Financial planning and wealth management are not often the first though that comes to mind when we think about sustainability. Although, when we apply these studies to the business environment we find them to be exceptionally forward thinking and sustainability driven concepts. Moreover, with just a little bit of work, they are easily measurable and offer a great foundation for analytical and personal evaluation.
Let’s look at the one basic step needed to perform a sustainability audit on your finical entities. Document your spending for 30 to 60 days. Yes, all of your spending. I know it’s a lot of work, but you’ll need accurate data to conduct basic data analysis, find inefficiencies, and start long term planning. I recommend using a debit or credit card for all of your spending’s and then use your monthly bank statements as an evaluation tool. The power of the audit is there are endless options as what you can analyze and value as a necessity. For example, How much do I spend to eat out for lunch each month? How much can I save and regulate by packing my own lunch? Tailor an evaluation and reduction system to meet your needs.
Anson Aninao, Financial Service Representative, offers advice on basic budget building.
“After finding a basis for my budget, I followed a simple system to manage my money. I recommend using two different bank accounts to make this work:
The first is your “business” account (without quotes for those of you who actually own businesses), which is where you deposit all of your income. My business account is a high-yield savings.
The second is your personal account, and it’s from this that you’ll pay your ongoing expenses. There’s no need to open a new account if you already have one that will work. I just use my existing credit union checking account.
Every month as you earn income, receive it (and leave it) in your business account. This is where you accumulate your cash. Because it’s in a high-yield savings account, it earns interest as it waits for you to use it. From this money, pay yourself as if you were an employee. Your monthly salary is whatever you calculated as your monthly budget, your minimum monthly income from the past twelve months.
First, you reset your salary. Based on the previous year’s numbers, your income might increase — or it might decrease.
Next, you use the “extra” money you’ve been accumulating in your business account to pay taxes. I could write an entire article on budgeting for taxes with an irregular income, but for now let’s just note that it’s very important that you remember to account for them, especially if nobody else is withholding them from your paycheck.
Finally, if you have anything left after paying taxes, you pull this money out of the business account as personal income. It is, in essence, a year-end bonus. You can use it for whatever you see fit: debt reduction, long-term savings, or a Corvette.
Here is display to better picture how things should come together.
Whatever you do, remember: It’s easier to deal with a budget surplus than it is to deal with a budget deficit!
If possible, live off just one income. If you have an irregular income but you have a partner who makes steady money, explore the possibility of living solely on their income. Use your partner’s money to meet the necessities, and use yours to pay for savings and extras. This isn’t an option for most people, but if you can manage it, it’s a great way to budget.”