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Underrated Success Tactic: Actually Doing the Math

Underrated Success Tactic: Actually Doing the Math
My friend Justin Jackson wrote an article recently about reducing costs for his online small business. Anyone familiar with start-up advice has probably been told a thousand times to not worry about costs. Focus on increasing revenue. Cutting costs is a losing battle.


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Doing the math for better decisions

It forces you to not rush and assume the answers to questions without actually going out into the world and checking them first.

It may take a few minutes to pull up a spreadsheet and see how one approach compares with another, but the answer you get will be far more accurate than if you had skipped the work and just stuck with prevailing assumptions.




Doing the math: life problems

  • If your problem involves comparing 2 things that happen at the same time, then just add up the 2 effects and see which is bigger.
  • If your problem involves comparing 2 things that happen at different points in time, you need to discount things that happen later.
  • If your problem involves comparing things that aren’t directly comparable (say the benefit of enjoying your job more versus earning more money), you can convert one to the other by imagining a trade-off point for each.




Definition of a budget

Definition of a budget

A budget is an estimation of income and expenses over a set time. It is usually drawn up and re-evaluated periodically.

Budgets can be made for a person, a group, a busines...

Understanding budgeting

A budget shows the trade-off made when one item is exchanged for another. The result is:

  • A surplus budget, where profits are expected.
  • A balanced budget, where revenues and expenses are expected to be equal.
  • A deficit budget, where expenses are expected to exceed revenues.

Drawing up a budget means you'll know where your money goes, and you'll have greater control over your finances.

Corporate budgets

Budgets are necessary for running any business efficiently and effectively.

  • Budget Development Process. Assumptions related to projected sales, trends, cost trends, and the overall economic outlook is established for the upcoming period. The budget is then published and outlines the standards and procedures used to develop it. The master budget includes forecasts of cash inflows and outflows, budgeted financial statements, and an overall financing plan.
  • Static Vs. Flexible Budgets. A static budget remains unchanged over the life of the budget. A flexible budget has a relational value to certain variables, such as sales levels, production levels, or other economic factors.

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Steps of the zero-sum budget

  1. Determine how much you make on any given month.
  2. List your bills: Once you determine how much money you'll make this month,  figure out how much money you need t...

The zero-sum budget

Using this method forces you to “spend” every dollar that you make, by allocating all of your earnings into the different categories that your finances require.

It prevents waste and maximizes your income, with the ultimate goal of reaching zero at the end of each month.  

Get The Most Out Of Your Time

It starts with knowing what your time is worth. For instance:

  • People who spend their time doing more profitable work make more money. 
  • People who...

Monetary Value of Time

We all have some idea of how much our time is worth. On extreme ends, it is easy to know if a task is worth your time. For instance, if someone offers you $0.07 per hour and another $7,000 per hour, you would have no problem to decide.
However, in the middle of the time-value spectrum, it is less clear if a particular task is worth your time. While everyone has an hourly value, few people know the exact amount.

The Real Worth Of Your Time

Use the Realized Income Methods to calculate the value of your time. It is based on the income you received and will help you make better decisions on how to spend money day-by-day. You need two numbers for your calculations.

  1. How much time you spend to earn money.
  2. How much you earn during that time.