Budgeting 101: How To Approach Your Personal Finances Like A Corporate Business Plan

I’m still forgetting to put “2012″ on my checks and already, the tax forms are pouring in. As I sit down and make sure that I’ve done my patriotic duty and paid my fair share to Uncle Sam, it seems like the perfect time to create my yearly personal budgeting plan. That’s right, as if spending hours in company meetings going through departments and projects with a fine-toothed comb just wasn’t enough, I’m preparing to do the whole thing over again with out personal bank accounts. After all, participating in the debates that form our corporate business plan has taught me some valuable tools about financial planning and yearly budgeting.

Here are some budgeting basics that I learned while sitting in on my corporation’s annual business planning. It’s definitely helped me look beyond my bills and into the future, no matter how much money I’m currently pulling in.

• Differentiate your departments. It’s a lot easier in a business with assigned accounting classifications, but you can sort through your expenses and group them based on the type of payment. Instead of looking at all your monthly bills as a lump sum, you need to differentiate between basic cost-of-living, investments and leisure spending. These all have a place in your budget, just make sure than you prioritize them accordingly.
  

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• Look beyond your day-to-day expenses. When I first started budgeting, my only goal was, “Pay the bills.” And I think very few people ever consider looking past their everyday expenditures. We pay our mortgage, insurance and cell phones, then we have a lump sum to be applied to various pursuits at various times. Sometimes we throw in the savings account, other times we indulge in an extended vacation or new furniture. We don’t plan what to do with that extra income and so we use it in inefficient ways. A real budget does so much more than pay your bills. It prepares you for the future. Every yearly budget should be taking the next couple decades into consideration.
• Use the tools available to you. My company’s owners don’t walk in to those meetings with a couple of spreadsheets ready to make up their mind on a million varied matters. They have reams of information and a team of people to help them flesh out their financial path. You may not be hiring on a staff to handle your finances, but that doesn’t mean you have to go into this process blindly. There are hundreds of free budgeting apps, spreadsheets and planners available on the internet. Simply signing up for services like Mint.com, which helps you manage all of your accounts, loans and investments with one interface, can help you see the larger picture.
• Give yourself some space to re-prioritize. The best lesson I learned from corporate business plans is that they aren’t set in stone. And that doesn’t make them any less useful or important. Businesses realize that their revenue might change mid-year, they know that their costs won’t remain constant and they’ve considered how a new product or a sudden emergency could change their course. Without a crystal ball, they’re left to create back-up plans and wiggle room within their budget to accommodate these adjustments. Your budget doesn’t have to determine every move you’ll make until 2013. You can set aside a percentage of your income to be used in case you have a change of heart or circumstance.
• If it’s not realistic, it’s not doing you any good. Especially for those new to the budgeting process, it’s easy to under-estimate the money that you actually spend. For instance, if you stop at Starbucks for a White Chocolate Mocha on Monday mornings, like I do, then you might spend more than $300 a year on Starbucks. At first, that seems pretty high. It’s easy to think, “I shouldn’t be spending that much. I won’t spend more than $50 on coffee!” Well friend, that means stopping for your weekly treat less than once a month. And that’s fine, as long as you’ll actually follow through. Now Starbucks is just a small example. Especially for those trying to pay down debt, it’s easy to make your budget so restrictive that you simply stop using it out of frustration. Be honest about your spending up front and it will be easier to stick to your plan all year long.