Welcome to the new year! It’s 2019, and you and I have some big goals to achieve.
If you clicked through to this blog post, that means that one of your goals revolves around making money. Which is pretty standard for a business owner. Makes sense.
But here’s the deal. It doesn’t stop there. There is absolutely no point in making more money if you don’t have a system in place to PROFIT off of that money.
Revenue is great. Revenue is where your resources comes from. You can’t profit off of money that you never made.
But, once you bring that revenue in, the real power is in your profits. And if you don’t have a plan to make 2019 your most profitable year yet, you’re about to waste a lot of money.
Welcome to your guide to making 2019 your most profitable year yet!
There has to be a plan in place.
You’ve probably already caught a whiff. Can you smell it? I think you can...
Budgeting. The stinky word. You sensed it coming, didn’t you?
In order to guarantee your profits next year, you NEED a plan. You can disguise it however you’d like - money plan, spending plan, profit plan - it’s all a budget.
But don’t back out of this post yet!! Because I’m about to teach you about a budgeting system that actually works. Because I LOVE the word budget, and my goal is to show you why you should too.
“Budget” is not a bad word.
You probably hate the word budget (or at least, choose to ignore it) because budgeting has never worked. The majority of people have tried it at least once. But a lot of people can’t seem to get it to do anything for them, so they write it off and say that they’re just not a “budget person.”
Wrong. Everyone can be a budget person. You just need the right system.
First, let’s take a look at traditional budgeting, the way most of us have been taught to budget. I say “us” because I’m right there with you - I learned how to do it and tried (and failed) many times to get it right. I even have a couple blog posts on this website that teach a more traditional approach to budgeting. I’d thought I’d found a way around the flaws of budgeting, but in time, those methods revealed their flaws.
The thing with traditional budgeting is that it looks good. It sounds good. It makes you think that you’re doing better with your money, when really, you haven’t actually done anything useful for your money management. But you don’t find that out. Instead, you’ll think it’s you that’s failing. You’ll blame yourself for not being financially responsible, and you’ll quit. When really, the problem was never you. The problem was the budget.
Here’s, to some degree, how you learned to budget:
Start at the beginning of the month. Write down how much money you expect to make this month. Write down how much you estimate you’ll spend in different areas this month.
Depending on how you learned, you either learned to assign every dollar of estimated income to an expense or savings category, or you learned to try and have as much of your paycheck leftover as possible to go towards a savings goal.
From here, you go on to live your life. You make money, you spend money. Then, at the end of the month, you come back and check your actual numbers versus the amount you budgeted.
Or, you tracked throughout the month, and found that your numbers were off, and that stressed you out - suddenly, you don’t have any money left for groceries this month because you’d only budgeted $250! Gah, budgeting is too restrictive!!
Or, you tracked throughout the month and found that your numbers were off, so you tried to adjust everything. But then it threw off all your other numbers which stressed you out and - what’s the point of this whole thing anyway if I’m not even going to stick to the plan?
Welcome to traditional budgeting. It’s a static set-it-and-forget-it “plan” based on estimates and projections.
We don’t need traditional budgeting. Because budgeting isn’t a projection, it’s a PLAN. And a plan should have less variables and more certainties - that’s kind of the whole point of planning something out.
We need cash-based budgeting.
Why this matters.
Cash-based budgeting is all about working with real numbers as they occur. Who said that you could only budget on the 1st of a new month? Who said our financial stories had to be told in 30-day increments?
Probably someone who wanted to line up their plan with their monthly bills. But that just means you’re centering your whole life and finances around your expenses, which, if you ask me, is a pretty negative and restrictive way of handling things.
It’s time to create a plan off of the money that actually comes into your bank account. Even if that means you’re budgeting twice a month, or once a week - that’s okay.
When I worked at my day job as an accountant, I received a once-a-month salary. Projecting my income a month out was easy, so we did. And we were able to use that fixed number to give us peace of mind that we could cover our rent and regular bills. But my husband worked retail, and he certainly did not have a reliable income. So we would project, adjust, project, and adjust - that’s why we saved his income for the variable expenses like groceries.
We were RELIGIOUS about our monthly budgeting. In fact, I’d venture to argue that we were doing just about the absolute best we could have possibly been doing with the traditional budgeting format. We saved a lot of money in a short amount of time, and never really worried about paying our bills or covering an emergency. However, if you asked me if I thought we were making the most of our income? I’d say no.
I believe we are all stewards of our money. It’s been given to us to manage, and it will ultimately be used for an important purpose, whether to provide for ourselves or impact others. And I believe that if we squander that opportunity to manage money, we will not be allowed to manage any more of it. Regardless of your spiritual beliefs, you’ve got to agree that money stays in the hands of those who know how to manage it.
If money is still slipping through the cracks, what kinds of opportunities are you wasting?
When you leave room in your budget for guessing games, you’re allowing your money to slip away.
Too good to be true?
So, from now on, your job is to create a plan based on the actual money that enters your bank account, as it enters your bank account. Assign every single dollar a job. Then, make all of your future spending decisions off of the budget, NOT your bank account balance.
This small shift is everything, especially when you have unpredictable income. It will remove so many anxieties and uncertainties around budgeting.
If it sounds too simple, that’s because it is simple. Yet, so few people do it this way! But think about it! It makes sense, right? Why plan out how you’re going to spend money you don’t have yet? Why not just take a look at your wallet (also read: bank account) and see what you have available today?
Then, when you add more money to your wallet (bank account), you can plan out how you’ll use that. And again, when more money comes in.
It’s SO simple! And it will make it so much easier to create a plan for your spending and your profits (because yes, when you budget, you PLAN to make a profit! Which means you WILL!).
If this sounds like something you’d like to get on board with, you can read more about what this concept looks like and what tools and systems I use to implement it in my free mini-ebook, Captured Cash Flow. It’s a super quick read that’ll dive deeper into these concepts and give you a glimpse at three of the core elements in my framework for my signature coaching program, Cash Flow Strongholds: my favorite budgeting tool, my personal finance philosophies, and my business finance system.
Until then, make a plan to MAKE A PLAN. Your money is meant for really great things, but you have to make sure it’s there to do its job when the time comes.
Until next time!
- Katie Scott