The Ultimate Guide to Budgeting for Entrepreneurs

I still remember my first salary slip, it was a weekly salary slip and I was so thrilled to be making my own money. It was very little money but I was excited. What I must confess is, I lived way beyond my means from that first salary slip and some years after that. It was not until I wanted to purchase a house that I recognised what a mess my finances were, I remember having to fill out a home application form and having no idea how much I was spending on any of the items listed there. It was a mess and I knew I had to do something about it. So where do you start?

 Step One

You have to know where your money is going?

I took my past three months bank statements and recorded each and every expense. I recorded airtime, groceries, family loans, e - wallets, eating out expenses, shopping, manicures, hair expenses, lashes, everything. It was important to do this to establish expense categories.

Step Two

Determine your average expenditure per category

Once you have an overview of the past three months, you will have a good indication of what your average spend per category is and if you are spending way beyond your means you can start to adjust until you have a plan to increase your revenue

Step Three

Pay attention to the triggers that set you off on a spending spree that makes you fall off 

Changing habits is not easy, especially money habits. There is a psychology to how we spend and it takes a while to uncover it. There are many books written about the relationship we have with money and the root causes influences our relationship with money. When it came to overspending, I had to spend time thinking about the emotions that triggered this for me. The biggest motivator was feelings of overwhelm, exhaustion and mental burn out. Shopping was a fun activity that distracted but it was costing me a lot. I had to fid alternative strategies for managing these emotions and clearing my mind.

Step Four

Follow the 50/30/20 Rule of Thumb for Budgeting

50% should be spent on your living expenses aka needs

30% on your lifestyle expenses aka wants

20% on your financial goals aka savings and paying off debt

It is very important to note that I had to have to have a clear plan for paying off debt and saving at the same time, no matter how small the money was.

Step Five

Set up a financial appointment

It is critical that you do weekly or monthly financial check in’s depending on how often you want to update your budget. I set a full working day, once a month to go through all my statements, management reports and all the updated I need to do for my accountant. Let me tell you something, I learnt the hard way when it comes to business. I am diligent about my finances all round and it has helped me a lot is setting goals, recognising where I need to channel my energy and reaching my targets.