By staff columnist, Alexandra Deluise
Successful businesses have one thing in common: they are good with their money. If you want to maximize your money at home, you should take a business-like approach to budgeting. Here are five things that successful businesses do well, and tips to help you do the same!
1. Businesses Are Organized
The first step in getting your household budget ready for business is to get organized. Businesses do this by taking careful inventory of every dollar that crosses their path. Successful businesses also need to know when their bills are due to avoid late fees or collection agencies.
Another way businesses get organized is by having different roles for various individuals. One person may be responsible for making purchases, another hires staff, and yet another is in charge of minimizing losses.
If you are budgeting with a significant other, relative or roommate, you may find it useful to divide up budgeting tasks and play on each other’s strengths. If your roommate excels at saving money through couponing, assign him the role of grocery shopping for the household. In exchange, use your strength in organizing income to arrange automated savings and bill pay for both of you.
When you are budgeting alone, organization can include setting up your direct deposit so that your saving is automated and bills are paid on specific days each month; additionally, debt should be organized so that you can easily access your payment information, debt totals, and interest rates.
One of my favorite ways to organize my finances is through Excel spreadsheets. If you are sharing the responsibility of household budgeting with someone else, use Google to create a shareable document that everyone can access and edit.
2. Businesses Don’t Rely on One Source of Income
Good businesses strive to have in multiple streams of income. A business that relies on two or more streams of income is less likely to go under if something happens to one of their products or services.
For the home budgeter, this means picking up a side job to bring in money. Even if you work a full time job, there are ways to make money on the weekend – I can think of 9 at least!
Picking up another source of income is essential for household budgets. If something were to happen to your main source of income, such as a layoff, pay cut, or other disaster, having something else to fall back on could prevent your family from falling into financial distress.
Bonus read: If you don’t have time for another job, there are always other ways to get a good return on your dollar!
3. Good Businesses Always Know Their Expenses
I can’t stress this rule enough: always, always, always know where your money is going. Businesses crumble quickly when they don’t understand how to price out their goods to turn a profit. Likewise, the home budget needs to clearly show where every penny goes to be successful.
How detailed your expense sheet is up to you, but it is essential that you group expenses into at least 6 categories: food, housing, transportation, debt, savings, and entertainment. From there, tracking your spending can become even more specific. Instead of lumping takeout and grocery shopping together under the food category, try setting one dollar amount goal for groceries and one for eating out.
I recommend giving yourself at least one month to just watch your spending before changing anything. See what categories may need tweaking, and plan accordingly for the following month.
Bonus read: Consider the cost of creating your product when setting a price on your freelance business.
4. Businesses Must Make Smart Investments
Businesses might make investments in different ways, including spending money on job-specific education for employees or reimbursing childcare costs – after all, businesses should invest in their people! Take a look at your own plans for the future, and decide whether investing in your education is the right step to make.
On the other hand, investing your money in the market might be the right choice. Doing your research on different types of investments is always the right move before jumping in. After all, even certain political parties can affect your investments!
5. Good Businesses Hold Frequent Budget Meetings
None of the first 4 steps to business-like home budgeting would help if you are not following up on them with frequent budget meetings. Businesses generally look at their finances at least once a month, tracking growth over the month, quarter, and year.
Whatever your financial goals are, consider implementing this tracking method: keep a year-to-date file on all your debt, investments, and savings accounts. At the beginning of each month, meet with anyone involved in your household budget and set goals for the month. For instance, you may set a goal of saving $100 extra for the month.
In January, April, July, and October, set quarterly goals as well. In this case, you might aim to have an extra $300 by the end of the quarter. Looking ahead and making short-term goals makes it easier to attain them. Additionally, you can play catch-up more easily if you miss your goal in one quarter.
Finally, once a year set aside some time to make a big goal for the end of the year. An important goal might be to pay off all credit card debt. This goal should be lofty enough to keep you interested, but attainable. Do not aim to pay off your $75,000 school loans if you only make $40,000 each year!
Home budgets need to be business-like.
If you take a business-like approach to your home budget, you will be one step closer to achieving your financial goals. Whether your goal is to retire early, save for your child’s college bill, or just have a little extra spending money, use these tips to get on track.
This post is part of Women’s Money Week 2016 #WMW2016
Staff columnist Alexandra DeLuise combines her banking experience with real-world financial advice to provide simple money tips to everyday people.