It’s funny how the words come together. Few people do projections, but lots of people do budgeting. They are not that much different. Lots of people hate to forecast. Lots of people hate budgets.

Even the word “budget” conjures up images of disapproving accountants and denied requests: “It’s not in the budget” is one of the world’s more familiar negatives. No, by any other name, would smell as sour.

But, despite their bad reputation, budgets are always useful tools and are almost essential to the proper running of a business. Budgets are used for planning and for tracking performance against plans. Your plan-as-you-go business plan should always include your spending budget, and that, by the way, when you rename it, is one of your building blocks for your projected income.

Some people think of budgets as normal, not scary. Some people think of forecasts as scary. They are basically the same thing. Take it however it seems easier for you. It shouldn’t be that hard to do.

The best and easiest way to create a useful expense budget is to take last year’s expenses and run them forward.

Start with an empty spreadsheet, the columns set up to show the months you’re running for your plan, presumably 12 months. Then use the row labels on the leftmost column to assign categories. Start with something simple, like rent. Estimate your rent and get it into a standard format. Don’t say you don’t know, or you have no idea. Take it a little bit at a time, and you’ll have something you can work with.

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Tim BerryTim Berry
Tim Berry

Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry.