Budgeting

Accept the learning curve. Living with a budget is an education. Trimming your expenses, knowing how long a pay cheque is going to last or how much of a cash reserve to keep around ... working these skillfully will take some time. But you can learn to adjust a budget as you go, and what was once a shot in the dark gradually will become a more predictable and useful practice.

Be prepared to miss your budget estimates and act accordingly. This was rule No. 1 in setting up a budget: knowing that your budget projections are a best guess and nothing more. For example, if you budgeted �200 a month for phone calls and your bill consistently tops �250 - say, for at least three months running - adjust your phone allocation up �50. By the same token, if the bill is only running an average of �150, you can trim your phone share. To keep things in line as much as possible, try to reallocate some other area of your overall budget to account for the adjustment.

Work flexibly. As with setting up a small business budget, sticking by one often boils down to a willingness to be flexible. For instance, if your revenue doesn't match what you expected - and there's a good chance that might be the case - trim back your expenses to compensate. By the same token, if you're taking in more than you anticipated, it might be time to invest in better equipment.

Watch your cashflow. If you want to stick to a budget, make sure that your inflow more than compensates for your outflow. Monitor your income closely to make certain that you'll have adequate funds to pay your bills, particularly if your business is prone to long lapses between pay cheques.

Err on the side of conservative. When setting up your budget, it's a good idea to overstate your expenses and underestimate your expected revenue. That approach is also a solid strategy when making sure your cashflow is going to hold up. Look into budget savers such as telephone calling plans, less expensive office furniture and other ways to lessen the burden on your income.

Nurture a cash cushion. The uncertainty of budgeting - both in terms of income as well as expenses - stands as one of the biggest threats to the survival and success of any small business. While trimming expenses to the absolute bone is always a good idea, it's also prudent to set aside income whenever possible. If you can afford it, earmark a portion of every payment you get and squirrel those funds away somewhere. Not only can that money come in handy for predictable expenses, it also can prove an absolute lifesaver should an unexpectedly high bill suddenly crop up.

By contrast, if you're thinking about starting a business sometime in the future, start saving - the money you set aside now ultimately may bail you out in ways you can hardly imagine.

Check your budget every month. This is a point that I cannot stress enough. Go over your budget every month and examine your cashflow to make sure your available funds are sufficient to meet your liabilities. If you're following point No. 2, above, and adjusting your budget as you go, you'll have some sort of emergency fund to take care of monthly overruns. Use it when things cost more than you thought and put money into the contingency fund if you come in under your expected numbers.

Use your budget as a form of restraint, not constraint! Setting up and sticking to a solid budget is the most effective teacher of fiscal discipline there is. But don't be shy about busting your budget on occasion should something truly warrant it. It's often impossible to budget for a valuable last-minute seminar or a trip to a trade show to make valuable contacts. If you are too rigid with your budget, you'll refuse to spend when you really should.