Your budget is your budget. It’s not about telling you that you have to put away a certain amount of money.

It’s about you being empowered to make whatever financial decisions you want. And keeping track of it.

You can spend money on the things you want and need because you’ve budgeted for it.

One of the key things Mecham says is that it’s not about the money. What are you going to do with a big pile of cash that has nothing to do? What’s the point of having $10,000 if it doesn’t have a purpose?
You think about what’s important to you. Whether it’s vacations, gadgets, saving to buy a bigger house, to enjoy fancy meals, or saving to send your kids to school.

We’ve seen time and time again, if you’re terrible with your own personal finances, it’s very unlikely that you’ll have good business money habits.
If you have good business money habits and can translate that into your personal habits, you’ll have better both.
No matter how inconvenient you make it to get that money, you have the power to take it. If your personal finances are bad and you’re backed into a corner, you don’t care how difficult it is to get the money out.

Creating a budget is about safeguarding the business. But also to make sure you’re managing both aspects of your finances well.
There are 4 rules to creating a budget.

Budget Rules

Give every dollar a job.

You pay your mortgage, you pay your electric, you pay your cell phone, etc. These are regular things that your money needs to do. At the end of the month, you may have $500, you save it. Saving in itself isn’t a job. What are you saving it for?

What happens is that your grill breaks. You see you have $3,000 in the savings account, so you buy the expensive grill. But that wasn’t something you budgeted for.  You start questioning every purchase you make. Perhaps you really want a new grill, but you’ve also noticed that somethings going wrong with your refrigerator.

What has priority?

With every dollar having a job, you can assign your savings a job. You want to save for a vacation.

One of the ideas from “Your Need a Profit” is having separate bank accounts for everything. You’re doing the same thing. The money that goes into the Taxes account, that’s its job.

Embrace your true expenses

Your true expenses aren’t just your mortgage and electrical bills. They’re also tires for your car. New eyeglasses.
These are expenses that you know are going to come eventually.

Start budgeting for those, always.

In your business, you know you’re eventually going to run out of ink for your DTG printer.
Your equipment might be under warranty, but you know you’re eventually going to need parts and repairs. Set aside the money for this eventual expense.

Roll with the punches

Your budget is going to change all the time. You’re going to have different months. Different things are going to come up.
Perhaps rent goes up. Your local municipality passes a new law and business property taxes went up.

Prices on blanks could change. Perhaps a supplier had a standard $2/shirt. However, now some are $1.75 and others are $2.25. Your expenses have now changed.

You may decide to refinance your mortgage to get a better rate and save $100/month. You might change your cell phone plan to a lower rate.
You need to change your budget.

You can take those savings you’ve just found and move them to another priority. What is the highest priority?
It’s not about reducing your expenses. Everything on your budget is an expense. Whether it’s the luxury vacation or the groceries.
If long-term retirement savings is a priority you can perhaps move funds from reducing your cell bill into that item.

Age your money

Aging your money is essentially paying all your bills with money that you earned at least 30 days ago. You are never waiting for a paycheck to pay a bill.

The point is to age it to as old as it can get. An initial and obtainable goal is 30 days.
Getting a month ahead can be done fairly quickly. All you do is chop all the low priority stuff out. It could be that $5 morning coffee you love or Friday date night.

If you cut out that $5 coffee out for a month, that’s $100 you’re aging. And you’re not cutting it out forever.
You cut date night for 4 weeks, you have another $400.  You might need to extend it to 2 months so you can save $1,000 and that’s what gets you 30 days ahead of your bills.

Make it a goal to get 30 days ahead. Doing so will also help you see areas in your finances where you can improve. Both personally and in your business.

If you’re late on your phone bill they might charge you a $3 fee. Which might seem like nothing, but if you continue to do that, those are dollars that didn’t originally have that job. So that might be something you get on top of to gain those dollars back.  It could also be a credit card that has interest fees.

Once you’ve aged your money and you’re a month ahead you can prioritize.  You get to decide, is that $5 coffee great or do you not miss it? Do you want to bring back date night every week, switch it up to every other week, or change where you go so it costs less?

We looked at “Profits First” and that need to put money into your profits account. You can always find a way to cut your expenses by 10%.
That same philosophy applies to your personal budget as you prioritize.

What’s your priority?

Everyone gets to make their own decisions about what is important. You can read books, listen to advice from your friends, but realize what is important to you.

Some people aren’t big into vacations. They would rather spend their time going to sports games. Others aren’t into gadgets.
It’s the same philosophy in your business. What is the priority? A natural priority may be profit, but what are you going to do with that profit?
Instead of putting it into your personal profit you might be interested in starting a second business. Or expanding your business to a retail location.  Or to give it to charity.

You don’t have those choices when you’re constantly trying to figure out what credit card to charge.

Start today

Start right now with the money you have.

You can adjust as you go and find other expenses that are your priority, and others that can be reduced.  You’ll start to recognize things that you’re spending your money on that you just can’t afford.

Because you’re now paying attention to your budget you’ll get better at it. You’ll get relaxed and comfortable with your money as you go.
There’s no panic in the middle of the month when you realize you can’t pay for something. You have more control.

Little piles

With every dollar having a job, you may have set aside money for a new iPad, a present for your mom, etc.
If something happens, for example, you broke your glasses, that’s now a bigger priority. You can take a little bit from each pile to buy your new glasses.

If something big happens, you still have a plan of where you need to get back to. And you know that you can get there because you’ve already done it once. It’s much less stressful.

Taking control

You’re more prepared for the unexpected. You’re more prepared to recover.

You have this long-term plan and you’re 6 months into it. Then something happens that costs you $10,000. You look at your budget list and it eats up everything.  But now you have a recovery plan. You figured out the problem and you know how to get out of it.

Prepared for opportunities

The goal of the budget is that no matter what emergency happens, you’re ready. It also means you’re ready for opportunities.
In your business, you’ve been setting aside money.

Perhaps it’s for in case a big order comes up because it happened to you before.
Thread, rhinestones, and vinyl don’t expire. If you’ve been setting aside this money and an amazing deal comes up on Colman & Company, there’s no better time to buy it.

You could have just saved $150. And you know it’s something you’re going to need eventually so it’s not going to waste.
You might also be able to buy the larger bag of rhinestones because you have the funds available.

That over time saves you money.

Summary

• You’re looking at the money that’s in your bank account with purpose.
• Embrace your true expenses. You have the future in mind and this is money you will spend, but it may not show up this month.
• If you’re living on the edge of your expenses, you’re not prepared for emergencies or opportunities.
• Don’t be afraid to change things. If an expense goes up you need to take it from somewhere else. If an expense goes down, add that money somewhere else.
• The act of paying attention to your budget and having goals will give you a better business.
  Have a good business!