It can ruin your health and it can destroy relationships. When you form a financial plan with your family you work together as a team to reach your goals. The lines of communication are opened and the stress is eliminated because you have a plan and a team of support. Additionally, when you’re all on the same page financially there are no arguments about money, which makes better relationships with your spouse and your children.

Reason #3: Most people would agree that it is better to live within your means than to get into debt. However, some people don’t realize they’re living beyond their means until it is too late and the debt has become overwhelming and stressful. A sound budget keeps you living within your means and prevents or eliminates debt. A structured and realistic budget prevents the ‘Oops I spent too much on my credit card this month’ mistake that we often make month after month until we’re paying more on our minimum balance than on our mortgage. If this applies to you, don’t let it get to this point. Take advantage of the power of a budget and gain control over your financial life.

There is absolutely no downside to forming a budget and we’ve only scratched the surface of the benefits they provide. Take a few minutes to realistically analyze your spending habits, your income, and your financial goals. I promise you’ll be glad you did.

Eddie Lamb owns LiveMortgageFree.com a website devoted to helping homeowners, first time buyers or tenants. You’ll get your own exclusive access to the program and bonuses that will get you on the road to living Mortgage Free. For more information visit: http://LiveMortgageFree.com/

Have you ever had an argument with your partner about money? Has he or she spent more than they should? Have you over-spent and tried to cover it up to avoid a fight? I have developed a system to stop the arguments over money. I have been married for nearly 14 years and we never ever fight about money.

I will provide some simple steps for you to take to stop the arguments over money permanently but before I get to that I will make a disclaimer. If you are deep in financial trouble, go and seek professional help immediately. And for everyone, I don’t know your personal situation so seek advice from your bank or financial advisor before doing anything. This article is education and should not be considered advice.

What causes fights over money anyway? Is it the lack of money? Perhaps if you just make more money, then the arguments will go away? I believe that this is never the case. In business, clubs, churches, community groups and even government there are always arguments over the allocation of money. Bringing in more money might fix things in the short-term but once your lifestyle adapts to the new income level, the same issues will arise.

There must be a way to allocate money so that money is set aside for those things that are important but not so that you have to walk around with a check-list on how much you have spent. Of course I am talking about a budget but don’t switch off just yet! there are two fundamental kinds of budgeting:
(1) Accounting for what you spent
(2) Providing for what you need in future.

The most common form of budgeting is accounting for what you have spent. To me, this is like driving your car along the road only using your rear view mirror. Every time you see that the car has hit the dirt, you start adjusting the steering wheel to get back on track. Analogies aside, 1-2% of analytical people and accountants love this style of budgeting and no one else can stand it!

The other form of budgeting is implemented by larger organizations where they make provisions for future expenses. I am not talking about accounting tricks to save money on tax either. I mean that cash is deliberately set aside in a bank account to be used at a later date, for a specific purpose.

So how do I implement a forward-looking budget that provides for future needs and will stop arguments about money at home?

Firstly, I accepted the fact that both my partner and I must have a certain amount of “mad money” that is not accountable at all. We both have our own separate card account that is our own responsibility respectively. This might be ten dollars a week or it might be a hundred - that will depend on one’s circumstances but the amount is regular and agreed to by both of us. No one should have to account down to what one did with a few dollars of change in your pocket.

Secondly, there might be regular things like purchase of food and is common sense that this would be the responsibility of one partner or the other and this would go into their card account as well. In our case, my wife is responsible for groceries, so that goes to her account. I pay for the children’s sport from my card account.

Thirdly, there are regular expenses such as electricity, telephones and utility expenses. It may include rent or loan payments. Consider the bank fees and charges before taking the next step and shop around if possible but pay for all of these regular expenses out of a clearing account. I use a no fee, high interest bank account for this purpose. I call this a clearing account and that is where my pay goes (not my card account).

Finally, I use about 10 no fee, high interest bank accounts for other savings goals (or provision accounts). I transfer regular amounts from my clearing account into these Let me tell you about some of them. As an example I will also show how much I put aside each 2-weeks into these accounts and the annual goal.
Holiday Account - $40 x 26 = $1040
Car Registration and repair - $57 x 26 = $1500
“New Car Account” - $40 x 26 = $1040
Electrical, computers etc $20 x 26 = $520

The list goes on. I also have accounts saving towards a new home, gym fees and so on. I have a separate account for our investment property, with sufficient funds to provide for minor repairs and unexpected property expenses. The total above is $4100 and with a quick bit of math, the average balance would be $2050. At 7%, that is $143 of interest to me as a reward for setting aside the money that I am going to spend anyway.

Why does this work for me? It still takes negotiation to decide how much to put aside for holidays and so on but once I set up the payments I found that I have always had the money set aside for the regular bills. After Christmas, I had no credit card debt at all because our family didn’t over-spend on what was set aside in a separate account. Right now, it is a little tough for us with unexpected medical bills coming in. I am negotiating with my partner where this money will come from.

When I go to the automatic teller (or use internet banking) I can see how much is in my card account and I know that I can spend it guilt free and consequence free. I know not to go over the amount in my card account. So if I want to take the family on a treat, then I know how much is available and so I can choose accordingly.

In a sense, I guess, I have turned the banking system around to do my budgeting for me. After all, isn’t that what technology is meant to do for me?

http://MichelleTheMoneyCoach.com
http://GlenTheGoalsGuy.com
http://BillBanisher.com

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