“The Dangers gather as the Treasures rise.” – Dr. Samuel Johnson, The Vanity of Human Wishes, 1749
“It’s like the more money we come across/The more problems we see” – The Notorious B.I.G., Mo Money Mo Problems, 1997
Money doesn’t come with a manager. Parents often tell their children how to spend their allowances, instructing them to save their birthday money in piggy banks and jars. Adults have no such guide, especially when it comes to running a business. In fact, many adults have never taken a money management course, which can make the complexities of dealing with finances all the more difficult to navigate.
The daily challenges you face when it comes to money may seem overwhelming. Fortunately, there are simple ways to manage income and expenses for your business and in your personal life without getting bogged down. Money doesn’t need to be a danger, and more of it doesn’t need to mean more problems. Take a few minutes to learn about putting your money to better use.
Build From the Ground Up
Let’s start with the basics. Say you run your own business and you’re having trouble managing your company’s finances from month to month. The first thing you should do is give yourself a crash course on the essentials of accounting.
You need to understand what your expenses are on a daily, weekly, monthly, and yearly basis. Different industries have vastly distinct profit margins, which means identifying the right approach for your particular business is essential. What’s more, your company is likely unique in many ways, which means you need to tailor your approach to the requirements of your situation.
Create separate bank accounts for personal and business purposes. Track your company expenses carefully and understand the cost of acquiring customers, selling goods, or providing services in your field. Once you have a solid understanding of your company’s specific needs, you’ll be better prepared to tackle more complex matters.
Saving Money Every Day
Whether you’re looking to find room in your company’s monthly budget or just trying to save a little extra money for a special vacation, a few key tips hold true. First, try to identify hidden expenses that are preventing you from saving money. When running a business, this could include anything from using overpriced vendors and service providers to performing tasks in-house that could be outsourced more cost-effectively. In your personal life, this could mean eating out less or spending less money on entertainment.
Second, make sure you understand your tax situation and that you are tracking business-related expenses for taxation purposes. You’ll be amazed by the difference that your taxes can make. If you’re having trouble with tax issues, consider reaching out to a licensed tax professional. The cost of hiring one could very well be justified by the money they help you save.
Finally, consider purchasing used business equipment. While the temptation when starting a new venture is often to acquire all-new technology and furniture, you may be doing yourself a disservice when it comes to your budget. Many companies sell quality used items that will serve you just as well as new ones.
In your capacity as a business owner, or in your personal life, leveraging loans or credit cards may be advantageous. It’s essential to understand how the Annual Percentage Rate (APR) of your loan or card works, to ensure you don’t go over budget.
An APR is the interest rate you pay annually on a credit card or loan. This simple number shows in clear terms how much you are paying to borrow money. By comparing APR numbers across multiple loan options, you can more easily decide which one is right for you.
In most cases, a lower APR is better, though it is important to check the fine print when applying for any loan or credit card, to make sure it really is a good choice. Do careful research and make attentive, conscious decisions with loans and credit cards, to avoid becoming overburdened by high-interest rates.
With all the complexities associated with managing money, it may seem easiest to simply hire an accountant and be done with it. While working with accounting professionals is often advisable, it’s still a good idea to review your finances to the best of your ability.
Only you can fully understand your goals and desires. While a financial professional can assist you with matters related to money, they will never have your complete perspective. Staying focused, informed, and attentive to financial matters related to your business or personal activities is the first step towards responsible money management.
When you understand your own financial situation in and out, you can more quickly communicate your needs to tax and accounting specialists, identify areas for improvement and make budgets for personal and company-related activities and ventures. Simply put, understanding your finances enables you to accomplish your goals.
Taking a Comprehensive Approach
General budgeting and expense tracking is a good start, but to really maximize your money management potential it is essential to consider every aspect of your financial situation. When running a company, you need to know the costs associated with supplies, product materials, employees, benefits, and much more. Additionally, you need to decide where you want to be 5, 10, or even 20 years down the line.
Planning for the future is where money management becomes complicated, but also incredibly rewarding. You might not be able to figure out exactly where you want your company or personal finances to be in the future, but you can start the financial planning process today. Through analyzing your current budget and expenses, you can get a good idea of where your floor is and where your ceiling might be tomorrow.
Take charge of your finances and start managing your money with the knowledge that doing so will put you on the right track to financial stability. With an understanding of the fundamentals of finances and a clear plan in mind, you’ll be fully prepared for a world of exciting opportunities. Don’t wait until tomorrow to get started. Sit down today and find smart solutions for your money challenges.