3 Personal Finance Lessons We Can Learn From Running A Small Business
We tend to think of our personal and business lives as being distinct. For some, this is an easy separation to make, especially if you don’t run your own business.
But personal finance is actually not all that different from running a business. It might feel a bit crass to boil our lives down to dollars and cents, but that’s not what we’re doing. Instead, we’re going to approach personal finance in a more calculated way so that you can achieve all that you want to achieve with the money you have.
To help you be better at managing your own money and financial lives, consider these three important lessons small business owners learn soon after they launch.
Cut Down on Overhead
In the business world, overhead is the term used to refer to the expenses we must incur to run the business. They include labor and production costs, but overhead can also be understood as rent, utilities, and any other services you need to operate.
In life, we have many of the same expenses. Our monthly phone, cable, electricity, internet, and transportation bills are expenses we simply cannot avoid.
We could spend days talking about how all of these things cost too much, but that wouldn’t get us any closer to actually dealing with these issues. So, your job needs to be to try and reduce these expenditures as much as possible.
For example, you’d be shocked at how much money you can save just by keeping your thermostat at a few degrees lower than what you’re used to, or by switching to the basic cable TV package instead of having access to all those premium channels.
The key here is to focus on how much these savings add up. Paying $20 less a month for electricity might not seem like much, but over the course of a year, that’s $240. That’s a good chunk of change you could put towards other things that will help you enjoy life more and worry less about money.
Do More with What You Have
The concept of employee engagement is an issue on the minds of most business owners. But why? It’s partly benevolence; business owners want their employees to be happy. Yet it’s more than that.
The goal of employee engagement is to try and get more out of what a company already has. In other words, it’s an attempt to boost productivity without having to incur additional labor costs.
In your personal life, employee engagement might not be super relevant. But the principle of doing more with what you have is, especially when you apply it to your time.
Each one of us only has 24 hours in a day to do what we need and want to do, but how much of that do we waste on little things?
- How often has a 45-minute errand turned into a 2-and-a-half-hour ordeal?
The solution here is to try and find ways to organize your time so that you can use it in the best ways.
- For example, if you need to run errands, why not block off a whole morning to do them?
This way, as the week goes by and you think of more things to do, you can push them to the side and focus on other things because you know you will have a chance to tend to the rest of your life during your allocated time.
This point is especially important for those who want to start their own business or spend more time on personal projects, such as a hobby or a creative pursuit.
It’s difficult at first, but once you see how it’s possible to always get more out of what you have, then you’ll soon find yourself in a whole new realm of productivity.
Be Lean Even During Fat Times
Good business owners know that there are lean times and fat times. Perhaps sales boom during the summer or at Christmas, and they lull at other parts of the year. The way in which your business cycles doesn’t matter, so long as you know how to manage your money so that you have enough when things get slow.
The same principle is quite relevant to personal finance because the secret to getting rich isn’t necessarily in making more money but rather in establishing a standard of living and not extending beyond it when you have extra cash.
This doesn’t mean you can’t indulge yourself, but it does mean you need to have a budget for these indulgences, and you need to stick to it.
For example, if you have a set amount of money for going out to eat every month, don’t let some extra cash fool you into thinking you can go out more often, as this will leave you in the same position as before.
It’s hard to get into this habit. When money comes in, such as from a bonus or a tax refund, we instantly think of all the things we could do with it. But if you train yourself to approach your personal finances like a business, then you’ll scurry this money away and have it for a moment down the line when you really need it.
Start Your Personal Business
Much like a business, we earn money every month and we spend money every month. However, when it’s our own lives, we tend to think less about how we spend that money. But we really shouldn’t. Money is a huge source of stress for so many people, and getting control over it is a sure way to improve our overall well-being.
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