You, Inc. — Why You Should Treat Your Finances Like a Well-Run Business

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.

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4 comments

  • I totally agree. I try to give myself a financial “performance” review after each quarter. I also, like a business, try to funnel as much of my incoming cash to activities with the highest return such as investing in stocks, buying stuff that will last, or staying healthy.

  • I would add that keeping your finances the way an accountant at a succesful company would do is important as well.

    I do not have all my papers organized. I am more a piler than a filer and I wonder if I ever miss opportunities because I don’t look or don’t know where to look.

    • I’m kind of a piler myself (*stares at desk*) and it is easy to miss opportunities because of it. I try to limit the lives of my piles, at least, as a compromise.