A startup budget will help you stop overspending and ensure that you only spend money on what you need for your new business. Interested? I’ll teach you how to create a startup budget for your new business so you can stop overspending and have enough to last!.

Step 1: Determine your total budget number

 A startup budget is separate from your regular business budget. Your startup budget focuses on the expenses you need to incur to start your business. When we talk about determining your total budget, we’re not talking about your monthly expenses for your business. We are talking about the amount of money you are willing to allocate to start your business. Let’s be real for a moment. There are always things you need to invest in to start your business. It could be as simple as a domain name, but to me, that’s something I would consider as part of your startup budget.

The reason we decide your budget amount FIRST is to keep your expenses under control. If you have clear boundaries to begin with, it’s easier to say no to expenses that don’t fit into your budget. If you don’t have a clear view of what you’re willing to spend, it’s harder for you to decline spending. When you have a number to use as your guideline, you’re less likely to buy things that are out of your budget.

When choosing your starting budget number, don’t choose a maximum number. People tend to choose the highest they think they can afford. Don’t choose a number that will extend you beyond a good quality of life. This is why you should never choose your maximum number. Choose the right number and give you what you need to start your business without stretching yourself thin. For example, if you have RM10,000 in savings, RM9000 is a good budget amount. It builds you a cushion. Don’t choose RM10,000 as your maximum budget because you risk going over budget and spending more than you allocated.

Step 2: List everything you’ll need to spend money on

Write down everything you think you need to spend money on. This is not like an organized list. This is not a categorized list. This is where you sit down for 10 minutes and write down everything that pops into your head that you think you’re going to buy. Just write. Write it all down! Start with the big things you expect. Then push yourself to delve into what you should buy. Consider the little things that relate to the big things. For example, if you need to do a headshot, what about your hair, makeup and clothes? Do you want to have props? All those things will cost you. Even if you’re not sure you’ll need it, write it all down. All we do is prepare ourselves for all the money we MAY have to spend in our business.

Step 3: Categorize as Essential, Nice to Have, Non-Essential

Every single expense on that list will have one of these three categories assigned to it. Essentials are what you need to start and run your business. Everyone’s list of essential expenses will be different. For example, a photographer will need a camera. Graphic designers will need an Adobe subscription. Podcasters will need a microphone and audio software. These expenses are things you must have to operate your business.

The “nice to have” category is usually software that you can technically do without. This is a “nice asset” because, although it makes your life easier, in the early stages of your business, it is not necessary. Budgeting is all about allocating money and you want to start allocating your money with the most important things first.

Then we have the non-essential. These are things you don’t need right now. You can think about it later, like 3 to 6 months down the road as you grow your business. Don’t stress yourself out with these expenses when you’re starting out.

There is no right or wrong way to categorize your expenses. It’s just important that you know what you have to pay now and then. This will help you budget accordingly.

Now look at your essential items and set spending limits. This is where you do the real work of seeing how much money you have to spend. You’ll know right away if you give a realistic shot of what your expenses will cost. In some cases, you’ll have a concrete number to spend, such as if you’re buying software. In other cases, you’ll need to do some research to get your cost estimate. After you set spending limits on essential items, move on to non-essential items.

Step 5: Adjust as needed

Now you will streamline your numbers as needed. Crunching your numbers means you have to make tough decisions about your spending. This is the hardest part emotionally because you have to let go of some things. If you need to adjust your budget during this stage, reduce your spending on a few items or be creative with ways you can save money. You may also have to cut some line items if you can’t afford them. Seeing all the numbers right in front of you will allow you to be more realistic about your budget. Once you’ve finalized your initial budget, you’ll feel more at ease.

 Step 6: Track your actuals and update your budget

When you make spending decisions, look at your budget. This will help you know whether you are overspending or underspending. Every time you spend money,  check your budget FIRST. Then, enter the actual expenses. If the expenses are less than you expected, then reallocate the extra money elsewhere. If it’s more, you’ll need to redistribute money from other line items.