Profitable, well-run businesses usually have at least two things in common: they have clearly defined targets and they meet or exceed those targets most of the time.
What if you approached your finances like they were part of a well-run business? What would that entail?
Define your targets
First, you’d have to define your targets. What do you want to accomplish this year financially? Where do you want to be long term? It may help to set those targets in reverse — from long term to this year — because that way your targets can build on one another.
When setting targets, be sure they are specific, measurable, and achievable by the desired dates. If you want to buy a mansion and you make minimum wage, set a smaller target first (like earning more than minimum wage) that you’ll be able to realistically achieve.
Likewise, your finances will not be in perfect shape overnight, so be sure that you give yourself enough time (but not too much time!) to reach your targets.
Don’t just stop with setting and reaching for targets though.
Give yourself a performance review
Once the current year is up, pretend your business wants to know how well you’ve done. Give yourself a performance review. Evaluate your behavior, give yourself assignments for improvement, and do more of what you’ve been successful at. If you missed some of your targets, figure out why and get help or re-evaluate their feasibility. You can do this for the previous year too, to give yourself a baseline starting point.
Repeat this exercise every year, and you’ll be that much more likely to hit (or exceed) your targets the next year. Analysis, action, and accountability are the keys, and treating your finances like a well-run business will help you get there.Posted in Money Management on 01.28.13 with 4 comments.