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. Act like a CFO and take control of your money:
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.
• If you don’t have a budget, creating one is the first order of business.
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.
• Debt has sunk more than a few companies and more than a few households. Your ability to manage debt is critical to your financial health. Minimize your use of debt. When debt is necessary, use it wisely.
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.
• To minimize the amount paid in taxes, you must be diligent and aware all year. You can’t just pay attention to your taxes when it’s time to file.
• Get organized and take advantage of every tax law relevant to your situation.
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.
• Track your expenses, savings, and investing activities. Know your net worth. How are your finances trending over time?
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.
• Make the amount of money you’re able save each month a priority. If you’re saving money each and every month, you can expect an affluent future.
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.