You had the grit and know-how to launch your own business—isn’t it time you applied the same determination to your personal finances? You know: follow a budget, pay down debt, save more. Millionaires spend an average of 8.4 hours a month planning and managing their personal finances, according to Thomas Stanley in his book, “The Millionaire Next Door.” If you want to be successful in business, start at home. No one builds an empire while their home books are a mess. Start simplifying your personal finances with the following steps:
Track Your Spending
Consider using personal finance software to help you track your spending:
- Use Mint (free) to create a budget, track your goals and download transactions from your bank account. Mint organizes and categorizes your spending for you, so you’ll see where every dime goes.
- The Quicken Starter Edition ($29.99) tracks your bank and credit card accounts and makes budgeting easier by categorizing your spending. You can add bill reminders and get email and text alerts on your spending habits. It also has a free mobile app.
- Simple You Need A Budget packages start at $60. This software claims you can stop living paycheck to paycheck by following four simple rules: Give Every Dollar A Job; Save for a Rainy Day; Roll With the Punches; and Live on Last Month’s Income.
Salary and Debt
This is a tricky one. You can’t budget very well if you don’t draw a regular salary, but you can’t always draw a regular salary at a cash-strapped company. There are two camps on this issue—one side says you should be paying yourself a fair, market-based wage, and the other says you get the crumbs left at the bottom of the cookie jar.
We can’t solve this dilemma for you, but we can tell you that which one you go for depends heavily on the amount of debt you’re carrying. If you’re trying to pay down a significant amount of personal debt while running a business, you’re going to need some kind of regular salary. Make sure you consider all other income streams, too. If you receive monthly structured settlement payments, you may be able to sell your future payments to a company like J.G. Wentworth for a lump sum of cash now. You could then use the funds to help pay down any outstanding debt and save potentially thousands in interest.
Automate and Audit
Establish auto-pay on your recurring expenses, including rent or mortgage, car loan, insurance payments, cable, utilities and cell phone bills. This frees you up to concentrate on your business. While you’re at it, audit these same accounts for hidden charges. It is not uncommon to find you’re enrolled in some subscription or service that is charging to your credit card each month, and you were unaware. Either cancel repeated fees or negotiate lower rates.
The Remaining
Once you have identified all your expenses that can be automatically paid each month, the remaining expenses are variable ones. These are the personal expenses you have the largest amount of control over, and if you are having a hard time understanding where your money is going every month, put your focus here.
If you can’t get a grip on your personal finances, don’t hesitate to reach out to a financial advisor. Doing so will help you and your business, and just may put you on your own millionaire path.
