Ever thought of running your personal finances like a business?
It’s time for a change in mindset: your personal finances are not that different from managing a business profitably. And if capital and revenue aren’t carefully monitored, even the best business ideas are bound to flop. In the same way if you overspend or mismanage your personal cash, you’ll find that you’re out of money by the time month end rolls around.
In the words of Nitesh Patel, Standard Bank’s Head of Personal Banking; “There are many similarities in the way successful business owners operate their companies and financially stable individuals control their personal finances. By approaching wealth-building with an entrepreneurial mindset, you can grow your assets and achieve enduring financial stability.”
So time to start thinking like a business owner! Apply these six business tips to your personal finances and watch as you reap the rewards:
1. Create a ‘business plan’ or budget
All business owners know how important a detailed business plan is to a successful business. They provide a company with direction, keep them aware of their goals and how to achieve them. Just like an entrepreneur you need to have a tangible plan for managing your personal finances, ie: a budget. Draw up a spending plan to keep track of how much is coming and going into your account each month. How? Write down your expenses and ensure you have enough cash each month to achieve your goals, such as paying off debt or planning for retirement. Simple.
2. Reduce overheads
When times get tough, business owners will reduce operating expenses (overheads). If you too get to a stage when your income has decreased, or your expenses are increasing, it may be time to downsize. This may mean moving into a smaller house, trading in your car for a more affordable model, cancelling your TV subscriptions or cutting out anything else that drains your account. Yeah, we know this sounds awful, and it most likely will be at first, but the long-term benefits will be worth it.
3. Pay employees first
It helps to think of yourself as an employee when managing your personal finances. Pay yourself before you pay anyone else to make sure that you meet all your monthly commitments, such as rent or school fees. You can also set some money aside for a savings account, retirement fund or other investments.
4. Grow your money
Make your money work for you by investing, using money you’ve set aside to build your financial future. There are a tons of investment options available, from unit trusts to property. If you’re unsure what the best option is for you, speak to a financial advisor at your bank. They’re trained to find solutions that suit your needs.
5. Insure against potential risks
All businesses have insurance measures set up against all types of risk; the passing of a business partner, a customer slipping and falling on a shop floor, an employee injured at a construction site. You need to protect yourself, just like a business, against potential risks. If you’re the breadwinner of your family, get life and disability insurance. Also make sure you have home, health, and car insurance.
6. Create multiple income streams
The most successful businesses have more than one source of income, so if one fails they can fall back on the others. Besides your nine-to-five job, think of other creative ways you can bring in more money. Have a skill or talent? Make the most of it! With some hard work, patience and extra time, there’s no reason why you shouldn’t be successful.
Want more money tips? Check out these 6 smart ways to save.
