Our guide to creating a bulletproof budget

Whether you are in business or not, understanding your spending is critical. In fact, for small business owners, planning and controlling your personal spending can be one of the most important parts of running your business. After all, the biggest single expense of any small business is typically the business owners drawings or wages.

Almost everyone would be aware of the term budget. For us, a budget is a blueprint for financial success. Living without one is like driving at night without your lights on – you might get to where your going, but there’s a good chance you’ll take a few wrong turns along the way and anyone who sees you might think you’re a little crazy.

So, where do you start?

The outgoings

The best place to start is with your outgoings. Include everything – rent or mortgage, groceries, gym memberships, subscriptions such as Foxtel or Netflix, transport costs, socialising, shopping, paying off debt (credit card, HELP fees). Also look at, and average out, your annual utility bills.

The best place to start is with your bank accounts. By exporting the last 12 months worth of transactions into Excel and sorting it alphabetically by description, it wont take you too long to go through and pick up everything that pops up over a 12 month period.

Typically, things are paid on either a weekly, fortnightly, monthly or annual basis. It is important to break every line of your budget into the those frequencies. Our template below will do this for you.

What’s coming in?

Once you have summarized your outgoings, you need to include your income.

Include the income you earn from all sources, and the amounts received after tax and super (the net amount).

Arrange the income into the same frequencies (weekly, fortnightly, monthly & annually).

Are you breaking even?

If the amount that is coming in is greater than the amount going out your in luck. However, if your expenses are higher than your income, your going to have a problem and will need to make some changes.

Review and update as you go

Your budget will be changing constantly – the cost of things will change over time, you might get a pay rise, have another child or get engaged and suddenly have a wedding to pay for. Regardless of your circumstance, the one things that is for sure is that things wont stay the same for long.

When things change, simply edit that line in your budget.

You should also regularly review the things you are paying for. Get quotes from alternative suppliers, and scrap things you no longer use.

What power does having an accurate budget give you?

Having a single page that lists all of your income and expenses gives you power to make important financial decisions and answer some important questions. Some of these might be:

  • How much does my business need to pay me so I can cover my expenses.
  • Can I afford to buy those shoes?
  • Can i get a better deal on my mobile phone?
  • Am I paying for things I don’t use (ie a gym membership or itunes account?)
  • How much can I afford to save, pay off the mortgage or invest?
  • How will buying a new car affect me?
  • How does it affect my budget if i refinance my mortgage to a lower rate?

Set your goals and automate

Hopefully after completing the above the bottom line of your budget is a positive (you’re making more than your spending).

If so, great, work out what you want to do with it, and set up automatic transfers to wherever you choose to send it.

Download our budget template here:

LBW Budget Template