1. Forecasting: Forecasting projected sales and expenses for the future can be instrumental in the construction of a small business budget. These numbers can give you a better idea of where the business’ financial future is headed, what to base a budget upon, and allow you to then break down your numbers into budgetary expense lines, assigning to each line a budgeted amount.

2. Review Historical Data: Taking previous years’ numbers into account when creating a budget can be helpful in getting a feel for how much a business spends and upon what. Not only can this provide a glimpse into the expenses your business might encounter in a typical year, but might also provide insight to rises or dips when it comes to seasonal factors or industry trends that could better help you plan for months where you might need to tighten your business’ belt a bit or when you can splurge a little.

3. Consider Industry Trends and Diversification: When you budget for your small business, it can be important to take into account industry trends and consider ways to diversify. With technology constantly changing and advancing, it’s important to look at ways your industry might change or ways in which you may be able to adjust your business to meet new market needs. Considering such developments might enable you to pad your budget a bit to allow more leeway to meet these needs or make such adjustments.

4. Wiggle Room: You never know when an emergency could occur or an unexpected drop in revenue could leave you searching for a little extra room in your budget to keep your business afloat. Consider aspects outside your realm of control that could affect your business’ income, expenses or ability to operate, and consider giving yourself a budgetary cushion in the event things don’t go as expected.

5. Pertinent People: While you might be the person creating your small business’ budget, this doesn’t mean that there aren’t other people in your operation that might have valuable input to contribute to the creation of that budget. There could be department heads, managers, accountants, and similar pertinent people that you might invite to offer their expertise and knowledge to help you formulate the best budget for your business.

6. Explain Your Budget: A budget may not be worth the paper it’s printed on if you don’t have the rest of your business’ team on board with making it a success. If others don’t know how to contribute to the meeting of a budget, you might find yourself in a loosing battle to make your budgeted numbers a reality. A meeting in which the budget is explained, as well as one that ensures the pertinent people of your business understand how they can make a difference can help align the stars when it comes to meeting your budget’s numbers.

7. Set Goals: Just because you’ve explained your budget to the relevant parties involved in your business’ operations doesn’t necessarily mean they will care about or abide by it. Setting goals for your team members to achieve regarding the portion of the budget that they affect or even assigning bonuses based upon budgetary expectations can have the members of your business who have the greatest impact upon the budget making sure they stand up and take notice.

8. Revisit Your Budget: Creating a budget and then just sitting back and hoping all goes to plan is not usually the best way to ensure a budget’s success. It is often critical to the success of a budget that it is revisited, revised and updated on a regular basis.

9. A Backup Plan: Having a backup plan in the event that things don’t pan out when it comes to your budget can help keep you and your business out of financial trouble. A cash reserve, knowing what expenses can be cut in a pinch or where adjustments can be made in the budget to squeeze out another dollar or two can help you maintain business as usual even if there is a flaw in your budget or you aren’t making the numbers you expected.

10. Understand Assets and Asset Allocation: In the event of a budgetary crisis, you may be forced to call upon means that you might not have expected to need. Understanding where your assets lie and how accessible they are can provide your business with the ability to outlast a budget crisis should one occur and allow you to know how long and how effectively you might be able to survive such a crisis.

This article was contributed by Tom Becker, a personal finance writer at Money Choices where he impartially reviews financial products.

In other financial news, I’m still on track to have my car paid off by June but it’s debatable whether or not I’ll max out my IRA.   I was a bad girl and dropped some loot to go on a ski trip in April.  I also have spent entirely too much money at the hair salon but we won’t talk about that.  There are a couple of other financial decisions in the works but I’ll discuss those later.  We’re one month into the new year.  How are YOU faring with your financial goals?

The next quarter starts September 30 so I need to register for the next segment of the class.  I’ve been slacking and never bothered to take the necessary steps to get the $120 refund I’m owed from the school for cancelling a class.  I guess that money will transfer over for the next class I’m taking.

Biting off more than I can chew has cost me.  I was taking an online course as well (a bad idea, I know) and that course is set to complete this Friday.  However, I am nowhere near finished so I will have to pay $100 to extend the course for three more months.  I can’t afford to procrastinate again.

Mr. Savvy and I are contemplating starting another small business.  I haven’t done all the necessary research yet but if we do, it definitely won’t be until after the beginning of the year.

As to why I was out of town for two weeks – a much needed vacation.  Mr. Savvy and I went to New Zealand and Fiji.  Though the weather was horrid the first week (cold and rainy), we made the best of it.  We had great fun but it was definitely a hit to the finances.  Needless to say, budget talks are on the agenda for this weekend.

What’s going on in your financial world?

photo credit: Latente § piove merda e dicono che è ciocolata

Like most of you, my 401(k) has steadily been declining despite the money I contribute with each paycheck.  When I checked my balance last night, it looked a lot like my 2005 balance!  So what am I going to do?  Nothing, or rather stay the course.  No one can predict the future so there’s no point shuffling money around and making matters worse.  So I will leave my contributions as is and evaluate my asset allocation at year end, as usual.  Then I will make any necessary adjustments.  Retirement is more than ten years away for Mr. Savvy and I so there’s no need to panic.

But enough about what we can’t do anything about, here’s what we CAN do something about.  As of yesterday, Mr. Savvy’s ‘hobby’ is now a business.  Therefore expenses he has occurred in the pursuit of such can now be written off against the income he’s bringing in.  Also, since he now has a business (a sole proprietorship, by the way), we’ll be opening a SEP-IRA in order to shelter some of that income.   So in addition to working to maximize our income, we utilize all possible (legal and moral) ways to keep as much of that income as we can.

We will also probably delay an upcoming major purchase.  We will still make the purchase but I’m comparision shopping in order to get the best price and I suspect there will be more deals to be had as the year ends.  What, if anything, are you doing differently during these financially trying times?

Those who are self-employed or have small businesses have many choices for funding their retirement. Below I’ve highlighted some of the most popular.

• Self-employed (or solo) 401(k) – This is for individuals who are self-employed or business owners who have no employees. Just like a regular 401(k), your contributions reduce your taxable income. Salary deferral contributions are capped at $15,500 for 2008. However, those age 50 or older can contribute an additional $5000. In addition, business owners can make additional profit-sharing contributions of 25% of compensation, up to $46,000.

• SEP-IRA – Only the employer can make contributions to the SEP-IRA for him- or herself and on the behalf of the employees.Also, the percentage contributed must be the same for every employee. The annual contribution is the lesser of 25% of compensation or $46,000.While earnings grow tax-deferred until withdrawn, there are no loans allowed against the value of the SEP-IRA.

• Simple IRA – This is a relatively inexpensive plan to establish.The employer can contribute for himself as well as on the behalf of the employees.The annual limit on these contributions is $10,500 or 100% of compensation, whichever is less.No loans are allowed against the value of the Simple IRA.