budget planning http://www.wisebread.com/taxonomy/term/14997/all en-US Balancing Living in the Now With Planning for the Future http://www.wisebread.com/balancing-living-in-the-now-with-planning-for-the-future <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/balancing-living-in-the-now-with-planning-for-the-future" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/bridge future.jpg" alt="bridge" title="bridge" class="imagecache imagecache-250w" width="250" height="161" /></a> </div> </div> </div> <p>The latest buzz in retirement news is that most of us won't have enough money to retire. The recent market crisis has everyone feeling very pessimistic about pretty much everything:</p> <ul> <li>&quot;Stocks aren't what they used to be.&quot;<br /> &nbsp;</li> <li>&quot;You can't rely on the market growing over time like you used to.&quot;<br /> &nbsp;</li> <li>&quot;Computer trading has ruined long-term investing.&quot;</li> </ul> <p>These sound like new ideas, but they happen every time after the market tanks (which has happened many times before, regardless of how alarmist the news is).</p> <p>The current state of retirement is a perfect way to analyze how and why we do the things we do when we try to balance the present and the future. (See also:&nbsp;<a href="http://www.wisebread.com/why-saving-money-is-a-gift-to-your-future-self">Why&nbsp;Saving Money Is a Gift to Your Future Self</a>)</p> <p>With all the panic and hoopla, everyday people like you and me who invest so that we can retire one day have decided to do one of two things:</p> <ol> <li>Give up investing altogether. If the experts are right and stocks aren't going to help us retire because the whole system is &quot;broken,&quot; then we might as well put our money under a mattress where we know it'll be safe. Others are even more pessimistic and just say the hell with it &mdash; I'm spending it all and will worry about retirement when I'm old.<br /> &nbsp;</li> <li>Save even more. Stressing out about being old and not having money will do wonders for some people's motivation. Many investors have decided they're going to max out their 401(k)s, max out their Roth IRAs, and then try to invest some money in hand-picked stocks so they can have a shot at a decent retirement.</li> </ol> <p>Both strategies, of course, are a little extreme. You need balance when you're saving for retirement, and the sweet spot is somewhere in the middle.</p> <h2>Live in the Now</h2> <p>We all have to remember that life happens in the present. Money comes and goes, but youth and time is something you can never get back. As poetic and mushy-gushy as that sounds, it's true.</p> <p>If you save up the money to go on a trip to Greece when you're 30, it's going to be a very different trip than if you decide to wait and go when you're 65. You won't be bungee jumping or skydiving; I can guarantee you that much.</p> <h2>Finding the Right Balance</h2> <p>The right answer is to be so prepared for the future that you can enjoy the present without feeling guilty about the things you want to do or panicked about retirement.</p> <p>That means following some basic rules:</p> <ul> <li>Contribute at least up to the match for your 401(k).<br /> &nbsp;</li> <li>Bump up your 401(k) contribution every time you get a raise.<br /> &nbsp;</li> <li>Put a percentage of your bonus into your <a href="http://www.wisebread.com/7-surprising-facts-about-roth-iras">Roth IRA</a> and try to max it out every year.<br /> &nbsp;</li> <li>Invest for the long-term in your retirement accounts, ignoring the ups and downs.<br /> &nbsp;</li> <li>Don't take money out your retirement account early.<br /> &nbsp;</li> <li>Run the numbers once a year and adjusting as necessary to ensure you're on the right track.<br /> &nbsp;</li> <li><a href="http://www.wisebread.com/10-monthly-bills-you-can-slash">Minimize your expenses</a> so you have more money to work with.</li> </ul> <p>And if you want to enjoy spending your money today without feeling guilty, here are some tips:</p> <ul> <li>Targeted savings &mdash; if you save ahead of time for a trip or a $200 pair of jeans, it'll be easier to spend the money because you &quot;earned it.&quot;<br /> &nbsp;</li> <li>Enjoy the present, so you'll have no regrets in the future.<br /> &nbsp;</li> <li>If you get a bonus, take a percentage to treat yourself to something you really want.<br /> &nbsp;</li> <li><a href="http://www.wisebread.com/21-frugal-ways-to-reward-yourself-right-now">Reward yourself</a> for hitting your goals (like making budget every month or contributing to your Roth IRA).<br /> &nbsp;</li> <li>Create a bucket list to remind you of all the things you want to do in your life.<br /> &nbsp;</li> <li>Don't forget you could die tomorrow and all your plans for the future would be for naught.<br /> &nbsp;</li> <li>Write. Keeping a journal or writing letters to others is a great way to keep us grounded in the present and reminds us the things that are really important.</li> </ul> <p>The secret to living a balanced life is to be organized and strict about how you prepare for the future, so you can cut loose and enjoy the present without feeling guilty about it.</p> <p><em>How do you prepare for the future without becoming miserable in the present?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/carlos-portocarrero">Carlos Portocarrero</a> of <a href="http://www.wisebread.com/balancing-living-in-the-now-with-planning-for-the-future">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-8"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-audacity-to-waste-money-for-better-finances">The Audacity to Waste Money for Better Finances</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-is-keeping-you-from-a-life-of-financial-independence">What is keeping you from a life of financial independence?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/401k-or-ira-you-need-both">401K or IRA? You Need Both</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-a-roth-ira-may-be-better-than-your-401k">4 Reasons Why a Roth IRA May be Better Than Your 401(k)</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-investing-lessons-you-must-teach-your-kids">10 Investing Lessons You Must Teach Your Kids</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Lifestyle Retirement budget planning building a financial future economic crisis Splurging Wed, 30 May 2012 10:36:08 +0000 Carlos Portocarrero 931181 at http://www.wisebread.com Why You Should Reconsider Your Business Forecasting Strategy http://www.wisebread.com/small-business/why-you-should-reconsider-your-business-forecasting-strategy <div class="field field-type-link field-field-url"> <div class="field-label">Link:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <a href="http://www.openforum.com/articles/why-you-should-reconsider-your-business-forecasting-strateg" target="_blank">http://www.openforum.com/articles/why-you-should-reconsider-your-business-foreca...</a> </div> </div> </div> <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/small-business/why-you-should-reconsider-your-business-forecasting-strategy" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000015590028Small.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>A standard best-practice for decades, the annual planning and resultant budget have become familiar <a href="http://www.openforum.com/idea-hub/topics/money/article/4-tips-for-an-easy-to-build-budget-and-strategic-plan-1" target="_blank">strategic tools</a> for businesses large and small. Yet small businesses and entrepreneurial ventures often struggle to find value in the process, with too much variability in their month-to-month performance to really project performance with any degree of accuracy.</p> <p><strong>Why the Static Budget Fails</strong></p> <p>Here&rsquo;s an example. A three-year-old company has struggled to generate a few hundred sales per month. They have carefully planned an annual budget, organized month-by-month, that reflects how they will utilize the resources from these sales to pay their staff, run their business, and have a little left over to invest in future products.</p> <p>Then, almost overnight, their monthly sales break 1,000 units and they never have a three-digit unit sales month again&hellip;ever. This company&rsquo;s annual budget became obsolete overnight, yet most businesses refuse to update their budget and try to analyze variances between their actual and budgeted performance. After one attempt, they realize this effort is futile and they abandon it altogether.</p> <p>Although this example is extreme, it highlights the point that forecasting the future of small and entrepreneurial companies is usually more difficult than forecasting much larger companies with more predictable sales. So, is there a way to make the budgeting process more meaningful for entrepreneurs?</p> <p><strong>Rolling Twelve-Month Budget</strong></p> <p>Rather than a static, locked-down twelve-month plan, what if business owners adjusted their forecast monthly based on everything they learned during the prior months? Some assumptions were likely validated, like the cost per lead. Other assumptions were likely invalidated, like the percentage of the leads that actually turned into paying customers. One important element of a rolling budget is the ability to change assumptions and outcomes along the way rather than be stuck with bad assumptions for an entire year.</p> <p><strong>Add a New Month as Each Old Month Passes</strong></p> <p>Another great feature of a rolling budget is that you always have twelve months forecasted with your most recent and valid assumptions, plans, strategies, and tactics. When most companies use a static budget, the forward-looking nature of their predictions get shorter as the year transpires. A calendar-year company, therefore, only has three months budgeted in October&mdash;not much of a forecast.</p> <p>As you update your budget each month, you also add another month on the end, meaning you always have at least twelve months planned into the future. It forces you and your team to constantly be thinking about the future implications of your actions today, how your products/services are accepted by paying customers, what competitive pressures will do to your sales, how you should staff your business, and so much more.</p> <p><strong>Once-a-Month Rather than Once-per-Year</strong></p> <p>So, does adding a new month to your budget every 30 days take more or less time than a once-per-year budgeting process? I haven&rsquo;t seen any empirical evidence to answer this specific question, but there are <a href="http://hbswk.hbs.edu/archive/5250.html" target="_blank">plenty of examples that cite improved results</a>, meaning if any extra time is required, it will likely generate a desirable return.</p> <p><strong>A Note About Software &amp; Drivers</strong></p> <p>Regardless of how you keep track of your budget, a monthly variance analysis is the catalyst to keeping the next rolling twelve months dynamic, relevant, and as accurate as possible. Many accounting and financial planning software packages exist, and this entire process can even be accomplished in a spreadsheet. No matter what tool you use, the basis for your month-by-month plan should be the key drivers in your business.</p> <p>A key business driver is an assumption about how different parts of the business will be affected by one factor. For example, a driver of business performance may be sales. Since sales determines the amount of variable costs, the assumptions we make about sales is a key driver for many of the expenses in the business. Other examples of key drivers include employee headcount, leads generated, attrition rates, working capital days, among others.</p> <p>The main point to remember is this&mdash;once you determine your key business drivers, or the best way to make assumptions about what will happen in your business in the future, allow the drivers to determine the outcomes. So, whatever software you use, make sure it will support your use of drivers to create and update your rolling forecast.</p> <p><strong>Bottom Line</strong></p> <p>Different versions of rolling forecasts have been around for quite some time in large organizations, but they are becoming more popular in small and medium-sized business (SMBs). Why? Because they are actually more valuable in companies with less predictable revenue streams and cost containment efforts. The rolling forecast is a powerful, forward-looking solution to help entrepreneurs spot key trends, make critical pivots, and maximize their performance and results.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ken-kaufman">Ken Kaufman</a> of <a href="http://www.wisebread.com/small-business/why-you-should-reconsider-your-business-forecasting-strategy">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/250-tips-for-small-business-owners">250+ Tips for Small Business Owners</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-dumb-little-budgeting-mistakes-you-need-to-stop-making-today">10 Dumb Little Budgeting Mistakes You Need to Stop Making Today</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-5-best-credit-cards-for-small-businesses">The 5 Best Credit Cards for Small Businesses</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-you-need-a-time-budget-and-how-to-create-it">Why You Need a Time Budget — and How to Create It</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/best-business-travel-credit-cards">Best Business Travel Credit Cards</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Small Business Resource Center budget planning budgets business forecast business planning rolling forecasts small business strategic planning Sat, 05 Nov 2011 21:22:20 +0000 Ken Kaufman 772755 at http://www.wisebread.com