Another word about budgeting, continued from yesterday’s post. Let me just say that all the cool kids are doing it. Maybe as a desperate attempt to get my point across. Or maybe because I cannot stress enough how important it is. So for startsies, here’s a question.
How far do you think Apple would have gotten without a budget?
The main purpose of most corporations and small businesses is to maximize profits. In order to do that, they need to increase revenues and decrease costs. Revenues are largely determined by the people who purchase their products or services, but costs are very much controlled by the company.
Some companies, like Wal-Mart, are dedicated to keeping costs as low as possible. In this case, the opportunity cost is the product quality and a lot of other controversial stuff that you and I probably have different opinions about. Let’s not get into that. Other companies, mostly small businesses, are more concerned with quality of service and product, and are therefore fine with the extra costs they incur in offering that. There is no right or wrong way, unless you’re doing illegal or unethical things. It just depends on the company’s goals and what people are willing to pay for. So by doing a lot more market research and calculations than I just displayed, each business determines where they want their costs to be. The important questions are first, what are the company’s priorities, and second, do they have enough revenue to support the costs and foster future growth?
So what if they don’t do any research? What if they just do what’s most convenient and not even worry about the costs? How would they know what price to set the product or service to ensure a profit? Would they survive? Maybe. Would they reach their goals? Probably not. So it’s true. All the cool kids are doing it.
So how does this rambling apply to you?
Well, first of all, what are your priorities? Do you want a long and luxurious retirement? Vacations? Pay for kids’ college? Or do you want to just live in the moment? None of these are bad things per se, but just keep in mind that there are trade-offs. For example, most people who live in the moment end up working long after they wish they could slow down, so be careful before you start making decisions that your 65-year old self will have to deal with. You want to be that crotchety old man/woman yelling at kids to get off your lawn, not the sad old man/woman who has to work because social security isn’t enough to live off of. I just heard you scoff. What social security? That’s right. Sad.
As far as the revenue, Apple won’t be selling many iPads at $1,500 a pop (other than to those die-hard fans, but we won’t have time to research the intelligence factor here. That scope is just beyond me). Similarly, if you walk into work tomorrow and ask your boss to double your salary, she’ll probably laugh in your face and call you a name my wife doesn’t like so I won’t be writing it here. So there is an element of all of that, which you can’t control. But just like Apple has rocked the world by expanding its brand with innovative product, you can do the same. Acquiring new certfications in your profession; going back to school; starting a side business. These are just a few things you can do to increase that rev. The possibilities are endless!
So write down your priorities. Once you have your priorities set, you need to decide if those costs are worth it. Weed out what is less important than what you just listed. Then look at your income. Is there a different way you can brand yourself to bring in more revenue? And all along the way, you’ve got to budget. Determine what you’re willing to give up in the future for a little better lifestyle today, then track it. If your costs get out of control–which they will if you don’t track them–you’re destined for mediocrity…or bankruptcy.
I want every single one of you to reach your fullest financial potential!!! The desire is so strong in me that I may have just peed a little. Just a little. And the awesome thing is that you determine your potential. You don’t have to do it by comparing yourself with others. It’s not defined by number, it’s defined by what’s important to you. Your goals. And no matter how much you earn or what your goals are, you can do it! And budgeting can help you get there. Does it click any better? Or am I just sounding more desperate? Whatever. Just do it.