Dentist – got a budget?

Although many dentists and team members plan and make goals for their practices, many don’t operate their households with a planned goal. In trying to survive from week to week and from month to month, many people overlook an important personal management tool – budgeting. Would you ever go backpacking into the Arizona desert in July, without determining what supplies you might need? Of course you wouldn’t. Then why would you take one of your most important adventures, starting or managing your home finances, without a clear picture of what’s ahead and what resources you will need to get there?

The objective of the fiscal responsibility is to teach you how to manage your professional and personal monies. Budgeting can give you a map of expenses that are known and help you plan for expenses that cannot be anticipated.

Once you have all of your figures together, you have to start asking questions such as: How much control do I place on my spending each month to achieve the desired profit? What purchases are coming up for me in the future? Can I afford to take my vacation this year?

Once you have completed you budget you will have one of the most effective personal management tools of all – something that you can use each month to check your progress in achieving your personal dreams.

In its simplest form, a budget is a detailed plan of future receipts and expenditures. Right from the start you can validate the activities that you have planned for the coming year. Knowing what your personal activities cost and when such expenses will occur will help prevent any unexpected surprises that could lead to financial problems.

Once the period for which you have budgeted is completed, you can compare actual results with anticipated goals. Get into the habit of making this a regular part of your personal routine. You may find it takes discipline at first, but the rewards are high. You don’t have to do anything elaborate, just a simple comparison of your budgeted figures to your actual results. Then begin by asking yourself “why” they are different. Were your expenses higher than you anticipated? If so, do you need to look for ways to cut costs? Don’t blame the budget, use the information constructively and improve your budget the next time around.

The next step in preparing a budget is to determine whether you can achieve your personal profit goals. To do this, you must project your fixed costs and your variable costs. From these three figures, targeted profit, fixed expenses, and variable expenses you can determine your required level of income.

Fixed expenses are those costs that regardless of personal income generally stay the same. Several examples are mortgage payment, insurance, car payments etc.

Variable expenses vary with income. Several examples would be entertainment, travel, groceries, and clothing.

During the year the budget provides you with one of the most important personal financial management tools. For example, by looking at the year you can anticipate peak periods and months where personal profits may be restricted. It helps you anticipate your schedule better so you can make good decisions about special personal purchases or activities.

Through the process of budgeting, you will gain greater self-awareness by developing a deeper understanding of your cash flow needs. This will lead to improved personal performance and an enhanced quality of life. Through this process you will become more self-aware and committed to take action in route to your personal financial success.