Managing your personal finances is no simple task. Between budgeting for large purchases, managing investments and dealing with day-to-day expenses, it can get tricky to keep your funds in check. Running your financial life like a business is a great way to deal with the money issues that arise in your life.
Money In vs. Money Out
The first and most important financial principle to remember is that your “business” will only make a profit when the money coming in exceeds the money going out. While it may seem like a straightforward concept, it is one that many people struggle to understand. Millions of Americans are in debt, paying off high interest credit cards, loans and other expenses. Keep your balance sheet in the black by bringing in more income than you spend on expenses.
Remember that the most important fact is not how much your business earns, it’s how much it keeps. If your business is earning a healthy profit but you are spending down to the last penny, you are simply spinning your wheels.
Small Business Accounting
Manage your own accounting with software like Quickbooks and Peachtree. Enter your daily transactions and see exactly where your money is going on a regular basis. Track all of your bills and payments with simple accounting features. If you want to skip the hard accounting work, applications like Mint do the work for you.
In any business, there will be people who will owe you money.Â Accounts receivable managementÂ is a must for any business. Don’t let people get away with not paying you what they owe. Track them down until they pay you, even if they’re your friends. Get a card reader for your Android or Apple device and take it with you to dinner parties. Casually mention the debt over cocktails and whip out your card reader. Not only will it make for a great conversation piece, it will create a memorable event that nobody will forget.
If you share your finances with a spouse or partner, schedule monthly budget meetings to gauge the effectiveness of your financial strategy. Review all of your monthly income and expenses and find ways to bring in more income and reduce expenses. There are always ways to cut back, and by holding regular meetings you will have a clear picture of your financial standing.
Running your financial life like a business is an effective way to enjoy financial success. Start your small business budget today.