Planning a budget is no less difficult.
If you are starting a business you will want to know your anticipated expenses for 12-month periods.
A quick-and-easy way to estimate your bare-essential expenses for the next 12 months is to map out every expense of one hundred dollars or more.
Why a hundred dollars?
Because anything less than $100 is probably discretionary spending and we can deal with that either by (a) tightening our belts or (b) providing a lump sum per month for small incidentals.
Grab a spreadsheet, key in 12 months across the top.
Key in your monthly rental or mortgage under each month. Stagger the payments like stairs, and in the 13th column (at the right) key in “Rent”.
Don’t worry that only 1/3 of your rent payment is an business expense; your accountant will work that out at tax time. For now you need to know that you have to find $1,200 every month, or you’ll be homeless.
Can you remember when you purchased cartridges for your laser printer? No. Can you remember how many you have bought this year? Yes? Good. Jot down $140 at equal intervals across the chart.
Your cheque book stubs, bank statements, and that shoebox of receipts will offer some clues.
When you are done, your spreadsheet will look a little more cluttered than this, but it will be a better starting-point than a wild guess.
This (partial) example tells me that I need at least $12,000 to survive. Of course I haven’t yet gone back through my receipts, and tonight I’ll think “Oh yes! My web-hosting costs me $120” or stuff like that.
Now what about those small discretionary items?
Perhaps you meet entrepreneurial buddies for breakfast once a month; perhaps you have supper at the local diner once a week with a close friend. Estimate those on a monthly basis, say $10 for breakfast and $15 four times a month for supper and call it $70. Write in “$100 for meals”, to give yourself a coffee when you meet someone downtown.
That it isn’t, and won’t be $100 doesn’t matter. That it is closer to $100 that “I dunno” is important.And from now on each time you spend $100 or more on any item, record it in your budget sheet. You will soon build up a clear idea of your requirements.