Voice for Business

Here are my five rules for the processing of your personal finances like a business:

1) Be Your Own Board.

To make good decisions, you must know what you? Re trying to achieve. In business, Boards manage your mission statement to keep business on track with goals. Home with it? Is up to you to define your goals and make up? Is to fulfill it by writing down your goals. Not just your financial goals either, but yours? Life? goals because, let’s face it, most goals involve money. Does your car need new tires soon? How much will they cost? How much you need to set aside each pay to save up for them? You get the idea?

2) Does the operating costs.

How much money flowing into your household and how much you spend each month on average? Businesses know this because they project their budget based on historical expenditure patterns. Chances are you not? Not what it costs to keep your household running on a profitable basis. Ever make out a detailed budget just to find out at the end of the month that you broke it in two weeks? Dump budget and create one? The cash flow statement? that records how much you actually spend each month broken into several categories. This, I promise, will be a wake-Opener. You will easily see where you are bleeding cash non-essentials like eating out four times a week.

3) Know Your Net Worth.

Companies measure progress towards goals through balance sheets which list their assets and liabilities. This is a balance where you list everything you own and its market value. List your control and savings accounts, investments, cars, house, etc. minus everything you owe. Ask yourself – “If I had to sell everything today, how much cash can I go?” That will give you an idea of what you are worth when you add some ready cash and investments you can sell. Track your net access worth quarterly to make sure you? Is moving towards personal goals. Without this step, you will see the effect of your money decisions when probably it? Is too late.

4) Forecast the possible results of Financial Decisions.

This is like fortune telling without a crystal ball. When a company makes important decisions, they use a process called? Scenario planning.? In plain English, they look at the possible economic effect of a choice in relation to another. You can use the same process to make smarter money decisions. For any choice, pick two options, and then look at what each answer would do to your cash flow and net worth. Bad choices put you further from your goals. Good choice you get closer. It’s really simple.

5) Give your family an annual report.

The companies report their results to their shareholders in their annual reports. You need to go through the list of priorities with shareholders, family members, every year. Make them a part of the solution. Congratulate them for helping to make your household profitable. Have you achieved any goals? Have your spending patterns changed? Did you spend less than you earned? Did you save as much as you planned? If you follow these five steps, your household will be a successful company.

If you treat your money as a valuable tool, give it the respect it deserves, money becomes a powerful determinant of your family’s future and those who finance director.

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