Overcoming debt and managing your personal finances can be a challenge—and a lot of that challenge stems from the fact that you take it all too personally. Your money is a source of fun and enjoyment, as well as a means of sustaining yourself. When you look at your money, you probably think of all of the things that you can do with it, rather than simply seeing it as an asset.
How to Manage Your Personal Finances Like a Business
So when it comes to managing your personal finances, it can be helpful to take a step back and view it all from a business-like perspective. If you can think of your life as a business—with income, expenses, overhead costs, and revenue streams—things start to get a little bit clearer. So here are a few tips for managing your personal finances like a business.
1) Create a Business Plan
Good business owners know that a business plan is essential to success. So if you want to manage your finances like a business, the first step is to develop a plan—or, in other words, make a budget. It’s not something that most people want to hear, much less do, but creating a budget is the first essential step to getting your personal finances under control.
Again, don’t look at a budget as limitations on what you can do with your money. Look at it as a plan for maximizing your personal profitability. By keeping your cash outflow at a minimum, and monitoring your financial life, you’re taking the right steps to managing your finances like a business.
2) Pay Your Employees First
Before anything else, businesses must pay their employees. And in your life, there’s really only one employee you need to pay—you. Before you spend money on anything else, you need to “pay” yourself, and that means putting money into savings. Decide on a percentage of each paycheck that you’re going to put away, and do so as soon as that check hits your account. Better yet, automate the withdrawal so you can’t forget about it or justify not doing it.
This may seem like yet another obvious financial management tip, but it comes back to the whole mindset of it. Don’t view your savings as money you “can’t touch.” It’s a payment that you make to yourself. It’s money that can’t be wasted on frivolous things or impulse purchases. Most importantly, it’s an investment in your future.
Treat your personal finances like a business and you’ll learn to pay yourself first.
3) Develop Multiple Income Streams
In business, it’s common sense that you can’t rely on one client to keep your business afloat. Every business has multiple clients and customers—sometimes millions of them. Businesses that rely on a single client set themselves up to be taken advantage of and, ultimately, bankruptcy.
So why do we treat our personal lives so differently? The majority of people rely on a single revenue stream—their full-time job—to keep them afloat financially. And when that revenue stream is removed, it’s crippling.
If you want to manage your personal finances like a business, you need to find another stream of revenue. It doesn’t have to be a huge stream; in fact, it can be a mere trickle. Whether you start a business or start driving for Uber, any extra cash you make will be one more step towards your financial security.
And who knows? That side job just might become your new full-time gig. In fact, according to Sam Ovens, CEO of Consulting.com, self-employment is the way of the future, especially for those with an interest in business consulting. Maybe that’s why he’s seen more than 3,000 people quit their jobs to start their own businesses. And maybe you could be next.
Taking a business mindset to your personal finances can make the difference between getting your finances under control this year, and plunging farther into debt. So try to shift your mindset, and you might be surprised at how much easier managing your money becomes.
When will you start treating your personal finances like a business?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.