I find I cannot withhold my comments any longer on this topic of budgeting software. I see too many articles that pretend to be about budgeting software when the author knows nothing about what the word budget actually means. I don’t like it when incorrect information is served up to the public.

Here are some examples of what I find offensive:

A recent article posted on the internet states that “Budgeting software is a computer program that creates a profit or loss plan from data entered into the software. Some of the data to be entered may include earnings and expenditures.” Sorry, but that is NOT budgeting software, that is accounting software.

The correct definition of the word BUDGET is: the amount of money it takes for the organization or household to function, and to attain its goals.

Here’s the good news: living on a budget does not mean you have to cut back on the quality of the things you buy or deny yourself anything fun. What it does mean, is that you have to figure out how to make enough money to afford the things you want, now and in the future, and to keep your spending within the limits of your income.

Therefore, a correct budget is partially a computation of what you have spent in the past and partially a calculation of how much money you will need for specific items in the future to achieve your financial goals. Budgeting is a useless activity unless you use it to do income planning and spending planning. Accounting software does not do that for you. It only records what happened in the past and cannot help you predict the future or plan future actions.

That same article states, “There are many different types of budgeting software…” I challenge the author of that article to name three or four budgeting software products on the market that are not, in fact, accounting software. I can name one; Money Management Solutions, and it is NOT accounting software, it is what its name implies, money management software.

And yet another useless statement pretending to be good information is this one from that article, “Any sort of budgeting software can be used to keep track of a personal budget…” Well, it is a useless activity to keep track of a budget, unless you add the useful steps of using the information to plan your financial future and manage your money in a way that guarantees you will achieve your financial goals. Just keeping track of what you spent is a waste of time, unless you use it as part of the whole money management equation of planning the steps to take to reach those goals.

And finally this statement which has nothing to do with budgeting software, and everything to do with accounting software, and so becomes a misrepresentation of the facts to the reader, “Money management software is some of the most comprehensive software on the market today. Products such as Quicken and Microsoft Money will keep track of individual account information with various types of accounts such as checking, savings, and investments. These programs can also track credit card spending and alert you when you have overspent on your monthly budget.”

In fact, Money Management Software is PLANNING software which is used to plan and execute the actions you can take to reach your financial goals. Therefore, you won’t need an alert that you overspent your budget; you’ll know BEFORE you are going to overspend and make the necessary adjustments so that doesn’t happen. Accounting software, like Quicken and Microsoft Money, is RECORDING software and can only tell you what happened in the past.

Making financial decisions for the future based only on what happened with your money in the past is a dangerous activity. For example, if you read an article in Money Magazine that is raving about some stock that had double digit increases over the past 5 years, and you bought that investment based only on the record of past performance, you could lose your money the next day.

What should you do BEFORE you make that investment decision? You should do your own research into the stock and make an investment decision based on YOUR belief that the future plans of that company will continue to deliver double digit increases.

Bottom line, don’t believe everything you read about budgeting software that is really accounting software. Accounting software serves its purpose to record what happened so we can file our tax returns. I use it myself. If we ever get the FairTax passed and we don’t have to file tax returns any more, I’ll still use my Money Management Software because it is my planning tool to make sure I stay on the road to achieving Financial Freedom.

Despite the ongoing efforts to save the U.S. Economy from disaster, the financial road ahead is going to be difficult for the vast majority of us. Instead of going into desperation and despair, however, one financial expert says there is much that can be done to protect yourself and contribute to an economic turnaround.

A short time has passed, and the only thing certain about the U.S. Economy as of this writing is that there is still a lot of financial uncertainty. This is being reflected in yet another big drop in the Dow Jones for the first day of trading. Commentators, Financial experts, and some of the smartest economic thinkers in the world still do not have a guaranteed fix for what is going on. As confidence plays a very large part in economic growth and stability, the lack of it could easily lead to despair and desperation.

But this does not have to be the case. Every single one of us, to a greater or lesser degree, all play a part in the health and stability of our economy. Although it is easy to get lost in the mind-numbing figures floated by Congress and Administration officials, the truth of the matter is that behind all of those facts, figures, and statistics, is a human being who is going to play an important part in our economic future.

No matter what happens, whether we have a Recession or in a worse case scenario, another Great Depression, our behavior and the way that we manage our money is going to have to change, and change in a big way.

Following a successful money management philosophy is going to determine how fast and how successfully we are going to weather this fiscal storm and come out the other end as an enduring economic power.

Although this may seem like a daunting task, the good news is that you can begin to take action, right now, to protect yourself against a bad economy and play your part in turning the situation around.

Well known money management expert and financial advisor Sandra Simmons has seen the economic writing on the walls for a few years now. She has written and lectured on the bad economic indicators long before it became fashionable to do so. Fortunately for her many clients, they are already well insulated against this current economic crisis. Her formula for protecting you against the next potential Great Depression is something everyone can do with a little fiscal willpower and discipline.

“The first thing you need to understand is what the word ‘economics’ means in terms of thinking about your personal or company finances, and how you can use what it means to your financial advantage,” says Simmons. “Forget what the media says about ‘economics’ when they report on the gyrations of the stock market, the banking industry, the mortgage defaults and unemployment statistics. Those are ‘economic representatives’ that gauge an area that is bigger than you can personally control.”

“What you do have control over is your own business and household economics,” she continues. “The definition of economics I am using is the original one: ’the art or science of managing a household or business.’ And those are things that you, as an individual, can control.”

According to Simmons, managing a business or household is an art. She maintains that it requires specific skills and abilities, like putting in organization so things run better. There is a science of managing a household or business, especially in the area involving money.

The following money management strategies are things that Simmons says you can do to guarantee that the economics of your household or business are strong and unshakable, despite the fact the general economy may be on the slippery slide to disaster.

Money Management Strategy #1 – Use CASH Not Credit

“Each time you buy something using lines of credit or credit cards because you don’t have the money to pay for it, you are promising your future income to the credit card company,” says Simmons with emphasis. “Those future earnings will undoubtedly be needed to pay your regular household or business operating expenses. That’s when you end up in the pay-for-life program known as the credit trap.”

The only exception is buying property that increases in value, like buying a home instead of renting, or investing in a commercial building that puts more income in your pocket. Using your money to make more money is smart money management.

Important Money Management Tip: Be sure you negotiate a big discount when you pay with cash. When the rest of the world is on the downhill run to economic disaster and credit is difficult to obtain, the guy who has the cash is king. In addition, figure out how to purchase items wholesale instead of paying retail prices to keep even more of your hard-earned money.

Money Management Strategy #2 – Don’t Spend More Than You Earn

Learn from your grandparents who earned little, but managed to live well. Reduce expenses to a rate that is less than your income. The most direct route to financial disaster is spending more than you make. You can keep a good quality of life while reducing optional spending. This can be accomplished by acts such as buying used equipment rather than new, and eating less often in restaurants. Don’t buy something because you only want it but don’t really need it. It’s just a plain good money management practice.

Money Management Strategy #3 – Money Must Be MADE Before It Gets Spent

“If there is some future large purchase you need to make, begin by setting aside small amounts of cash in a savings account for that purchase and keep that up until you can pay for it with cash,” Simmons says in reference to the safest way to make larger purchases without using credit or going into debt.

On a household level, if your child will be entering college in 10 years, then figure out what the tuition costs will be and work out how much money you have to set aside every week to have the full amount just before they graduate from high school. Plus turn in applications for each student financial aid package, scholarship and student grant you can locate.

On a company level, if you will need to purchase or upgrade equipment for your office, then figure out what the costs will be and work out how much money you have to set aside every week to have the full amount the month you will need to make that purchase. Plus look for each place you can locate to get the best deal possible.

Money Management Strategy #4 – Put Away Some Cash for Emergencies and Living Expenses

“You will sleep much better at night with the financial security of knowing you have money stashed away in a savings plan for emergencies like needing to repair the car or an office machine, having to have some unexpected dental work or experiencing a big drop in income,” Simmons says. “When you have a cash cushion you can get your hands on immediately, then magically, you don’t even worry about money, and your focus returns to living life and enjoying it, and earning money suddenly gets easier.”

In reality, the primary thing you have to be afraid of should there be another Great Depression is not having enough (or any) cash reserves tucked away in a savings plan you could immediately get your hands on.

Out of every bit of income that comes in the door, immediately set aside 10% and stash it in an interest bearing account that you have designated for your cash cushion.

A word of caution here – Be careful to protect your cash. There are many banks that are in trouble, and while some have failed, many are on the government’s “likely to fail” list. How safe is your bank? You owe it to yourself to find out.

While your bank probably won’t reveal their rating if you ask, you can find out for yourself how safe you bank is by signing up to get my FREE Bank Ratings Report right here.

“Perhaps you’ll have to cut expenses AND work an extra job to build your cushion of cash,” concedes Simmons. “Now, no moaning about how you can’t, JUST DO IT!” she exclaims. “As the weeks and months roll by you’ll find you are sleeping better and are walking through life with a lot more confidence knowing you are on your way to financial freedom and have protected yourself from The Great Depression looming on the horizon.”

Why is controlling the flow of your money so important? It is the energy and life blood of a household or business. It is vital to channel some of it through the income producing areas first to keep it running smoothly, and also to save some of it for future survival. Everything runs better when adequate cash is available.

Vice President Joe Biden stated that it is patriotic to pay more in taxes. That statement caused quite a stir and is certainly a point of debate. What is less controversial, however, and what truly would help your country get back on the road to wealth and financial security is following the money management points outlined above. If each and every financially responsible person in the United States got themselves out of debt, relied less on credit, and built savings and wealth, the American economy would be stronger than it has ever been.

This is the road map out. The rest is up to you.

What are you doing to stay financially healthy? Leave a comment.

Sandra Simmons is the President of Money Management Solutions, Inc. She specializes in helping business owners and individuals manage their money to achieve financial freedom. Claim your FREE Debt Reduction Solutions Guide.

With all of the doomsday news about THE ECONOMY as if it were an entity unto itself, it should be pointed out that THE ECONOMY is actually made up of millions of smaller “economies” called businesses, companies, corporations, and sole proprietorships. The indicator of how well each of these smaller entities handles their money management responsibilities is what makes up the general condition of THE ECONOMY.

I saw the economic crisis coming years ago, and I’ve been warning my readers and my business owner clients about this dangerous financial condition for the past several years. The current economic condition is never the fault of THE ECONOMY. The money management practices of businesses, the government and American households create the economic condition.

Let’s take AIG (American International Group, Inc.) for example, since they just received a bailout loan of $85 billion from the Federal Government. This is a multi-national company selling insurance, investments and retirement accounts. That means their income comes out of the pockets of individuals and other companies, and they have a fiduciary responsibility to pay their clients’ insurance claims and invest their investor clients’ money in things that are supposed to make the client money.

This company, with trillions of dollars in assets, is not just experiencing financial instability, they are beyond broke. They had to have a huge bailout loan to have a prayer of surviving for one more day. And what did their press release say? They said, “Policyholders of AIG companies around the world can rest assured that AIG’s commitments will continue to be honored.” What I feel must be said is that they committed TREASON [Treason: Betrayal After Trust] against their policyholders and drove their company to the brink of bankruptcy and could not honor their commitments to their policy holders, so ‘We The People’ have to bail them out and now We The People own this company which is collateral against the loan.

Is this debacle the fault of regulatory mistakes? To a degree it possibly is. Is it due to the current “economic scene”? No way! This is a company that is so large that it has massive effects on creating the economic scene. You don’t drive a trillion dollar company into bankruptcy overnight or over a few months. And I’m not singling out AIG here. Look at what is happening to the banking, mortgage, real estate and investment companies.

There is no confusion in my mind about how this happened. The treason starts with small violations of sound financial policies and continues to evolve into gross financial irregularities, all in the name of posting a profit and making the stockholders happy. The senior executives of any publicly owned company consider it their first duty to please the stockholders every quarter, year after year, even if it is at the expense of their clients. The senior executives in power at any given time do not want to be the ones bearing the bad news to the stockholders and, in doing so, put their personal reputation and their million dollar salaries on the line. So little violations begin, and then bigger and bigger ones, until complete betrayal of not only the policy holders but, the shareholders as well, becomes reality.

And make no mistake, the consumers and clients of those companies are also committing treason against themselves. According to the newest data from the Federal Reserve, as of December last year revolving consumer credit card debt stood at 943 billion dollars. Revolving debt is set to reach one trillion dollars later this year. That’s *trillion* with a “tr”. Earlier in 2008, a Vice President of a U.S. bank stated that over 24 Billion dollars was paid out in interest, late fees and over-limit fees last year on credit cards. That means Americans are committing financial irregularities and treasonous acts against their own households’ economic well-being. But the credit companies are equally to blame for granting that much credit to consumers who can’t pay the bill.

The early warning signs of this economic crisis were evident 3 years ago. It’s been in the news for that long as well. Were the corporate executives and the American consumers just not paying attention? Did they hear the warning signs and ignore them? Well, the financial condition of THE ECONOMY that each of us as individuals create with our financial actions is going down for the count. So what are YOU going to do to take responsibility for your own financial condition?

Can You Help Me Turn Around My Construction Company?

Service professionals like construction companies can find themselves in the financially tough position of running a lot of projects, but still barely making it financially. Without proper money management strategies and control of their financial planning and cash flow, a general contractor can actually find themselves in financial difficulty with declining profitability and increasing debt.

The following money management strategies illustrate what construction companies and general contractors can do to improve their financial condition and put their business back on the road to wealth and prosperity.

In May 2007, a construction company called me for help. Despite the mortgage loan debacle, the construction industry continued to be strong in Louisiana after Katrina. However, this company was behind on all of their projects, had no operating capital and had accumulated a lot of debt trying to keep the business afloat. They need a FAST turn around in order to survive.

The challenge was to raise income to keep projects moving ahead, placate materials suppliers and subcontract labor, cut runaway expenses, close sales on new projects and deliver the jobs profitably, while reducing a six-figure debt liability as fast as possible.

Money Management Strategy # 1 – Raising Income & Profitability

Behind the 8-ball, the company’s biggest challenge was to raise income to fund projects to keep them moving forward. Recent project draws from funding banks had been used to keep earlier projects going when money got tight and delivery of projects was coming to a standstill. The income statistic had crashed and personal savings had been drained to try to stay afloat. The debt load had grown to 6 figures.

The Money Management Solutions software program was implemented immediately, and a special “Income Planning Drill” was done with the client to determine what the major problems were. As part of the drill, an evaluation of profitability was done on projects that were running in negative profits. An analysis revealed that the company’s construction crew was making costly mistakes that had to be corrected at the company’s expense. To make matters worse, having to correct poorly installed doors and windows often ruined the materials. Replacing costly materials was an extra drain on the company’s bank account.

Many of the highly skilled construction workers had left the state when Katrina hit, never to return, or to return to locations further from the coastal areas. Less qualified workers were hired both to save money and because they were available for work. In the long run this cost the company more because job mistakes had to be corrected at no additional charge to the client.

The worst effect of this was the owner of the construction company was spending all his time doing quality control checks and correcting and re-working jobs, so he had little to no time to work up bids on new contracts. No bids meant no new projects.

The existing construction crew employees were replaced with half the number of new highly skilled crew who could get it right the first time. One of these had experience as a job foreman, and he was given that hat. Despite the increase in the hourly pay for the higher skills, the work was done correctly and faster than before on existing jobs. This freed the owner up to work up bids and close contracts.

In addition a new company policy was implemented, and bids for new jobs were confined to commercial projects which generate more income than residential jobs.

Money Management Strategy # 2 – Slashing Expenses

With jobs being done right the first time the cost of materials dropped dramatically, but cash was still very tight and materials suppliers who were owed a lot of money were complaining loudly. Money was so tight that one of the weekly financial planning actions was to look for things we could sell quickly to raise cash to buy materials. Now, a construction guy would rather die than part with any of his tools or his truck; but here’s what happened.

The owner walked his property and found a riding lawn tractor he could sell. The cash went to pay a supplier. That wasn’t enough for me, so I asked about vehicles. It wasn’t easy, but the sale of the second pickup truck the owner rarely drove was agreed upon and that cash was used to pay suppliers as well. I asked the owner to walk his property and see what else he could find. Sitting in a shed were some very expensive doors and windows he had forgotten about from a project done long before. They happened to be from one of the suppliers who was making threats. The doors and widows were washed clean of accumulated dust, loaded onto a truck and delivered to the supplier for a healthy credit on the bill owed. That was a real win for all of us!

The company had not had good luck with hiring competent bookkeepers, so a good replacement was found and trained on the Money Management Solutions software system. She was easily able to input the information into the MMS software program to prepare for my weekly planning meeting with the owner. The accounting chart of accounts was cleaned up and simplified, and the correct entry and reconciliation of credit card statements was implemented.

Just by having the accounting cleaned up and entries corrected allowed the owner to view a correct Profit & Loss statement and review past job profitability. Each line item was reviewed and red-flag items were investigated. The spending faucet was turned off in some areas and turned down in others so available income could be used to maximum advantage to buy time and move current projects forward while income and profitability was being strengthened.

Money Management Strategy # 3 – Turning the Ship Around

With projects moving forward the owner was freed up to spend his time working up bids and closing new contracts. One area that was a drain on profitability then came to light. Past bids were hurriedly prepared due to lack of time, suppliers were not called for current prices, old pricing was used to make up the bids and the increased prices of materials were missed. Consequently jobs were bid with little profit built in.

A new policy was implemented to get current materials and labor quotes before writing a project bid with clauses to cover unforeseen materials increases. With the owner getting price quotes good for 30 days from suppliers and writing bids that were profitable, the cost of materials was adequately covered and that drain on profitability was stopped cold. The bids on the more lucrative commercial jobs that were closed opened the income faucet and the ship started to turn around.

Money Management Strategy # 4 – Putting the Owner Back in Financial Control

Using the money management software, funds were allocated to job materials and labor on a weekly basis which kept projects moving. Funds were also allocated to past due bills while keeping up with current operating expenses. That kept suppliers happy. A set aside account for cash reserves was funded weekly to cover unexpected emergencies.

The company owner had plenty of time to work up bids and close projects. He landed several big contracts and sold a spec house he had been building which enabled him to pay off a large chunk of debt. Faithfully following the money management system, the weekly financial planning meeting included income planning for closing new projects out on bid, promoting for new projects, and allocation of funds to keep digging out of debt, keep current projects moving, and paying current operating expenses. Here is what the client had to say about the Money Management system:

Less than 3 months ago the likelihood of paying off a huge debt without borrowing money seemed impossible, much less figuring out how to continue running our business without any money, except what we were making week to week. Our stats [production statistics] were down, the quality of our work was poor, jobs were not profitable, acquiring new contracts was at a stand still and we were BLOCKED.

Using Money Management Solutions, with help from Sandra Simmons, we did our financial planning faithfully. It brought us understanding of what caused our financial difficulties in the first place, peace of mind through a very stressful period, and the ability to get through each week with a plan of action that allowed us to systematically work ourselves into a better condition in just a short three months. Now the contracts are flowing in, we have qualified personnel, great profitable work, haven’t had to borrow a penny to pay off debts and now have a very simple and workable technology to flourish and prosper, which we are.

Using the Money Management software in this construction company, the weekly allocation of income included percentages to pay for job costs, reduce debt, pay regular expenses on time, promote the company and even set-aside funds for a long-term retirement savings plan,” she says. “The increase in income from cost cutting measures, promotional activities and weekly income planning was immediate and profitability was on the rise.

The success of the plan was driven by owner’s decision to fully embrace the money management program and keep the discipline in. Once that decision was made, the rest was easy. As part of the plan, statistical graphs are being charted weekly and the decrease in debt and increase in cash reserves are proof that the weekly planning continues to work. Keeping the action in to keep a tight control on job costs, raise income and pay off debt is handled in less than an hour each week using the money management software, and the company owner spends the rest of the week with his attention on writing bids and closing projects.

He isn’t worried about the money any more and he’s having fun doing what he loves to do, constructing new, beautiful buildings. He actually beat my 8 month estimate of how long it would take to turn the company around by a couple of months. That is a testament to the power of the money management software program when it is kept in and used as intended.

If you would like a consultation regarding your construction company or general contracting company, contact Sandra Simmons at 727-448-1011 or email her at info@moneymgmtsolutions.com .