To get a hold of your finances, you need to create an effective, customized budget plan that gives you precise insight into where your money comes from and where it goes.

While budgeting often sounds like a restrictive financial strategy that prevents you from enjoying some of your favorite activities, that’s not necessarily the case. Instead, a sound financial plan can often help you do just the opposite — save up enough money to afford to treat yourself to nice things more frequently.

So, if you’re ready to achieve greater financial stability, let’s take a look at how you can create a well-thought-out budget that suits your needs and helps you achieve your personal and business goals.

Set Short-Term and Long-Term Financial Goals

Before you even start thinking about a budget, you’ll need to identify your financial priorities and set short- and long-term financial goals.

As a general rule of thumb, your short-term goals need to be achievable within the following year. So, keep them realistic. Personal financial short-term goals can be anything from saving up for a summer vacation to buying a new smartphone or getting a better mattress. Business short-term goals can go from upgrading PCs in the office or switching to ergonomic office chairs to raising salaries by the end of the year.

Long-term goals are those that usually take years to achieve, such as paying off student debt, investing in a new home, or expanding your business to new markets.

Keep in mind that your financial goals might change as time goes. However, it’s still essential to set them. They’ll give you something to aim for and make it easier to create a realistic budget that you can stick to.

Take Note of the Amount of Money You Have Coming in

With your financial priorities in mind, you can start doing the budgeting math. The first step is identifying your net income or revenue. Unfortunately, though, this can be easier said than done for some.

One of the main mistakes many people make when trying to identify how much money they have coming in is taking into account their whole salary (or revenue). However, your entire income isn’t equal to your total budget. So you need to subtract deductions like taxes, Social Security, 401k.

To avoid overestimating your net income and making budgeting mistakes, you’d benefit from working with an accounting firm. It will help you understand exactly how much “spending money” you have.

Subtract Main Monthly Expenses

The next step in creating your customized budget is subtracting main monthly expenses. That can include:

• Credit card debt;

• Utilities;

• Groceries;

• Rent;

• Insurance;

• Payroll;

• Business supplies, and more.

Only once you’ve subtracted these expenses will you have a clear insight into how much money you have to set aside for your short- and long-term financial goals.

If you’re trying to create a business budget, you must have accurate data on your main monthly and annual expenses. Accounting services can help you identify all fixed expenses and ensure that you’re never late on your payments.

Examine Your Variable Expenses

As their name would suggest, variable expenses tend to change frequently, but it’s still important to take note of them. Personal variable expenses often include things like entertainment, eating out, buying gifts, traveling to your hometown. Business variable expenses can consist of marketing costs, employee training/onboarding, office supplies, and the like.

Suppose you want to supercharge your savings and create a personal or business budget that works for you. In that case, you’ll need the complete picture of all the money coming in and out, so considering both fixed and variable expenses is a must.

Come up With a Budgeting Plan

Now, it’s finally time to start developing a comprehensive budgeting plan. With all fixed and variable expenses and net income in mind, you’ll have a clear idea of how much money you’ll have/need for a sustainable budget.

If you’re lucky, you should have an income that’s higher than your expenses. In that case, it would be a good idea to adopt the 50–20–30 approach. Use 50% of your after-tax income to pay for the main expenses — mortgage, insurance, utilities, etc. Use 20% to supercharge your savings or make investments, and use 30% for non-essential expenses like entertainment or travel.

If your expenses are bigger than your income, you’ll need to adjust your spending habits.

Tweak Your Spending Habits

Always make sure that you have enough money to cover your main fixed expenses. Otherwise, your financial situation will be less than enviable, and it will be more challenging to stay on top of your budget.

If you need to tweak your spending habits and make financial adjustments, try to cut costs on variable expenses like your gym membership or Netflix subscription. Every little bit can help.

If it’s still not enough to cut variable expenses, see what you can do to adjust fixed ones. Talk with your bank about better credit card terms and examine carefully whether an expense is a “need” or a “want.”

Final Thoughts

Creating a personal or business budget takes some trial and error. You’ll need to be dedicated and focused on your goals, which often means making some sacrifices.

If you’re finding it challenging to create your own budget, you can always hire accounting services to help set you on a path to success.