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Why you should run your personal finances like a business

Why is it that we can manage a budget at work but the same task at home often gets pushed aside or we make emotional, rather than rational, decisions? For many of us, managing our personal finances can feel daunting. However, it doesn’t need to, especially if we apply how we manage our business finances

Personal finance

Why is it that we can manage a budget at work but the same task at home often gets pushed aside or we make emotional, rather than rational, decisions? For many of us, managing our personal finances can feel daunting. However, it doesn’t need to, especially if we apply how we manage our business finances to our personal finances.

Building and managing a business requires structure. It takes planning, processes and systems. More than that, running a business requires you to be accountable to others, such as business partners, shareholders or investors. So, what lessons can we take from managing a budget at work and how can we apply them to our personal finances?

1. Start with a plan

Every business starts with a plan, even a simple one, which acts as the roadmap for where the business is heading. When it comes to your personal financial situation, it makes sense to also have a roadmap for where you want to get to financially.

For a lot of people, the idea of setting a personal budget fills them with dread. It feels like hard work and limits their financial freedom. But in fact, it’s the opposite. Having a budget is like having a business plan for how you will manage your personal finances so that you can achieve financial freedom.


2. Detail your financial goals and set clear objectives

Take the time to write down your financial goals, whether they’re short-term or long-term. All of these goals, whether it’s investing in property or retiring early, will affect how you plan and manage your personal finances.

No doubt you’ve heard about SMART objectives. SMART is the acronym for specific, measurable, achievable, relevant and time-bound, and is commonly used in setting objectives in project management and employee performance management. It’s also increasingly used in personal development.

You can apply the same criteria for setting goals and objectives for your personal finances:

  • Specific – target a specific area of your finances, such as saving for retirement.
  • Measurable – quantify or at least record an indicator of progress (e.g. to save X amount by X date).
  • Achievable – be realistic about what you can achieve (e.g. save X amount of your monthly salary).
  • Relevant – ensure your goals make sense to you and your lifestyle.
  • Time-bound – set realistic dates for when you want to achieve your goal(s).

Emotional situations can cause you to make bad financial decisions. Setting clear objectives will help to remove the emotion from decision-making, instead helping you to weigh logical options for managing your money.

3. Involve your partner and/or family members in the decision-making process and objective setting

If you are in a relationship, or you share your finances with family members, it’s important to involve them in the process. You need to ensure you’re all on the same page and your financial goals are aligned.

It’s also wise to discuss your individual attitudes to money. In particular, how you approach financial responsibility and whether or not there is anything in your respective lives that could have a major impact on your finances. Most importantly, be honest. The more honest everyone is, the more it will help managing your personal finances now and in the future.

4. Give your personal finances the level of attention they deserve

Just as you would set time aside at work for something so important, schedule time in your calendar to properly plan your personal or household budget. Also, make time to review your budget and overall finances on a regular basis. Don’t simply ‘set and forget’ and make adjustments to your spending and savings as necessary to keep you on track for meeting your financial goals.

If you are in a relationship, make the time to do this together. You need to be on the same page. Once that happens, and you communicate clearly about financial goals and objectives, you will be surprised at just how much more smoothly things will run. As a result, it will be far less daunting to manage your personal finances.

5. Attribute spending

If you are in a relationship and share all of your personal finances, it’s important to be on the same page regarding spending, and who is responsible for what. This is especially important when it comes to larger purchases, such as a car or overseas holiday. It can be challenging, so try following the rule that until you both agree on a large purchase, it should not be made.

6. Review performance and make accountability a priority

Reviewing your income, expenses, savings and investments will help you identify cash flow opportunities and challenges. This is what happens in a business environment, so there’s absolutely no reason to follow the same process at home.

Improving your cash flow and looking for opportunities to increase your income are valid reasons for treating your personal finances like a business. After all, the goal is to put you in the strongest possible financial position. Also, having accountability is key to managing your finances smoothly with a partner.

7. Keep educating yourself

Meeting your financial goals takes focus, hard work and commitment. Taking a business-like approach to your personal finances is a great starting point but don’t stop there. Learn as much as you can about things like credit, saving and investing.

Of course, you don’t need to become an expert if you don’t want to but it’s important to be armed with the right information. Your research and learning will be beneficial, even if you decide to use a financial adviser.

To help expats educate themselves further on financial planning and investing we have created a resource library full of downloadable guides as well as blogs covering key financial topics.

Don’t be afraid to ask for advice

Managing your personal finances can be overwhelming, even when you’ve taken the time to approach them like a business.

A good financial adviser can help to review your goals and objectives, update or review your financial plan or simply review your budget to get you back on track.

The most important thing is to invest in yourself and your financial future. If you need a financial adviser who can help, get in touch.