Running your life more like a business

Being a successful woman in business is one thing – managing accounts, tracking your company’s profitability, negotiating strong deals for your enterprise. But how good are you at running the family finances? Even the most potent CEOs or entrepreneurs can have trouble dealing with family money because there is one major thing many of us fail to do with our personal finances – deal with them as if we are running a business.

This may sound an odd thing to suggest but when you think about it, dealing with your family’s personal money should ideally be approached in exactly the same way as you would run a business. Of course, when it comes to family, this is so much harder to do. Our own money is tied up in emotions and family decisions, which makes it more difficult to handle with dispassionate rationality and the calm analysis of a businesswoman in action. If you can learn how to sidestep some of that emotion by approaching your own money with more of a business sense, you will reap the rewards from extra efficiency and ability to think clearly.

For example, good businesses are built on strong balance sheets, where a clear idea of profit and loss is second nature. Most business owners can tell you exactly where their balance sheet stands at any time. Most people cannot say the same of their own financial affairs, so becoming more disciplined and organised with them will start to help straight away.

Now, I’m not suggesting that you start creating profit and loss accounts for your own personal finances (unless you want to of course!). But I am suggesting that you become more aware of what you have coming in and going out at any one time. Initially, this would involve sitting down with all of your paperwork relating to income – bank statements, wage slips, dividend receipts, portfolio reports, savings account interest statements – anything and everything that will tell you what income you have.

Once this is established, take a look at your outgoings – taxes you have to pay, fixed expenses such as those related to property, utility bills, loan repayments, school fees, and other expenses such as gym memberships or other clubs. Check whether there are any other areas where you could trim the fat, such as discretionary expenses where you could either get the service for less, or do without it altogether. You may even find things you are paying for that you had forgotten about and no longer use, in which case get round to cancelling them right away and stop spending money unnecessarily.

With both of these established, you can then work out your home finances equivalent of your profit and loss to see what free cash flow you have from your household income that could be used to save. Even if you are very wealthy, there is no point in wasting money in areas where you could put that money to better use. Just as in business, you would not allow profits to be drained by a cavalier approach to the way your company’s money is managed.

Having done the hard work with your income and expenditure, you may also want to go as far as outlining all of your assets too – this is especially useful if you are making a will, or want to get a good idea of your overall net worth. Include everything from property you own, collections such as antiques or paintings, investments, cars, and anything else you can think of. If there is debt against any of these, such as mortgages or car loans, then subtract that to get the overall value of your assets.

So take a lesson from the business world and mindset for your personal finances, and watch them a little more closely. You might be surprised just how much more you can do with the money you have.

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