Free Family Finance

Dave Ramsey often presents a simple question to folks who call into his radio program. “If I hired you to manage your finances, what would you do?” Almost every time, the solution is made abundantly clear.

Its interesting how differently people run their lives from how they might run a business. Although the same principles apply, emotions creep in. Personal finance becomes just that – personal.

If we ran our lives like businesses, I think we would find ourselves in much different places. Much better places. In this series, we will look at how we can run our lives more like businesses and benefits of doing so.

The Marketing Department

Your company has a Marketing Department, but do you?

Two years ago, it might have been difficult to see the need for a personal marketing department. However, since that time, many companies have been forced into layoffs and pay cuts. With these circumstances, it is easier to see the reasons you need a personal marketing department. Let’s look at 3 things your company’s Marketing Department does, that you could mimic at the personal level.

1. Public Relations: Business like to be charitable and like for others to know about it. It is the heart of public relations. As individuals, we can replicate this easily. How? Do good stuff and don’t be a hermit. There is great value in community involvement. It should be something we are involved in, regardless. But as we participate in these activities, we should make extra effort to engage the folks we serve with. Community involvement is a fantastic way to network, particularly with other good-hearted people. If you have been laid off, or are currently looking for a new position, it might be time to ramp up your charitable involvement.
2. Record Keeping: Your company’s marketing department should keep lots of records. They use these records to develop marketing material. Your marketing department must be able to substantiate their claims with facts and their facts come from record keeping. As an individual, you should also keep adequate records about your performance. Depending on your line of work, it is important to track stats that show your effect & importance. Don’t wait until you are looking for your next job. By then, it will be too late. You won’t be able to access or remember the important details. But by continually keep records of your performance, you will be prepared for any unexpected career change.
3. Maintain a Website: Your company certainly has a website. But do you? Probably not. It can be incredibly useful to morph the record keeping above into an online portfolio. It doesn’t necessarily need to be a website, although it could be. With tools such as Twitter, Facebook, Linkedin, etc. you have plenty of opportunities to create a fantastic online portfolio for perspective employers to see your handy-work.

Dave Ramsey often presents a simple question to folks who call into his radio program. “If I hired you to manage your finances, what would you do?” Almost every time, the solution is made abundantly clear.

Its interesting how differently people run their lives from how they might run a business. Although the same principles apply, emotions creep in. Personal finance becomes just that – personal.

If we ran our lives like businesses, I think we would find ourselves in much different places. Much better places. In this series, we will look at how we can run our lives more like businesses and benefits of doing so.

Only Spend Money On Things That Make Money

I believe this is the area with the biggest divide between businesses and individuals.

Well-run businesses have three types of expenses.

• First, there is ‘mandatory’ expenses. These expenses have to be paid – no matter what – with no foreseeable future benefit. Taxes are a great example.
• Next, you have ‘investment’ expenses. This might include licenses, office rent, payroll, etc. These are not mandatory expenses. They are expenses you pay for a current or future benefit. You pay your employees because they help you perform more work. You don’t have to pay them, but you want to pay them because they enable you to sustain a higher level of output.
• Last, there are ‘want’ expenses. These expenses are not mandatory and they don’t have an additional future benefit above a ‘investment’ expense. You may ‘invest’ in a company car, looking forward to the promise of your salesmen making personal connections with prospective clients and subsequent sales. If this investment can be met with a Chevy Malibu, to purchase any nicer vehicle, the additional cost is a ‘want’. It doesn’t satisfy the investment with any greater promise of future benefit. It is just nicer. It puffs our ego. It makes us feel fancy. But it doesn’t help us achieve the ‘investment’ goal with any greater success. In fact, the additional cost makes the ‘investment’ return harder to realize.

Good businesses focus their expenses on the first two types. They proactively guard against ‘want’ expenses. However, individuals spend a tremendous amount of money on ‘want’ expenses. Many individuals choose ‘wants’ over ‘mandatory’ expenses – which is foolish. Additionally, individuals will often choose ‘wants’ over ‘investments’. They will flounder in their attempts to save for a down-payment for their first home, in the name of new clothes/dining out/entertainment/etc. If you can’t afford your mortgage due to a hefty car payment, you have also fallen victim.

To that end, if we want to run our lives like a good business, we must prioritize our expenses. We must satisfy ‘mandatory’ expenses first. We must look to ‘investments’ before ‘wants’. There is a time and place for ‘wants’, but it must be after ‘wants’ & ‘investments’. This principle is key to building wealth.

Dave Ramsey often presents a simple question to folks who call into his radio program. “If I hired you to manage your finances, what would you do?” Almost every time, the solution is made abundantly clear.

Its interesting how differently people run their lives from how they might run a business. Although the same principles apply, emotions creep in. Personal finance becomes just that – personal.

If we ran our lives like businesses, I think we would find ourselves in much different places. Much better places. In this series, we will look at how we can run our lives more like businesses and benefits of doing so.

Maximizing Your Income

As a business would strive to maximize sales, an individual should also strive to maximize their income.

So what might this look like?

Asking for a raise: Yeah, it is a bold move, and one that should only be reserved for appropriate situations. If you are in the midst of a struggling company, in a struggling industry, now is probably not the time. But if your situation is less dim, it might be a great time to put together a case for higher compensation.

Picking up a second job: It might not be the most ideal scenario, but it might be the most productive. It could certainly be a quick way to raise your income by a significant percentage. Do you have a hobby that could easily be turned into an income producing effort? Is there a natural extension of your day job? Could you use your expertise in a consulting roll?

Advancing your capabilities through education: While the first two suggestions are short term solutions, the answer might need a long term approach. The dreaded, “What do you want to be when you grow up?” question. It might be time to identify your career path, set achievement milestones, and begin achieving.