Managing your personal finances can be a tricky task given the ever-changing circumstances of home life. Keeping track of what comes in and goes out, as well as factoring in those unexpected expenses – a new tyre on the car or a school trip for the kids for example – can seem like a full-time job, but there are ways to stay on top of it.
It may sound strange, but perhaps the best way to stay in control is to manage your private finances as if they’re business finances. In business, you can’t simply spend and hope for the best – there needs to be planning and structure in place. You are accountable to other people and sometimes a sacrifice has to be made to achieve a profit. When you think about it, it’s not too dissimilar from managing your own finances. Here are five ways you can run your personal finances like a business.
Create a plan
This is never an appealing task, but businesses always start with a plan, and so should you. Sitting down to work out your incomings and outgoings can reveal harsh truths about your spending habits, but being able to identify where you’re going astray can be invaluable in the long term.
Document what you’re earning are each month, and look back over previous months’ expenditure to see where you might be able to cut back. Prioritise essentials such as your rent or mortgage and utilities bills, then investigate what else you’re spending money on and determine how you can streamline it. Are you paying out on a great car which is fun to drive but ultimately eating into your balance? Do you find yourself opting for takeaways rather than cooking at home a lot? Although it might seem hard to give such things up, cutting them out or at least reducing the money you spend on them means you can start to build up savings for the things you really want.
From the findings, you can create a plan for the coming months, detailing how and where you can spend. Making a conscious decision to cut out unnecessary outgoings puts you in a better position to afford the unexpected costs or get your savings looking a lot healthier.
When businesses start out, the owners don’t already know everything about running a company – they have to learn along the way. That may mean extensive reading, going on courses or attending conferences. Education is a great way to learn about your own finance.
You can read up on credit scores, for example, or invest in one of the many online finance courses that are available. These are helpful because they enable you to choose how in-depth you want to make your learning. You may only want to know the basics of how to manage your money or make smarter investment decisions; alternatively, you may feel a deeper understanding of market dynamics and influences on the global economy would really help you. Whichever course you choose, it’ll prove valuable when it comes to taking control and making your money work hard.
When you’re buying in a product or service for a business, you look for the right package at the right price. It’s no different with your personal finances. Instead of simply accepting the insurance renewal premium that comes through, or the raised price on your TV package, look around for a similar but cheaper option. Taking the time to compare products from different suppliers may only save a few pounds here and there each month but you’ll soon find that can add up. You may even find expenses lurking that you can cut out altogether – the gym membership that’s never been used, for example.
An important part of business is investment – investing in good employees, good software, good systems. It’s the only way to ensure the infrastructure can keep up with growth when it comes along. If you have some money put aside, or you’ve managed to get some savings together, don’t revert back to old habits because times are good. Start to think about a long-term investment that could benefit you or your children in the future.
Online trading is a good way to make your money work harder for you, enabling you to choose which stocks to buy or sell and when to make trades. If you’re new to investing, go to a broker who can help you decide where to put your money and how much risk you want to take. Other ways to invest money include property, corporate bonds or even overpaying your pension to ensure a secure retirement.
Business owners don’t try to do everything themselves. The reason they hire people with certain skillsets is so that they can draw on others’ expertise and ensure an area they’re weaker in is controlled by someone for whom it’s a strength. When you’re first starting to make sense of your finances, or if you find yourself in a situation you don’t feel equipped to handle on your own, it may be wise to seek the help of an accountant or financial advisor. Although this means parting with some money, it’ll help to set you on the right track or – if you’re self-employed for example – ensure you’re doing your self-assessments and returns correctly and could potentially save you no end of time and money in the long run.
Managing your personal finances like a business may not solve all your money problems, but it’s a good way to begin transforming how you handle your earnings and expenditure. Taking action will help you reduce your debt and achieve greater financial freedom, potential enabling you to have the things you really want.
Author's bio: Neil Dennis is a financial author and member of Capital.com editorial team. Capital.com is a global trading platform that allows users to trade a variety of financial instruments. Along with quick access to the markets, Capital.com offers financial courses, a huge collection of industry terms, personalised content and more. For over 16 years, Neil was previously employed by the Financial Times for over 16 years. He left his career to become a freelance writer. His fortes are currencies and the Fintech industry.
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