So, you want to know how to run your finances like a business.
First, answer this…
What do successful businesses have in common?
A solid financial structure.
Many people find themselves overwhelmed and frustrated when it comes to dealing with personal finances. The majority of the time it’s due to lack of structure.
As humans we often find ourselves having false expectations and when it comes to our finances it’s no different. We expect to get paid, pay our bills, put money into savings and live happily ever after with no real plan.
If only it was so easy.
You can’t just think yourself into financial success. You have to be intentional about doing what it takes to make sure your business (your household) is setup for success.
That’s why it is important to run your finances like a business. In all actuality, your family is your business.
Have a Plan
In order to start a business, you first start with a plan. Planning is a vital part because when a business lacks vision and goals there is nothing really fueling that business to grow.
To manage your finances like a business you should first create and implement a financial plan.
Which is basically (dun dun dun)…… a budget!
Yes, I know that dreaded word budget again, I think it’s about time you start to embrace it.
A budget is a business plan for your household. It will allow you to see what is coming in and where you are spending it. It will actually reveal some things you probably were never aware of, like how much money you are actually wasting.
The main reason for budgeting is it will keep you accountable and keep you on track. Your financial plan (budget) should cover:
- What products or services are necessary
- How much to spend
- How much money will be needed to cover expenses
- What needs to be done to reach goals
Once your plan is in place you will be able to focus on other elements that will contribute to your financial growth.
Keep Operating Costs Minimal
If you were in business you would cut out everything you didn’t need or that wasn’t adding value to your business.
When it comes to your life it seems that everything is a necessity. This is when taking a good look at your budget will help you eliminate unnecessary expenses.
Do you have cable boxes in every room you’re paying monthly for?
Can you try an alternative cell phone provider?
Are you driving a $50,000 car on a $30,000 income?
If you are paying for a lot of unnecessary things, eliminate them from your budget and ask yourself if those things are truly adding value to your life.
Pay Employees First
You may be thinking who’s the employee.
You are the employee!
When a company values their employees they pay them first because without them there’s no business.
Treat yourself as an employee and pay yourself first before anything. When you get paid automatically transfer a certain amount to your savings accounts (ideally 20%).
By doing this you will get into the habit of always paying yourself first.
Businesses communicate constantly to ensure that it’s moving in the right direction by holding meetings that discuss goals and performance.
Having frequent meetings in your household will allow you to do the same.
When it comes to communicating about finances it’s often when something isn’t going right or a problem has occurred, not because we are being proactive to keep our finances in order.
That usually stems from our upbringing because many of us didn’t grow up having discussions that involved money. When it comes to your household finances it’s important that everyone is involved including the children. This will allow you to raise money minded kids.
Communicating won’t solve all your money issues, but it will relieve some of the financial pressure (by being on one accord).
When it comes to your money don’t to be a complainer, have conversations to address your concerns.
Maybe you’re tired of your spouse spending without checking the account or constantly spending money on unnecessary purchases.
Simply talk about it.
Insure Your Risk
If a business loses money to a fraud what would happen? What if a business loses their building to a fire? These things could lead to the end of a business, that is why businesses make it a priority to insure themselves against theses types of risks.
Just like a business owner insures against risks, you should also. Make sure you always have life, home, health, and auto insurance.
Insurance is one of those things where you have to do your due diligence, research different options and make sure that whatever insurance you choose is of quality, don’t just choose one because it’s cheap.
Grow Your Money
Businesses are always looking for opportunities to grow financially, you should too.
When you are able to create multiple income streams and keep your operating costs (household expenses) low you will have a positive cash flow.
With that positive cash flow, you can start having your money make money. In other words, you can make that money work for you.
The main way you will do that is by investing your money wisely. Look into stocks, real estate, and other investment activities.
Think Long Term
Businesses become successful by being proactive and not reactive.
Can you imagine what retirement would look like? What about your kids going to college without having to use loans?
Your financial situation will improve greatly if you keep the long term picture in mind. That’s your motivation and your why.
Businesses don’t become successful overnight, it’s a process.
At first, you will feel excitement because you have had this revelation and your drive will start to fuel you as you see your debt becoming smaller and smaller.
But then you notice your debt is getting smaller but $0 balance is just not coming fast enough. But stay the course don’t get discouraged your path to financial success is never ending.
Once your debt is eliminated you will most likely want to stop because you feel your goal to pay off your debt has been reached.
If a business was to stop managing their money because they were no longer in debt, they would quickly fail.
There is always more to do even when you are out of debt.
You want to continue to grow, you don’t want to be complacent with just being out of debt. Investing and doing other things that will allow you to grow financially takes time.
Make sure you keep a good attitude and keep going no matter what, even if it’s a little here and a little there.
Running your finances like a business is not a guarantee financial fix. Just like any challenge or goal you want to accomplish it takes dedication and hard work.
This idea, however, will give you a structure to help grow your finances and put you in a better space financially.
It’s all up to you, maybe you have a better way to run your finances, I just want to see you successful.
But remember nothing will ever change if you don’t take the actions necessary to make the change.
What are you changing? and how do you find your self-running your finances? Are they a complete mess or nice and organized?
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