You spend a lot of time at work, doing a great job for your boss, your company, and your clients. You use your time effectively, and you work hard to keep your numbers within the parameters.
Your personal finances are as important as your day job
Shouldn’t you be as diligent with your personal life? I can answer that: Yes, you should! Treat your personal finances like a business and you can be more successful with your money.
If you want to be successful with your money, you must treat your finances like a business.
Here are some steps to consider when you start to run your finances like your own personal business.
Create More Than One Income Stream
Businesses have more than one client, which is more than one way of getting income. You should also have more than one income stream, in case one goes dry.
You work, you get paid. This is one income stream. What about other ways you can get side money?
Income streams have two ways that they are fed: either with your time or with (some of your capital) money.
If you want to create another income stream with your time; a side-gig or a second job, create product or services using technology, art, engineering or science. Look at what interests you and see if you could possibly make some extra money doing something you love.
If you want to invest your money into something that creates another income stream, then you can look at investing your money into a variety of entities that can earn you money. It will depend how involved you want to be with your time; buying rental homes may take more time investment than buying long-term stocks or bonds.
Pay Yourself First
You are the employee of your business…er…household. If you want to feel secure and well-compensated, you must be paid a good salary. You (and your family) are the only reason why you do this, because you want to be taken well care of, and you should get compensated for the hard work you do. The best way to do this is to pay yourself first.
Payments to yourself first is considered savings of any form, giving you a foundation on which to build. Saving money for later will give you security, and make it easier to make needed purchases when they come up. It’s also the way to plan for important events, holidays, vacations, a new(er) car, or even to buy a home.
Putting away 10% is ideal, but you can work up to that if you’re too nervous about paying yourself that much money. This “pay yourself first” goes towards savings: emergency fund, fuck-off fund, and retirement. When you have a solid foundation of cash for future and unexpected needs, you are placing yourself in a great place when you get into a financially dire situation.
Get Lean with Overhead Costs
The goal is to decrease your debt and keep your monthly expenses as low as possible. As a business, you don’t want to spend more than you’re taking in, and high overhead costs can financially ruin you.
Your overhead costs are what you need to live — mortgage or rent, utilities, food, transportation, etc. Break down your costs for living; how can you decrease this total amount?
Start by going over each bill and find if there is a better, cheaper, or more appropriate way to spend money for maintaining your household.
Recently, I went through all of my services and decided we should try to decrease our utility bills. We found that our household didn’t use cable services, so we discontinued it. After calling our local cell phone company, I updated our plan to something that was less expensive and more appropriate for us. This saved me over $200.00 per month just on two bills.
Look at also decreasing any unnecessary fees or interest, either by paying off loans, or looking at a loan with less interest. And pay bills on time to avoid fees.
Be properly insured
There are 3 different types of ways to lose large sums of money and you must protect yourself from that risk.
“3 Types of Risk in Insurance are Financial and Non-Financial Risks, Pure and Speculative Risks, and Fundamental and Particular Risks. Financial risks can be measured in monetary terms. Pure risks are a loss only or at best a break-even situation. Fundamental risks are the risks mostly emanating from nature.” ~iedunote.com
Anything that is an asset or that you still owe debt, you will need to insure. At the basic, you will need medical insurance, home or renters insurance, and auto insurance. If you are a freelancer or a self-employed professional, you know that you may need business and professional insurance. It’s better to have these upfront. If you don’t, you’re putting yourself at risk for financial collapse if anything adversarial happens.
Streamline Your Daily Operations
You don’t want to spend a lot of your time doing the tasks of bill paying. Your time is money. Instead, work on having the money covered in your budget, and autopay all of your regular monthly bills. Load your accounts with dollars to cover those bills and let the banks do the work for you.
Grow Your Capital
Make sure your money is working for you. Once You are on a path of decreasing your debt, you will also want to tackle increasing your assets. Take an interest in responsibly investing your money into assets that will help you earn even more money. Learn how your money can be used to grow your capital, and get interested in building your wealth.
Plan for The Future
There will be a day you plan to “retire” whatever that will mean as you get closer to that age. Bankroll yourself so that your ‘business’ can pay for you once you decrease or no longer bring in streams of income. What does your golden parachute look like? Make sure you know what you want and plan your future around it, whether it’s next year or twenty years from now.