How to create a business and personal budget in 3 easy steps

If you’re not sure how to create a business budget, you’re not alone. I’m also guessing that you might not like the idea of “budgeting” much at all. If that sounds like you, you’re definitely not alone!

Most of us don’t like the idea of budgeting (for business OR for life) any more than we like struggling with money. Because sometimes, the whole idea of a “budgeting” itself sounds like you’re telling yourself what you can’t do because of money.

Sometimes it’s enough to make you wonder why you would ever want to deal with money at all.

I remember being there myself a while back. There was a time that I got the notion to go off the financial grid altogether and forget about this whole “money” thing. Because I was having a moment where I felt like relying on a job, a business, or money to live my life seemed to be just too much. Surely there was a better way to live, wasn’t there?

I was especially intrigued by these stories about people who do pretty wild things when it comes to money. Like live without it altogether. The idea of being one of these extreme minimalists who hasn’t spent money in decades sounded appealing for a while, not gonna lie…

BUT, while I admire these people for having such unwavering self-discipline, I have to be honest. I am really not that committed to the idea personally. One reason is that I have realized this over all my years in business and finance…

There is a balance in all things, including money.

I don’t believe you really need to stop spending money or live without money to find peace with money. You just meed a plan to spend money so it can serve both you and your dreams better. THIS is where a budget comes in!

Now, I say this a lot. But I will say it again.

A budget isn’t supposed to be restrictive, no matter what you might have thought about budgeting. (I used to think budgeting was restrictive, too!) A budget is actually about managing your money, and creating a plan to spend your money.

The idea of budgeting is not to shrink to fit your budget, but to make a real plan to EXPAND into your dreams.

So how do you do it for your business and life? That’s what we’ll get into now!

Here I’ll show you how to create a budget for both your business and personal life, so you can use it to support your goals and dreams.

Now, where do we begin? Before you can create a plan to spend, you need to know how you currently spend your money. Once you know where you are, you can adjust accordingly to ensure that your budget will help get you where you want to go.

Now, there are two types of budgets you’ll need: a business budget and a personal budget. Let’s talk about both.

As an Entrepreneur, your personal life and your business might feel like they’re blending together, at least for a while. But either way, you need to keep your business and personal finances separate, and create a plan for both.

If you’re an entrepreneur who is also working a W2 job, bear in mind that for now, the income you receive from your job counts as “personal” income. And, any income generated by your business endeavors counts as “business” income.

(Sounds obvious, I know, but I want to be completely clear about these differences, to make planning your budget easier going forward.)

Pro tip: If you live in a two person household, your budget should include BOTH of your incomes and expenses, even if you split expenses 50/50. This is because a two-person household means two-person dreams! So you need to account for what both partners want out of budgeting.

Now, the let’s talk about only three things you will need to create both a business and a personal budget.

Here are the only three bits of information you need to get started. Gather up the following information:

• Total monthly income for the last 6 months
• Total monthly fixed expenses for the last 6 months
• Total monthly variable expenses for the last 6 months

Gather up this information. Then, put it down on paper. Now, this could be an actual piece of paper, a word document, or my personal favorite, an Excel spreadsheet. This part doesn’t need to be fancy, it just needs to BE.

Now, let’s make creating a budget as easy as 1-2-3!

Now that you’ve got all the information you need, let’s jump into creating the budgets themselves. Here are the 3 steps:

Step 1: Determine your average monthly personal income and average business income. 

Take the last six months of income data (or at least three months of data if you don’t have six). Then add them together and dividing by six. Then, once you’ve got this data, record it.

Here’s an example on determining and recording your income numbers:

If you and/or your partner are on a salary at a job, this will be an easy one to figure out. You likely make the same amount each month. Recall this counts as personal income, and more than likely it’s the same every month (or close).

On the business side, if your income fluctuates, collecting six months worth of data will help you understand how much you make on average.

Pro tip: If your business is new and you’re not currently making any money, don’t worry! Just save space here and envision what is coming your way in the future.

Now, let’s say your total average personal (in this case job-related) income each month is $6000 and your total average business income is $1000 per month. Simply record this data using headings like this:

Total Average Personal Income per month: 6,000

Total Average Business Income per month: 10,000

Step 2: Record your fixed expenses both on your personal and business budget separately.

A fixed expense is something that never changes. For instance, your internet bill might always be $40/mo. Doesn’t matter how much you use it or what month it is–it will never change. Other fixed payments are things like rent, car insurance, car payments, or health insurance.

I’ve generated some example figures for you below.

Record this data like this:

Total Personal fixed expenses per month: 5,000

Total Business fixed expenses per month:: 2,000

Step 3: Create your average variable personal and average variable business expenses. 

Example: A variable expense is something that always changes each month but you still spend money on it. For instance this would be things like date nights, the water bill, fuel, travel, household items, groceries, or pet needs.

Take the last six months (at least three months of data is needed) add them together and divide by 6. Then record them on separate lines. (I’ve generated some example figures below).

Record this data as follows:

Total Personal variable expenses per month: 1,750

Total Business variable expenses per month:: 1,000

Now take the total income and subtract expenses. This tells you one of two things: how much you have left at the end of the month or how much you overspend.

Here’s an example of how that might look using some figures I generated for you:

Personal:

Total Personal Income: 6k

Total Personal Expenses: $6,750

Total loss: -750.00

Business:

Total Business Income: 10k

Total Business Expenses: 3K

Total profit: 7K

This process is important to creating your budget for two reasons.

First, it’ll help you understand your current spending habits. Then you’ll see places where you might want to cut back spending, or increase spending. You’ll also see how much income you ideally need to bring in to cover both business and personal expenses.

When it comes to it, a budget simply creates a snapshot of where you are with your business and personal finances. It’s not about judging, and it’s not about scarcity. It’s about noticing where you are, and making a real and workable plan to get you where you want to be.

Now, what do you think? Do you have any questions or need any support in this area? I’d love to help! Leave me a comment below about where you are with budgeting, where you get stuck, and what kind of support you’re looking for.

Until next time,

Love, light, and MONEY, Honey…

Kaylee

P.S. Still hate the idea of budgeting? If creating a budget still feels depressing and limiting to you, trust me, you’re not alone. Let me share 3 little steps you can take to shift your mindset about budgeting, so you can create your budget without feeling stress or scarcity! You can find those right HERE.