Start Planning For 2012: Your Budget

by Randy Murray on October 25, 2011

Most people hate budgets and budgeting. I know. I understand. Unfortunately they’re unavoidable. They’re an essential tool for any business and an increasingly crucial part of personal life. Budgets don’t have to be difficult. And they don’t have to be looked at as limits. Budgeting is a way to understand and control factors that, if ignored, will end up controlling you.

A good budget will have two main parts: your plan and your reality. It doesn’t have to be set in stone and inflexible, but it does have to be something that you keep updated and on top of all year long.

Let’s get started on next year’s budget.

Here are the basics:

  • How much money do you have on hand?
  • How much money to you anticipate earning?
  • How much money to you anticipate spending?

The first of these is necesarily a hard number, not an estimate; but not all of it may be “spendable.” Cash on hand may already be committed. When you list your available funds you need to be clear that this is uncommitted, unreserved, and actually available money.

Next: what you will earn. That’s a difficult one, but that’s why you budget. The most reliable number, if you’re doing the same thing next year that you’re doing this year, is what you earned for this past year. This number is a projection. Break it down by month.

Your anticipated spending number is very important. This may be where you can exercise the greatest control, especially if you know the first two numbers. You can reduce spending or accelerate it, depending on your cash flow. You’re in control if you understand these numbers. This is where you’ll review your goals for the coming year and see where you need to spend and when you need to spend it to achieve your goals. This is the point where you’ll make decisions, make choices. And you’ll do that equipped with facts.

If you find that you can’t achieve your goals based upon your budget, this is the time to make new goals, ones that will help you to step back a little from your original goals, and move to a secondary point, one from which you can later reach those higher goals. Your budget will help you, not hinder you. Use it, keep it updated, and make adjustments as time passes. You may suddenly find that you can move forward on other goals or you may discover that you need to postpone or change goals for a time. Either way, you’re in control.

With your goals and budget in hand, you can begin the next phase of planning: mapping out the obstacles.


The Start Planning For 2012: Your Budget by Randy Murray, unless otherwise expressly stated, is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.

{ 2 comments… read them below or add one }

subhorup dasgupta October 27, 2011 at 11:23 am

The simple approach of all the posts in this series has been especially attractive. Most of the posts on goal setting or personal finance take a highly technical systems approach that may not be what I am looking for as a lay reader. Thanks, Randy, for setting my 2012 ball rolling.


Randy Murray October 27, 2011 at 1:37 pm

You’re welcome. Good luck with your 2012 planning and keep a supply of napkins nearby at all times!


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