In today’s fast-paced world, managing personal finances can feel overwhelming, especially when you are up against corporations that spend billions to get to you. There is no single approach that can be used to manage your personal finances that can fit all. But what if you approached your money like a well-run business? Imagine yourself as a company and your skills and time are the services you sell to your employer, and you treat your day-to-day spending like a business’s expense. By adopting proven business strategies, you can optimize your financial health, build wealth, and achieve long-term success, or at least gain some leverage against big corporations.
Why Treat Yourself Like a Business?
If you feel that you are not fulfilling your inner satisfaction, which could be anything that fuels you for the day. You will never get out of this situation without changing your mindset. And what better mindset than something that is well studied and well established. The mindset that you yourself are the business can change your outlook towards all the steps that you can take to get out of the rut.
Businesses and business strategies around the world are vastly studied, but the basics are the same no matter what kind of business. For simplicity, we will divide it into the following three pieces:
- Value creation/reason to exist, which is products and services: In this case, you, your skills, and the man hours that you are selling to your employer/customer.
- Revenue Streams: Your income consists of all the incoming money minus the loans.
- Running cost/Expenses: These are all your expenses, including any money going out.
Businesses thrive by maximizing revenue, minimizing costs, and planning for the future by being agile. Similarly, individuals can benefit from viewing their income as revenue streams and their expenses as operational costs. Your “product” is the value you provide—whether through a job, freelance work, or side hustles. By managing your finances with a business mindset, you gain clarity, prioritize your moves, and can set your future goals that can be achieved over time.
Here’s how to apply business-inspired financial strategies to your personal life:
1. Know Your Revenue Streams
A well-managed business understands where its income comes from and ensures that it enhances and diversifies it over time so that it’s not obsolete. For you, your primary “revenue” is likely your salary. But just like a business, relying on a single income source can be risky.
Personal Finance Tip:
- Assess your current income source, e.g., your job. Find ways to elevate it by investing in your skill sets (e.g., new certification, digital skills that can complement your occupation), adding more value for your employer/customer, or perhaps find a better customer who is willing to pay more.
- Explore additional revenue streams, adding more product lines such as freelancing (many online platforms to do this on the side e.g. upwork & fiverr), investing opportunities (trading stocks, online marketplaces using Amazon or Shopify), or starting a side hustle (Content creation or gig economy).
- Think of these as business profit opportunities that can boost your financial numbers.
By enhancing and diversifying your income, you reduce dependency on one employer and create a safety net and like a business, can work as a hedge against market changes.
2. Track Expenses Like a Chief Financial Officer
Businesses methodically track their expenses to ensure profitability and growth. As your own Chief Financial Officer (CFO), you should do the same. Every dollar you spend is an operational cost that can either support your business or detract it.
Personal Finance Tip:
- If you can measure it, you can manage it. You must use budgeting tools like Mint, YNAB, or even a simple spreadsheet to monitor your spending. There is no business that can survive without budgeting, it is a must. It does not include a rough number that you have in your mind.
- Start with bigger categorization of expenses (e.g., housing, food, transport, and miscellaneous). This will quickly help you identify areas for cutbacks. Remember, there is no such thing as a small amount. All multibillion-dollar businesses are accountable for every spending, even the pennies.
- Treat unnecessary spending like a business would treat wasteful spending and eliminate them to improve your bottom line. If you are having a hard time deciding, just cut back on anything that comes to your mind as unnecessary, and later, if you feel that you must have it, bring it back. It can be a good practice to evaluate your spending.
Regularly reviewing your expenses (set a periodic review time like an audit) ensures you are not overspending and keeps your financial health in good standing and the business running smoothly.
3. Know & Plan for Debts
Businesses account for debt to avoid uncertainty, and you should too. debt can significantly impact your profits, so proactive planning is key. How a business credit rating can tell you its financial health (debt vs. net profits). Our credit rating can tell you our income to debt ratio. Think of credit card debt as short term debt for a business. We must pay it off before reporting any income.
If you do not have huge credit card debt (amount depending on your income and monthly expenses), you are very lucky. But in case you have a revolving credit card debt or something similar in nature, you must bring it down before doing any other thing. Debt is not only an expense but it’s the worst kind as it will also kill your motivation to earn if you know that your money is not yours before you even earn it. You must plan to pay off all short-term debts like credit cards before saving any money. It is a must.
Personal Finance Tip:
- Set aside a percentage of your income for Debt Repayment. Make a robust plan to get it down. Divide it into stages. Put your card on hold until you bring it down to your comfortable limit.
- Use any unexpected income, e.g. bonus, gifts, extra savings, tax refund to pay off your debt. Do not think of your money as your money until your debt is not paid off.
- Consult a professional to optimize your strategy just like a business hires an external firm in crisis. Research online for debt payment strategies and learn about them as much as you can. It will give you leverage that you did not have before.
By treating your income as someone else’s money you can bring down your debt far more quickly than anything else. As it will help you dissociate from your incoming money and you will not feel entitled until your debt is paid off.
4. Business Investment for Growth
Businesses reinvest profits into research and development, or marketing to grow. For individuals, this can mean investing in yourself, tools & equipment, and your future.
Personal Finance Tip:
- Allocate a portion of your income to savings and investments (e.g., stocks, retirement accounts, or real estate). Do it in stages, divide your investments based on your monthly income. Example: put $50 a month into a separate account and at the end of the year buy $600 worth of stock. This will enhance your saving experience.
- Upskill through courses or certifications to increase your “market value” and boost your income. It can be achieved easily through the free online course from platforms like Coursera, EDX, or Udemy. Start with a program that is interesting to you and look for something that can complement your current skill set.
- Think of these as capital investments that can yield long-term returns. Remember humans have a natural tendency of overestimating the short term and underestimating long term results.
Just as a business grows by staying competitive, actively investing in new opportunities. You can enhance your earning potential and financial security through smart business strategies too.
5. Build a Cash Reserve
Every well-run business maintains a cash reserve to weather unexpected challenges and for situations like economic downturns or equipment failures. In our personal life, this is our emergency fund.
Personal Finance Tip:
- Set a goal to have 3-6 months worth of living expenses in a high-yield savings account.
- Treat this as your working capital to cover unforeseen situations like job loss or unexpected bills.
- Replenish it after use, just as a business would rebuild its reserves.
A solid cash reserve gives you financial flexibility and peace of mind, mirroring a business’s ability to stay afloat during tough times.
6. Set Financial Goals Like a Business Plan
Businesses operate with clear objectives such as profit targets, expansion plans, and market share goals. Similarly, your personal finances need a short term and long term roadmap.
Personal Finance Tip:
- Define short-term goals (e.g., paying off debt) and long-term goals (e.g., buying a home or retiring early).
- Break them into small actionable steps, like a business breaks down quarterly targets.
- Review your progress regularly to stay on track.
A “business plan” for your finances keeps you focused and motivated, ensuring every dollar works toward your vision.
Conclusion:
Managing yourself like a well-run business is not just a mindset, it’s a practical approach for personality shift for achieving financial freedom. By treating your income as revenue, your spending as expenses, and your future as an investment, you can empower yourself and be in control of your money and build a prosperous life. Start now by tracking your cash flow, diversifying your income, and setting clear goals. You as a business deserve to thrive and only you can give it the strategy it needs to succeed. Think of yourself as a CEO, treat your employer as your client. Budget your income and expense as CFO. Hire external consultants by researching online for your strategies.
