Episode 25: Using a Budget to Put Your Business on a Diet... and Other Helpful Tips.

Does your business need a financial "diet"? Picture the days when families managed their budgets with physical cash, a practice that seems distant in today's cashless society. Join me as I share personal anecdotes about these nostalgic times and explore the challenges that emerge with the shift to digital payments. Younger generations, in particular, face hurdles in budgeting and debt management, and it's crucial to address these issues to maintain healthy finances. As businesses increasingly rely on digital transactions, we discuss how this convenience must be matched with strategic financial planning to avoid pitfalls like overspending.

Subscriptions, often the silent drain on resources, are another key focus. Many of us have discovered unused app subscriptions eating away at our budgets, both personal and business. The importance of reviewing these expenses annually cannot be overstated, and we offer concrete tips on canceling those that no longer serve you. Budgeting is not just about numbers; it's about making intentional spending choices that pave the way for financial growth. Additionally, we explore tax reduction strategies personalized to individual circumstances, advocating for professional guidance to effectively lower tax liabilities. For more insights and updates on your path to financial wellness visit our website HERE.

To learn more about Busy Bee accounting and services, or to simply connect with Eric or Melissa, find them at Busy Bee Advisors.

Transcript

00:00 - Melissa Broughton (Host)
I can say that there is a power that happens when we take something that is in our brain and we write it down on paper. So create your budget, post it someplace where you can see it and then, every month, when you do your reconciliations, compare what your business income is and what your business expenses are to your intended spending. It's a great way to see where those other expenses may be creeping up. Hello and welcome to the Real Buzz taking the sting out of taxes, brought to you by Busy Bee Advisors. I'm Melissa, I'm Eric, he's my husband, she is my wife. Together, we're your hosts for this informative and fun podcast where we share forward-thinking strategies to help you get organized, plan ahead and, ultimately, pay less in taxes. Hey, welcome to this episode of the Real Buzz. We are knee deep in tax season, so the bearded man is not with me and you just have me today. 

01:17
We were reached out to by an organization that invited us to speak at one of their breakout sessions. It's about two weeks away. We're super excited about it but, unlike other speaking engagements that we've done, where we get to pick the topic, this particular group reached out and they actually needed us to fill a slot that they had. So our topic is does your business need a diet? And when they first kind of presented that to us, I was a little bit I don't know. There was some head scratching that was going on. There was some. How do we? You know, how do we phrase this? How do we? They didn't write the speech, of course, for us we get to come up with the content, but they gave us the general idea of what they feel that their audience is interested in. So, rather than, you know, seeing it as a negative, we of course are seeing it as a positive. We're incredibly excited to go speak at this event, but I, in doing kind of research and in thinking about what spin we could take on this, it really led me to something that I thought would be valuable information for an episode of the Real Buzz. So, who knows, this may be the quickest episode we've ever done Five minutes and she's done. No, you know, does your business need a diet? 

02:34
And I think that that poses a very interesting question and one of the pieces that I feel for those of us who are, let's say, over 45, and I am happily in that category but for those of us who are of a certain age so we'll say over 45, we remember when we worked at a job or we would have parents that of course, worked and they would go and they would literally cash their paychecks on payday or pull out. I mean, I remember my dad going to the bank on payday. He would cash his paycheck, a portion of it would go into his checking account, I would assume, to pay bills, and then the other portion was cash that was in his pocket. I definitely don't think I've ever seen my dad use an ATM machine. I can tell you my mom does not like to use ATM machines. So it's really the cash that you pull out from the bank on payday and I'm saying payday in quotes is the money that you had then to spend on, you know, your, your weekly expenses, whether that be groceries or in my. 

03:42
My grandmother actually did things the same way. The cash would go in an envelope in her kitchen drawer. I can picture exactly where she would put it. That was her money for the I would guess two weeks, because that's pretty, pretty standard for businesses. So that was her spending money for two weeks and that was the money for everything that a check wasn't written for, right, so it was groceries. It was, you know, any entertainment expenses. It was the money that she, you know, would use when she did tithings at church. It was all of her expenses were spent out of that envelope of cash and when the cash was gone, well, the cash was gone, really easy way to stick to a budget, so to speak. 

04:25
Well, we don't do that anymore and we are, as a society, becoming, you know, of course, a cashless society. Faster and faster, you can even scan your hand at Whole Foods to pay for and I do not know how that works but to pay for your groceries, right, like, we are becoming a cashless society. And while that's fine and that's I certainly loved that, you know, my, my guys were out last night, and and we'll get onto this topic a little bit further but my guys were out last night and we needed groceries, and so I, you know, I, I ordered groceries and they were delivered an hour later. It was great, I didn't have to run out to the grocery store. 

05:08
But it all runs through on, you know, either a debit card or a credit card, and for younger people, those under a certain age that have not set good money habits or not had good money habits set up for them. That's a really fast way to get into debt incredibly quickly, and the relationship that you have with your money is very different. Now, right, so in our business it's somewhat the same way. We are not in most cases for all of our clients. I'm trying to do a mental scan. I don't think we actually have any clients that don't have an online store or some kind of an online presence where they're able to take money. Most are not. We have two bars that are clients, so they're a bit of a cash business, but most of our clients do not run a cash heavy business. They're not bringing money in in cash or primarily in cash. It's either with payments through their website or you know ACH payments, so everything is kind of automatically processed or automatically billed. You know you send an invoice out to a client. The money then just feels like it magically appears in your account. And while that's fantastic, when we get emails and get solicitations from you know this company can do this for us and sign up for a subscription for $10 a month, or this software program can do this and it's $25 a month All of those kinds of little things here and there, both in our personal life and in our business life, really start to add up and it is alarming and surprising. 

06:51
So that's kind of the spin that we've decided to take on this topic of does your business need a diet? But let me talk a little bit further. And you have my life partner and I and I say that and people always chuckle because generally you picture something different than a six foot plus man with broad shoulders, a beard and long hair as a life partner. But when my partner and I, when my husband and I, are on this show, I mean you really get to feel like what we are like as a couple, and that dynamic doesn't necessarily change. So we'll go personal here today and I'll say that we because we do have, you know, two sons that will be college bound pretty soon. 

07:36
Here, One took a little bit of a of a detour into the military and, yes, I, I appreciate all of the people who reach out and tell me thank you for his service, but he will be ironically starting school, starting college, right around the same time that his younger brother, who is still at home, will be starting college. So we will have two that are college bound and you know, our oldest son has the GI Bill that's available and our younger son potentially may, you know, may take advantage. We've had quite a few full ride because of football Gotta love sports. We've had quite a few full ride offers come in and he may elect to go with one of those or he still has a very specific school in mind. That's kind of his dream school and we are willing to and able to write the check on either way. But we are also aware that our potential outlay of expenses may become more if either of our sons need assistance as they are going through college, right, and the expenses that could potentially be incurred as part of the college experience. 

08:48
So you know, we started to look at where we could I love the phrase trim the fat, but where we could trim the fat in our own lives. And I got to tell you I love my office manager. I don't know if she ever listens to these shows, but I love my office manager, jules, so much she really helps us to kind of keep the train on the tracks of Busy Bee Advisors. And so, jules, if you're listening, thank you. But Jules, you started a challenge for us because what my girl's family decided to do was they looked at her and her husband. Both work from home, although they do not both work for Busy Bee Advisors, but they both work from home. And as a result of working from home, they determined that they, you know, maybe could cut expenses because they too have a college bound child at home, or college, but it's so funny because they don't really seem like kids anymore, but they are kids. They too have a college bound kid at home. And so they were, you know, being aware, looking at ways that they could cut expenses and they decided to go from being a two-car household to a one-car household. 

10:00
Now, the way that they handled it was they sold both vehicles and then picked a vehicle together that would work for them, and it's been, from all accounts, it's been awesome. So Eric gets presented with this idea and let me tell you, my wonderful life partner, my wonderful husband, is frugal, We'll just say that, and I love that about him. So and I'm not being sarcastic, I promise so he gets presented with this thought of what better way to trim expenses than let's get rid of a vehicle. And he, of course, is a truck guy, loves his truck, and I had a Chevy Tahoe that I also loved. But we started paying attention to it and you know, the first thing we did was we looked at both of the vehicles and we determined what they were actually costing us now on a monthly basis. Now we didn't break it down to like per day it costs this, but we looked at all of the expenses. We looked at fuel expenses for both of us you know we assigned his, of course, to his truck, we signed mine to my SUV registration fees, insurance fees, repair fees, things like, you know, tires, any, anything. Luckily both of our vehicles are relatively new, so not too high in the repair expenses. But we looked at all of those fees and we broke it down and we figured out, you know, what each of the vehicles were truly costing us on a monthly basis. And I was blown away to see, especially with registration, that was kind of the big kicker for me, but that I was, we were, I shouldn. Registration that was kind of the big kicker for me, but that I was, we were, I shouldn't say I was that we were spending about, you know, $1,200 a month on my vehicle and I did love my Tahoe, but it kind of, when you see those numbers, it kind of became an easy decision to say, hey, maybe it's not quite worth it, especially when he printed up a calendar and he checked, marked any day that I had used my vehicle and at one point I went about three and a half weeks without it leaving the driveway. So it really became an easy decision to have the conversation about getting rid of my car. 

12:18
I say this only because I want you to know that I'm not just you know saying things that you know can be done to reduce expenses. I'm speaking from my own personal experience. In truth, we really have not noticed any downside to going down to one vehicle. Now I will be honest and tell you our high school-aged son, who of course still lives at home he also has a vehicle. So in worst case we do have a backup vehicle, but that's his car that he uses to get himself to school, to football practice, to rugby practice, whatever. So it's not like that vehicle just sits at home and is available to use. But the only time that we really ran into a challenge with going down to one vehicle was when his car was in the shop. Then it became a little bit of just needing to figure things out. It was for a day, it wasn't a big deal. Obviously, we all survived and got through it. But I really feel like it is important on an annual basis to go through both your business and your personal expenses and to see where the fat can be trimmed, not just because you're, you know, living from paycheck to paycheck. 

13:34
I think most people who are listening to this podcast are kind of beyond living from paycheck to paycheck. I think most people who are listening to this podcast are kind of beyond living the paycheck to paycheck life, which we've all been there, we've all had that, you know, starving student lifestyle experience, and it's really not as much fun although there's fond memories to look back on that time in our lives, but it's not. It's not as much fun as it sounds like, or it's not as much fun as it looked like it was on what Friends on TV was. So we're beyond the starving student lifestyle, but it's still gosh. Wasteful spending is just not. It's not awesome. 

14:11
So I, on the personal side of things, you know it's it's a little bit more challenging because unless you're using some kind of a tracking software maybe it's Quicken or something like that, microsoft has one as well Unless you're using a tracking software. It might be a little bit difficult to figure out where you're spending, but you can go through all of your bank statement, your credit card statement. Bank of America actually even offers a service and I think some of the other banks do as well where you can call your banker or customer service and they can go through and they can provide you with a list of subscriptions that run through your checking account. So I would imagine that if that technology is out there, that they don't necessarily have a monopoly in that area. If you can't easily identify subscriptions on, let's say, your bank statement or your credit card statement and this is all talking about the personal side of things but if you can't easily identify subscriptions, maybe may consider calling your financial institution and seeing if they can provide you with a report of those reoccurring subscriptions, because from their aspect I'm just thinking about from the computer side of things they most likely can pull that data for you. So my point is to identify the reoccurring subscriptions, make sure that there's still value when we went through it, because we now do that on an annual basis for our household, not only on the personal side but on the business side. We'd like to start doing an internal audit, so to speak. In January and I think it was two years ago we realized that when we looked at all of our reoccurring subscriptions, on the business side of things, we were spending close to $1,500 a month on reoccurring subscriptions. 

16:08
Now some of you listening may think, oh, that's not high. Some of you listening may think, wow, that's crazy. So let's say it's a no judgment zone here. But look at those reoccurring subscriptions and see if you are still finding the same value that you did when you started the subscription. Is it something that you're still using or is it something that you know is a subscription that you long forgot about? If it's a subscription that you long forgot about, that you're not using, cancel it. You know, reduce that outlay of your, your hard-earned money, but the subscription model does not seem to be going anywhere anytime soon. So just be aware of that and be mindful of that, of what you're. You know what you're spending your money on and I don't think you need to go crazy about it and like examine it every month, but I do think once a year is probably the minimum amount of time that you want to do that, that you want to go through and review your subscriptions. When you sign up for a subscription, on the business side of things, have your bookkeeper or, if you're your bookkeeper, market is dues and subscriptions. You can easily change the category at the end of the year. But if you have all of your subscriptions in that one bucket, it makes it much easier to do the review of all of those subscriptions at the end of the year so that on the business side you don't need to worry about calling your financial institution. 

17:40
Now, on both the business and the personal side, I am the biggest proponent of creating a budget. It is something that, from my corporate background, was not, you know, not even a question. I mean large companies set up budgets and spend lots of time in meetings with you know, depending on how many chiefs are in the kitchen. Spend lots of time in meetings with you know, depending on how many chiefs are in the kitchen. Spend lots of time in meetings going over the budgets. But small businesses don't necessarily take the time to start a budget or set up a budget at the beginning of the year. If you have a bookkeeper, your bookkeeper should very easily be able to set up a budget for you. If you do not have a bookkeeper and you're listening to this. Of course, I'm more than happy to have a conversation with you on it, but we do have some. There was a book that I wrote about two years ago, busy Bee Advisor's Guide to Basic Bookkeeping. That walks you through step by step on how to create a budget and different ways to use the budget that you create. 

18:47
So super passionate about budgets, and not only does a budget allow you to be more intentional with your spending, but it allows you to have benchmarks that help you to grow your business, and it's very interesting. You know, I had somebody a few years ago explain the psychology behind it, and it was very interesting and they were very intelligent in their field. I, of course, am not in any way a mental health professional, nor do I play one on TV any way a mental health professional, nor do I play one on TV, but I can say that there is a power that happens when we take something that is in our brain and we write it down on paper. It becomes even more powerful when we then revisit that piece of paper or have it where we are, you know, looking at it, whether we're aware that we're looking at it on a regular basis. So create your budget, post it someplace where you can see it and then, every month, when you do your reconciliations, compare what your business income is and what your business expenses are to what is your intended spending and kind of you know, see where you can make adjustments. It's a great way to see where those other expenses may be creeping up and, in truth, I'm in California. We are seeing a lot of little jumps in utilities, you know. So just, prices are creeping up, whether it be prices for your business or whether it be prices for your personal expenses. But prices, little by little, are creeping up. And I think, once a year, make that appointment with yourself or make that plan to sit down and spend a few hours, look over all of your expenses and see both on the business side and the personal side, see if those, especially those reoccurring expenses, make sense. 

20:49
And then, of course, the second piece that I always recommend is setting up a budget and, like I mentioned, we've got some great resources. There's some free resources. We'd love to send them to you on how to create a budget and different ways to use the budget. We'd be happy to send them to you on how to create a budget and different ways to use the budget. We'd be happy to send you that guide for free. All that I need you to do is reach out. You can either shoot us an email at info at busybeadvisorscom, or you can visit our website at busybeadvisorscom. We are, again, more than happy to send you a free e-copy of the book that will walk you through exactly how to set up and create that budget, to determine where there is wasteful spending and to determine if your business needs Real Buzz. 

21:36
Short and sweet, our two action items that I would say for this episode are to take a look at those reoccurring expenses. So those long forgotten subscriptions. I have to tell you, at one point I had three different running apps that were paid subscriptions that I had signed up for on my phone and I at that point had stopped running completely. So that was, you know, $30 a month that was saved when I canceled those subscriptions. So it creeps up. Take a look on both your personal and your business side for those reoccurring subscriptions. Determine if they're still valuable to you, determine if you're even still using them. If you're not still using them, cancel them and move forward. And, you know, maybe look at taking that money that you were spending on those subscriptions and look at depositing that money into a savings account, something like that. 

22:34
So the first step would be to look at those reoccurring expenses. The second recommendation is to create a budget. We have the guide for you that we're happy to send you for free on how to create a budget. There are lots of different philosophies out there on creating a budget, so I take a little bit of a different approach than a lot of other people in the financial space do about creating a budget. And then you know, the third thing is just to really decide where you want your and this is more for the business side of things than the personal side of things. But where do you want your business to go to at the end of this year? What do you see that you would like in your business? What is that when you close your eyes? What is that dream that's kind of in your head, and your budget can absolutely be used to get you there. So the book will give you lots of ideas on what to do and how to apply the budget. 

23:34
I think it would be pure torture to try and walk you through how to create a budget by verbally explaining it to you. So I'll let you take a look at the written word to make it make sense. But don't be afraid to kind of go through line by line, on the personal side of things, and question every expense that you are paying out for and see if they can be reduced. Some of them may feel like they are silly. Some may feel like they are silly, but the savings truly, truly do add up. And with that I will leave you all and I will catch you next time. 

24:14
Thanks for listening to the Real Buzz taking the sting out of taxes. If you like what you heard, please subscribe, please post a positive review and share with a fellow business owner or friend. If you're serious about reducing your tax liability, reach out to us at BusyBeeAdvisorscom and follow us on Facebook and LinkedIn at Busy Bee Advisors, thank you. So here's the fun part. The purpose of this episode is for entertainment purposes. You understand, of course, that everyone's tax situation is completely different and that one tax strategy or suggestion cannot be applied in all cases and that there very well may be variations. Thanks for listening.