Budgets and personal finances aren't most peoples favorite topics, and actually not one of mine. Even bank corporate executives have issues in this area, but if you are an entrepreneur so do you. You're concentrating so much time on your business, your private checkbook takes a rear seat. Then one day you are met with the alarming fact that you are not saving enough for lean times and you panic.
Well, just apply your professional gifts to the situation and become your own personal CFO. By utilizing your CFO eyes on the situation, it somehow tempers the agony of coping with your own money. To get started, here are 5 rules for treating your private finances like a business:
Be Your Own Board of Directors. To make good decisions, you have to know what you're trying to realize. In business, Board of Directors write mission statements to keep the company on track with goals. At home, it’s your decision to define your target and make sure you’re satisfying it by jotting down your goals. Not just your fiscal goals either, but your “life” goals.
Know Your Operating Costs. Did you know what you spend every month roughly? Businesses do because they base their budgets on historic spending patterns. The great majority of people , however , do not know what it costs to keep their lives running. You can make out detailed budgets, but find out at the end of the month that you haven't stuck to it. So rather than doing a budget that dictates how much to spend, do a “cash flow statement” that records how much you spend every month broken into one or two categories.
Know Your Net Worth. Corporations measure progress toward goals thru balance sheets which list their liabilities and assets. Your net worth is your balance sheet where you list everything that you own. That suggests your checking and savings accounts, investments, automobile, house, etc. Minus everything you owe. Track your net worth quarterly to make sure you're moving towards your private goals. Without this step, you will not see the impact of your money choices till it is too late.
Forecast Money Decisions Results. When a business makes important decisions, they utilize a process called “scenario planning”. They glance at the possible outcomes of one choice compared to another. You need to use the same process to make smart money calls. For a choice, pick 2 options, and then look at what each answer would do to your money flow and net worth. Remember, there are no “good” or “bad” selections “only decisions that put you closer or further from your ambitions.
Track Progress by Annual Reports. Just as corporations evaluate their progress in their yearly reports, you want to check your list of concerns every year. Have you accomplished any goals? Have your spending patterns modified? Did you spend less than you earned? Did you save as much as you planned?
You want to treat your money like you treat your business. Make a simple business plan. Give it the time it deserves, because at the end the time you spend is actually an investment in yourself and your dreams.
Are you an entrepreneur and need a few business plan examples? James Helmering’s site Entrepreneurs List gives out excellent business advice that will help entrepreneurs get started on the road to success.