Managing a business profitably is not much different from managing your personal finances. Even the best business ideas can fail if the capital and revenue are not carefully monitored. Likewise, if you overspend or mismanage cash on a personal level, you could find you’re short of money by the time the end of the month comes around, or even in debt.
Nitesh Patel, head of personal banking at Standard Bank, shares 6 tips adapted from the business environment that will help you on the road to personal wealth:
Create a ‘business plan’ or budget
Business owners recognise the importance of detailed business plans. Not only are they useful when attempting to secure investors and loans, they provide direction by outlining company objectives and the steps to be taken to achieve them.
Just like a business owner or entrepreneur, you need a plan to manage your personal finances. A budget or spending plan is a great tool to determine how much money you have coming in and going out every month. To create a budget, write down your expenses and ensure you have enough cash each month to meet your financial goals, such as paying off debt or planning for retirement.
Reduce overheads
Entrepreneurs usually reduce operating expenses, or overheads, when times get tough. Modelling such tactics will keep your personal finances on track and build your financial security. If you find that your income has decreased, or that your expenses are increasing, it may be time to downsize; you might have to move to a smaller house, trade in your car for a more affordable model, cancel your magazine subscriptions, or cut out anything else that drains your account. This may seem unpleasant, but the long-term benefits will be worth it.
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.
Grow your money
Use the money you put aside for yourself to build your financial future; by investing, you can make your money work for you. There are a number of options available for investment, from unit trusts to property. If you’re unsure of the best options to achieve your goals, contact a financial advisor at your bank. They’re trained to find solutions that suit your needs.
Insure against potential risks
It is essential that every business is insured 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 – all these incidents could mean the end for an undertaking if they have not taken steps to protect themselves. Just like a business, you need to shield yourself and your family against potential risks. If you’re the sole income earner, get life and disability insurance. Also make sure you have home, health, and car insurance.
Create multiple income streams
The most successful businesses have multiple streams of income. This way, if one fails, they have others on which to rely. Besides your nine-to-five job, think of other creative ways you can bring in more money. Make the most of a skill or talent, such as painting, baking, cooking or sewing. With some hard work, patience and extra time, there’s no reason why you shouldn’t be successful.
Many finance professionals and journalists agree that managing your finances as you would a business is the key to prosperity. However, it’s important to realise that wealth does not occur overnight and these changes will take time to show positive results.
“Just as you would run a business, take a professional approach to managing your finances. Patience and persistence are as important as the right guidelines. If you can follow your plan indefinitely, prosperity will be your reward,” concludes Mr Patel.
