Budget and personal finance are not many people’s favorite topics and certainly not one of mine. Even bank executives have problems in this area, but if you are an entrepreneur, you are. You spend more time in your business, taking a back seat to your personal checkbook. It may come as a surprise to you someday that you are not saving enough for slim hours and you are upset.
Well, focus on your professional skills and become your own personal CFO. By using your CFO eyes on the situation, it somehow reduces the pain of dealing with your own money. To get started, here are 5 rules to consider your personal finance business:
1. Be your own Board of Directors To make good decisions, you need to know what you’re trying to achieve. In business, the board of directors writes mission statements to keep the company in line with its goals. At home, you need to define your mission and make sure that you accomplish it by writing down your goals. Not just your financial goals, but your “life” goals as well.
2. Know your operating costs. Do you know what you usually spend each month? Businesses do so because their budgets are based on historically insurmountable spending patterns. However, most people do not know how much it will cost to sustain their lives. You can set a detailed budget, but at the end of the month, find out that you are not stuck to it. So instead of making a budget that specifies how much to spend, make a “cash flow statement,” which is divided into several sections for how much you spend each month.
3. Know your net worth. Balance sheets that list their assets and liabilities measure the progress that is being made towards the goal. Your net worth is your balance sheet and list everything you have. That means your checking and savings accounts, investments, cars, home, etc. will all pay off. Find your net worth quarterly to make sure you are moving towards your personal goals. Without this step, you won’t see the impact of your financial decisions until it’s too late.
4. Results of cash forecasting When a business makes important decisions, they use a process called “vision planning.” They look at one choice versus another. You can use the same process to make smart money decisions. For any choice, choose two options, and then see what each answer does to your cash flow and net worth. Remember, there are no “good” or “bad” choices – only choices that draw you closer to your goals.
5. Monitor progress as per annual reports. As companies evaluate their progress in their annual reports, you should review your priority list every year. Have you met any goals? Have your spending patterns changed? Did you spend less than you earned? Did you save as much as you planned?
Treat your money the way you treat your business. Give it time, because ultimately the time you spend is truly an investment for you and your dreams.