When you run a business, you spend your money differently. Here are some important pointers to keep in mind when creating a personal budget.
How do you budget for personal splurge items when you’re being so cost-conscious in your biz?
1. Set up Automated Deposits
“Ramit Sethi is a well-known financial expert who Gen Y individuals and millennials read widely. One of his themes is financial automation. Everyone will have a different system, but it is generally a good idea to set up automated rules so each time you are paid, a small percent goes into multiple sub accounts. For example, I have unexpected, travel and big purchase expense accounts.”
2. Splurge in Small Amounts
“I think one aspect of being an entrepreneur is that there are times when we want to take some time off to relax (if we can at all) or buy something we really want. I value vacation more because I notice that time off generates new ideas and allows me to recharge. For products, I usually look for the perfect balance of usefulness and splurge factor. I still need to justify it.”
3. Create a Play Account
“Carve out 5 to 10 percent of your income, and create a play account that is separate from your regular savings. This way, you’ll have money set aside that will give you some parameters to stay within and remove the feeling of guilt you could have if you randomly splurge.”
4. Use Simple Banking
“I use Simple’s goals feature. Simple is a new online bank. You make personal goals, and it will automatically set aside money for your goals. I am hoping to take a (much needed) vacation in the fall, and I am having Simple put aside a little bit of money automatically for it each month. I don’t even think about it, and then I spend less on coffees and extras.”
5. Cut Back on Entertainment
“If there’s a big purchase that I want to make (and it’s not an immediate need), I cut back on entertainment and set aside those savings until I have enough to make the purchase. I promised myself long ago that I’d never carry a credit card balance, and to this day I never have.”
6. Prioritize Shopping Lists
“In the same way that an entrepreneur creates a budget and a 12-month plan, you should take a similar approach with personal expenditures. You are limited by the cash you have, so take the time to prioritize what you really want. For me, buying a big screen TV meant that I could enjoy a movie or TV show like a rich man on my rare breaks!”
7. Set Aside an Allowance
“When I am being cost-conscious in my business, it is easy for that attitude and behavior to become normal in my personal life, as well. Budgeting personal splurge items is actually harder than it might seem, so I set aside an amount that is essentially an allowance. It is money that I plan to spend on splurge items, special events or other wants that do not otherwise fit into my budget.”
8. Work Hard and Play Hard
“If you’re going to work hard on your business, you should be able to splurge when you want to. Don’t go overboard, but if something is going to make you happy, buy it! You’ll be more motivated to work harder and grow your business even more.”
9. Set Aside Funds for Fun
“In my fifth year as president, my views haven’t evolved. I used to feel guilty leaving and travelling when I should be working or saving. Now I realize not only the importance of recharging my own batteries, but also having a good checkpoint for how well your company runs without you. Set something aside, and go do it.”
Originally published by StartupCollective.