One of the basic tenants of leadership that I learned long ago is that if you approach your personal life as a business in which you are the senior executive and make decisions based on how you’d expect the senior executive of You Inc. to operate, your life will be a lot better.
This holds true in your personal financial planning as well. When you begin to think like a CFO, you begin to make better financial decisions and your financial future becomes much brighter.
Many people handle money well at work, but horribly at home.
There’s a different mindset when you’re expected to act like a professional. What if you handled your personal finances with the same professionalism a CFO takes care of business? Discipline and professionalism can add a lot to your personal financial future.
Just because no one is watching you doesn’t mean you can be irresponsible with your finances at home.
1. Live by your budget.
Even the wealthiest companies have budgets that each department and manager are expected to follow. As your own personal CFO, you should prepare a monthly budget and chart any discrepancies. Then make the necessary budget adjustments.
2. Manage your debt.
One of the biggest responsibilities of a CFO is the debt structure of the company. While you might not have the option of issuing stocks or bonds to finance your household, you do have access to debt. Credit cards, personal loans, and lines of credit are just a few examples.
3. Engage in financial planning.
What are the long-term goals for your personal finances? What is your plan to reach those goals? What is the big picture? What are your retirement plans? Companies have long-term plans. You should have long-term financial plans, too.
4. Minimize your tax exposure and maximize your tax breaks.
Many US companies have moved their headquarters overseas to avoid paying US corporate income taxes. The tax code is complicated for everyone, regardless of income. But that’s no excuse to remain in the dark. Either educate yourself or get professional assistance.
5. Continue to build your skills and knowledge.
CFOs are constantly in the hot seat and work hard to keep their jobs. You can’t fire yourself, but you still need to be at your best. Spend some time each month increasing your knowledge of personal finance.
6. Maintain excellent records.
Financial officers are dependent on records and must prepare financial documents for release each fiscal quarter. Do the same within your household. Keep financial records that provide the information you need to assess your financial health. Review them regularly.
7. Focus on profit.
In a household situation, profit can be thought of as savings. When your household turns a profit, you have money left over to save and invest. Companies that routinely turn a profit are successful. The same can be said about households.
Learning to think like a CFO is worth the time.
A good CFO is an expert and applies his expertise wisely. Become a personal finance expert and apply the same mentality. Act like a CFO when dealing with your household finances. Be as much of a professional at home as a CFO is at work.
Your financial future is worth the time and energy.
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