In many ways, managing your finances should be like managing a business.
A good manager should be primarily focused on:
Having a vision
Having a good plan
Communicating that plan
Training and educating staff
Making it fun (Staff engagement)
Outsourcing where required
Looking for ways to increase revenue and decrease spending
Minimising risks and on the lookout for threats
Seeking feedback and reviewing performance
Many business don’t survive because they are missing one or more ingredient. They may have a poor plan or perhaps their focus was only on increasing revenue without focusing on keeping costs under control. Perhaps they were oblivious to external risks and didn’t plan for a rainy day.
Most however are serious about surviving and thriving. They are focused on improving financial performance every year.
The same can’t really be said for the average kiwi. We are terrible savers. Frequently sitting below 3% of savings.
I think if more kiwis took their finances more seriously, like a business, we would be much better off.
If a business spent like a drunken sailor the way many individuals do, it wouldn’t be a very good business.
So how can an individual focus in the same way a business does?
Have a vision
This is critical. Just like a business can’t get collective buy in without staff understanding what they are trying to achieve, neither can someone save and invest for their future without knowing the purpose.
For me, my vision for the last 10 years was to save enough money to work less hours, have a more flexible job, and coast towards retirement. Less work hours means more time with family, playing tennis, and other important parts of my life. Having that vision front and center of mind has been extremely motivating and has allowed me not to stray far from course.
I have clients that have trouble saving sometimes because they have no clear vision or goals. I would be the same. Why save if you have nothing to save towards? Everyone needs that strong vision that will motivate them to show up each day and do what needs to be done and not slack off.
Have a plan
It’s one thing to have a vision, but another to turn that vision into a well formed plan.
Like a business, you need a plan for your vision. Detailed action points that will help you get from where you are to where you need to be.
Communicate the plan
If employees don’t know what the company plan is then they won’t execute.
If you have a partner then it is critical you are on the same page. It is not much good if you are not on the same page or heading in the same direction.
Training and education
Companies are always seeking opportunities for staff to upskill in the hope that they will become more valuable.
Individuals should be the same. If you can learn more about how to be good with money then you will be much better off.
Make it fun
Just like we spend a lot of time at work, we spend even more time being us!
If employees aren’t engaged at work they will deviate from the plan and be less productive.
The journey should be fun or you are far less likely to stick to it.
Tips include have strong motivation for doing what you are doing (exciting goals), don’t be too restrictive, automate as much as possible, marvel at your progress, and have the odd reward.
Learn to outsource
Companies are good at identifying their weak points. Or even acknowledging that someone else is better off performing certain tasks.
Individuals should be open minded enough to see their own weaknesses. No matter how smart we think we may be it is always nice to have a fresh set of eyes over what we are doing. There are always some bad professionals out there, but if you can find the right ones to work with, you too can be better off.
Perhaps it isn’t a weakness but more a time issue. Creating time by outsourcing duties can be a good decision for some people too. We have purchased a robot vacuum and robot lawnmower. Sure they are expensive but it has freed up many hours a week for us to do more with our spare time. Whether that is time together having fun, doing some other household tasks, or even some work we couldn’t get to during the week.
Look for ways to increase revenue and decrease expenses
Money. So important to help you achieve your goals. The fastest way to get to where you need to get is through a combination of increasing income and decreasing expenses.
Like a business, you want to get better each year and not lose ground.
You should always be on the lookout for ways to better your finances.
Minimising risks
Good businesses should always be on the lookout for threats. New businesses, economic conditions, staff revolts, and so on.
Having plenty of spare cash, good level of knowledge, being well diversified, and flexible, you too can help to minimize the risk of a downfall.
Our recent house build went way over cost and I am thankful for the extra cash we had put aside for that possibility. Otherwise we may have been in a position to have to pause the build or sell the dream house before even moving in.
Feedback and communication
This is a critical, but often neglected part of many businesses. Staff need to know how they are doing and how the business is tracking. This is so that if things are getting off track they can quickly be corrected.
Reviewing your progress and regular communication with your partner is essential in seeing what you are doing well, what is not so well, and what changes are required. Checking if your goals or plan need changing. Or perhaps your spending has got out of control. Maybe you are being too restrictive and need to loosen the reins.
Final thoughts
You are the CEO of your life. You need to take your finances as serious as a business does, if not more so.
You want to remain profitable with a good balance sheet so you can meet many of life’s challenges much more easily.
I am not here to minimize the challenges you face. But I do know that having well functioning finances will make whatever you face much easier.
The bonus that we have over businesses is flexibility. Many businesses are slow moving due to the levels of hierarchy and many decision makers. As an individual we can act quickly and decisively.
So take charge of the wheel and stop the leakage. A business wouldn’t put up with it so why would you? Your life is more important than any business.
If you need some help with developing and executing a vision and plan, then get in touch today.
The information contained on this site is the opinion of the individual author(s) based on their personal opinions, observation, research, and years of experience. The information offered by this website is general education only and is not meant to be taken as individualised financial advice, legal advice, tax advice, or any other kind of advice. You can read more of my disclaimer here