Budgets and Controlling Expenses: A Brief Overview

Brief Comment about Budgets

Budgets are very important business tools.  Budgets, as most all are familiar with, are planned revenues and expenses.  It is a forecast of the future.  Actual revenue and expenses are compared with budgeted revenue and expenses.  This way you can tell whether you are within your budget and pinpoint areas that may be lacking. 

Setting up a budget for the first time for any Internet marketing venture can be very tricky.  The key here is not to panic because creating a budget comes with gained experience and persistence.  How many times have you tried to live on a personal budget?  Needless to say, it is hard to stay on a personal budget because of unforeseen expenses, such as car problems or medical emergencies.  The more you stayed with that personal budget, however, the easier it became to forecast future revenues and expenses.  Then unforeseen expenses became easier to deal with.  Why?  You are more experienced in budgeting now compared to when you had to create a budget for the first time.

Your budget must be in line with and reflect the goals that you set in your business plan.  If your budget does not match any of your goals, you will fail in your Internet marketing venture.  Revenues should be planned as accurately as possible.  Expenses, on the other hand, should be padded or inflated.  The reason for this is to allow for flexibility. 

Do not get alarmed if some expenses exceed budgeted amounts.  You may see that one expense is over its amount budgeted while another is way under its budgeted amount.  The key is to look first at your total budgeted expenses and compare this to the total actual amount spent.  If the actual totals are equal or lower, you can breathe a sigh of relief.  However, you will still need to see why that particular expense was over its budget and make adjustments to the budgeted amount, if necessary.

Brief Comment about Controlling Expenses

To the Internet marketer, the most controllable expense you will have is advertising. It is the “make” or “break” of your entire Internet Marketing venture.  You really have to be on top of this expense if you want to survive selling on the Internet.  If your advertising is not working, change the advertising.  Do not wait until you have lost a great amount of money to know that it is not working.  Monitor your advertising closely so you can see the trends in your items you offer online.

Another controllable expense you will incur involves buying items for resale such as products, programs, memberships, and subscriptions.  When you purchase such items, you must have a way to get the word out.  This is where the advertising model takes over.  You may spend $200 on a program or product to resell, but your advertising costs will probably equal as much as the cost of the item you purchased.  With just those two expenses, you must now sell $400 just to recover the cost of the product and advertising.  

Choose your products or programs wisely.  Just because a program looks good does not necessarily mean it will sell for you.  Research your potential product or program before you buy.  It will save you money in the long run.  Monitor advertising costs on a daily basis to make sure you are in a profit mode.  For more on Internet Marketing, I invite you to purchase my new eBook “The Training Guide for New Internet Marketers.”  For a limited time, the cost is $10.

Tags: brief, Budgets, Controlling, Expenses, overview

Why You Need A Personal Cash Flow Budget

It is true that some high income earners have no idea how much they spend, simply too busy making money to take the time to work out how they are spending it. And there are some people who consider you are not really wealthy if you ever have to ask how much anything costs. Budgeting is so demeaning.

However, it is no coincidence that all major businesses budget and account for their cash inflows and outflows. It is unlikely any lender or potential shareholder would provide them with funds if they didn’t. They would be viewed as financially irresponsible.

If you’re serious about personal wealth management, we believe that household cash flow budgets are a necessity, not a nice to have or something only the less well off need to worry about.

A personal cash flow budget requires you to estimate:

* The timing and amount of your expected cash inflows (e.g. earnings from employment, interest, dividends); and
* The timing and amount of your expected cash outflows (e.g. family expenditure, tax payments)

for an appropriate planning period. We consider that an appropriate period for most of our clients is to their age 100.

These estimates, together with their regular review, are critical to building a realistic financial plan and accumulation of wealth by design, rather than by accident.

You’re financially blind without a personal cash flow budget …

Some people are very diligent in recording their annual cash inflows and outflows, using software like Quicken or Microsoft Money to reconcile their bank statements and, perhaps, provide information for preparation of annual tax returns.

But many don’t go the next step, to ask what are my expected cash inflows and outflows for the next year. And then spend the time to compare actual with estimates, to understand whether they are saving more or less than they expected.

Even fewer prepare these budgets over extended periods. The purpose of such long term (or lifelong) cash flow budgets is to help assess whether, if you keep doing what you are doing now, you will be able to accumulate sufficient wealth to retire when you plan and continue to live in the manner you have (or want to) become accustomed.

Without them, your chances of achieving your long term financial objectives are pretty remote. But if you are going to the trouble of doing lifelong cash flow budgeting, it is important that it is done properly. Otherwise, it is a case of garbage in, garbage out. A real life situation will illustrate.

A number of years ago, we assisted a client who was three years away from his planned retirement. He was a partner with a major accounting firm, good with numbers, who was comfortable that he was well placed, financially, for retirement. But, fortunately for him, he sought a second opinion.

When questioned in our introductory meeting how much he was currently spending and how much he expected to spend in retirement, he replied confidently about $150,000 p.a. and $100,000 p.a. respectively. By the time we had completed a thorough budgeting exercise with him, the figures were revised to more like $200,000 p.a. and $150,000 p.a.

Among other things, his initial estimates had failed to take account of “capital maintenance”. In particular, the ongoing upkeep of his Sydney residence and a family beach house, and the regular replacement of two motor vehicles.

Our rough rule of thumb, discussed in “How far to financial freedom”, indicates that additional wealth of about $1.25 million is required to support another $50,000 p.a. of planned expenditure! The comfortable retirement expectation needed some significant revision.

The story had a happy ending. With some adjustments to his existing financial position, and a decision to take on some part time work beyond his retirement from the accounting firm, the client’s revised expenditure expectations were able to be met. But all this would not have been necessary had he prepared more comprehensive and regularly updated budgets for ten years, rather than three years, prior to retirement.

Lifelong personal budgets are the foundation …

Well formulated lifelong cashflow budgets are the foundation on which any smart wealth management plan should be built. If you do not have at least reasonable estimates of what you expect to come in and go out over extended periods of time, we think it severely jeopardises your ability to build a coherent investment strategy consistent with both your attitude to risk and your lifestyle objectives.

And given a world of great financial uncertainty and our emphasis on focusing on the things you can control, we believe that failure to give sufficient focus to two financial variables over which you have a fair amount of influence (i.e. your personal income and, particularly, your personal expenditure) really biases the odds against achieving the financial future you want.

Tags: budget, Cash, Flow, Need, Personal

Health calendar: Feb.28 to March 7

Health calendar: Feb.28 to March 7
Benefit fashion show and dinner – Anthony’s Pier 9, 2975 Route 9W, New Windsor. April 19. Reservations by March 1. “Step Into Spring,” a breast cancer awareness event to benefit the American Cancer Society. A reception begins at 6 p.m. with dinner at 7 p.m. and fashion show at 8 p.m. Fashions provided by Talbots. The keynote speaker will be Dr. Hannah Brooks, breast specialist and surgeon at St …

Read more on Poughkeepsie Journal

Tags: calendar, Feb.28, health, March

Theatre Department Weighs Budget Options

Theatre Department Weighs Budget Options
In the wake of the College of Arts and Sciences’ charge to the Department of Theatre, Film and Dance to cut between $1-2 million of their budget over the next two years, the department has begun the process of considering exactly how it will go about the restructuring process.

Read more on The Cornell Daily Sun

Tags: budget, Department, Options, Theatre, Weighs