What any person or family should aim for when it comes to finances is profitability. In order to attain profitability, treat your finances as if you are running a business. This table shows objectives for a business compared to comparable objectives for an individual or family.
|1) Manage costs/Pay for operation||1) Manage Budget/Pay for living expenses|
|2) Increase income||2) Earn more money|
|3) Have a solid cash backup||3) Plan for retirement|
|4) Turn a profit||4) Have money left for “fun”|
As you can see, the goals are not that different for a business than they should be for you or your family. So, how do you go about treating your finances like a business does? Take the same methods that businesses use, and apply them to your financial situation. Concentrate on these five main aspects of your budget, and start to control your finances.
Just like any business, we all would like to improve our income. Fortunately, our personal finances have a myriad of ways to do this, whereas businesses have fewer options. In business, cost cutting, advertisement, adjusting prices and new products may all lead to more income. At home, we can cost cut, but we can also get a new job, start a small business, get a raise…any number of things that will help us earn more. Both the business and the family want to earn more money, and are constantly searching for the right recipe for success.
Striking a good financial balance requires constant maintenance. Budgeting is by far the most effective tool we have to stay on top of our money matters, but budgets need attention. You will be hard pressed to find a budget that stays constant for too long. This applies to business and personal finance. If your business slows down, or your income changes, you need to tweak your budget. It works the other way too. If you are taking more profit in the business, you may find more room in the budget for advertising or employees. At home, if you get a raise or start to take in money elsewhere, you will need to adjust your budget accordingly. An important note: A change of lifestyle is not necessary if you receive a boost in your income. You do not need to splurge to reward yourself. Don’t get me wrong, a reward may be in order, but save slowly for the bigger purchases. You do not want to put yourself in a hard place should something happen.
Ahhh, finally the reward. You have a profit. Your budget has paid off, you have scrimped and saved. Your debt is gone, and you are finally in the green. Now you can reward yourself. Do not go overboard, but you have earned it. The business will likely sink the profit back into itself with hopes of growth and even more profit. The profitable personal financier can do the same, and max out savings or retirement accounts. They may also use the money to start a project of their own. If they do choose to start a business, chances are that they will be a success. With all of the trials and tribulations associated with adhering to a budget, it is hard to succeed. If you can make a profitable personal budget, then your overall financial intelligence is strong. Business may come naturally to you, and as long as you can manage people, the numbers side of it should not be too hard for you.
History is the best teacher we have. Far too often, we overlook previous result and attempt the same recycled ideas that (surprise, surprise) yield the identical result. Trying new things and paying close attention to what we have learned in the past is a good way to move forward. It does not always work, but sometimes failure teaches more than success, and can bring out a fighting spirit that lifts you to new heights.
Businesses do it, so why shouldn’t we?
Most businesses leave room in their budgets for causes. Sometimes it aims to bump the local economy, but it may also go toward a national or international cause. There is no reason that you should not leave room in your budget for giving to a cause that hits close to home. If your church is very important to you, give to them. Maybe you have had a relative or friend who passed away from a disease. If you would like to see a cure, help out a cause that is dedicated to finding one. There are millions of noble and dedicated non-profits that need funding. If it is important to you, help them out.