Handle Yourself as a Business for True Personal Finance Success

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This is a guest post by Eric Rosenberg, a full-time freelancer and blogger at Personal Profitability. Eric writes about personal finance and entrepreneurship at InvestmentZen, his own blog, and other sites around the web.

If you have trouble managing your money, you are not alone. Millions of people struggle every single day with paying the bills, keeping their accounts straight, and having enough leftover to save for an emergency, let alone retirement.

handle yourself as business

If this sounds like you, why not take a step back and look at your finances through a different lens. If you treat your finances like a business, and yourself like a financial analyst, you may be able to better identify your financial strengths, weaknesses, and put together a plan to enjoy financial success for years to come.

Create Personal Financial Statements

Every business tracks its financial health using financial statements. If you search for your favorite large company’s annual report on Google, you can find its financial statements posted online. To get an idea of what these look like, stop in and check out Google’s latest annual 10-K report here.

Of course, we don’t need to put together a 100+ page detailed report, just a simple one will do. The three primary financial statements you’ll want to look at are the Balance Sheet, Income Statement, and Statement of Cash Flow.

  • Balance Sheet – The balance sheet is a snapshot of everything you have and everything you owe in one place. Subtracting your debts from your assets, you can find your net worth.
  • Income Statement – The income statement shows how much you earned and spent over a specific period of time.
  • Statement of Cash Flow – The statement of cash flow shows how much money came in and where your money went in terms of spending and investing.

If you want to learn more about personal financial statements, check out my guides here.

Diversify Your Revenue

If a company earns a significant portion of its revenue from a single customer, that is called “revenue concentration risk.” It is a risk because a problem with that one customer can completely bankrupt a company or destroy a product line.

For example, GT Advanced Technologies went bankrupt after losing its biggest customer in 2014. GT Advanced Technologies was a primary supplier to Apple for iPhone glass screens. When Apple changed suppliers, it destroyed the entire company’s business.

What would happen if you lost your primary income source tomorrow? For most people, that is a full-time job and losing it would mean a serious hardship. By diversifying your income and investing your time in side hustles, you are in much better shape to withstand a sudden change in income.

Maximize Profits

The root of business is earning a profit. Earning a profit requires earning more than you spend. Businesses and individuals can both utilize a budget to help plan for this goal. A budget isn’t something to restrict your spending, it is about planning and understanding your spending.

It is important to focus on both revenue and expense when budgeting. Don’t look at your income as a fixed number, look at it as something you can grow through hard work and focus. If you do well at your job, you can get a raise. If you do well with a side hustle, you can earn more. That is key to growing your wealth.

On the other side, do focus on big wins for your budget. Saving a few cents here and there is great, but finding recurring costs to cut and major expenses to avoid will have the most meaningful impact on your finances.

Be Your Own CFO

If you can stay focused and treat your finances like a business, you are essentially acting as your own Chief Financial Officer. Mastering your bank accounts, credit and loan accounts, and taking an active role in growing your income while cutting expenses will be hugely helpful in the long-term.

Even if things seem too tough to handle today, creating your personal financial statements will show you where you need to focus to live the life you want. Whether you want to travel more, save for retirement, or just want to feel more confident when dealing with your money, treating your finances like a business is the way to go.

Environmentally Friendly Ways to be Entrepreneurial

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The terms entrepreneur and eco are not always synonymous, although recent years have led to a rise in the adherence of eco standards in business. If you are thinking about starting a business and want to still prioritize our environment, you are in luck. More and more customers opt for environmentally friendly companies, so it’s becoming easier to save the planet while still making a good business decision.

Arguably, so long as you address carbon consumption and embrace carbon neutrality, then a business in almost any sector can be environmentally friendly. Here we look at some of the best options for being environmentally friendly and entrepreneurial.

Offset Carbon

There are several ways to offset your company’s carbon consumption. Many of these can be encouraged across the company, to create a culture of care for the environment. This includes switching monitors off overnight, and having lights which switch off after a certain amount of time, along with ensuring the building is well insulated, to keep in the heat during the winter and out in the summer.

Ensure that company cars are low emission and staff are trained on how to keep emissions low through sticking to speed limits, etc.

Work Online

Anything from copywriting to web design and accountancy to admin can be done online, which means remote working. This cuts down on carbon emissions in travel to and back from work, reduces overhead due to less people commuting.

Monecor’s Spread Betting is one way to make money through digital platforms, by simply working from home.

Reduce Paper

Wherever possible, keep everything stored on a cloud system and therefore remove or significantly reduce paper copies. Encourage staff not to print unless it’s really necessary.

Digitalize all resources, banking and invoicing, and ensure that you use recycling services.

Consider Using Solar Panels

If your business is of a certain size, then you may be able to use solar panels, which will reduce electricity bills, and in some cases you can even sell excess energy back to the grid and make money.

Installing solar panels does involve an initial outlay, which is why it’s best to seek financial advice about the size of the company.

Reduce Water Consumption

Depending on the nature of your business, you may not need to use a lot of water, but fostering a culture of ensuring taps are turned off, washes are put on eco settings, and water is not wasted are behaviour changes that make a difference to the environmental soundness of a company.

There are many other things that you can do to be friendly to the environment without sacrificing your bottom line. Hopefully, this post has given you a few ideas on how to move your business down this path.

Ignorance of Financial Realities Is a Major Concern

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They say there are two certainties in life; death and taxes.  Whether the word certainty applies is a moot point but there are some realities in the USA today that appear to be unavoidable, and miserable retirement for many is on the list.

A recent study of 1,000 people over the age of 18 identified almost 60% happy at their ability to enjoy a comfortable retirement because of their ability to save sufficiently. With life expectancy rising, many can expect to live twenty years or more after retirement, so it is a challenge to have a large enough fund to do that. A common way to calculate how big a fund you will need is to take 4% per year of your fund’s total as your potential annual spending.

These 60% are arguably far too optimist when average savings in society today are analysed further. Only half actually knew how much they would have in their fund when they retired. While Social Security benefits help support retirement they are far from sufficient for a comfortable retirement; no, very far!!

Statistics reveal that the average annual spending of a couple who has retired is around $45,000 with benefits paying up to half of that depending on the couple’s working history. It means that a couple need around $500,000 in their fund if the 4% rule is applied.

Too few Americans have anything like this and many of them are of an age where it would be impossible to accumulate that amount, simply because of time. With the chances of hitting the jackpot one in many millions the reality in the USA is extremely disturbing. It is not helped by other facts that have been revealed by further questioning in TIAA’s Lifetime Income Survey:

  • Of the 1,000 people surveyed around 400 stated that they were saving only 10%, often less, of what they earned each year towards retirement. That 10% is only the starting point on widely-acknowledged advice that recommends rising up to 15 and then 20% in later years.
  • Almost 30% admitted they were not saving anything at all. Surprisingly half of them said they had no worries about retirement so there is a clear issue here.
  • 500 or so said that their first financial goal was to create a monthly income for the years of retirement yet almost as many did not appear to have any idea or plan about how this could be achieved.
  • There was a feeling that spending would drop by a quarter once they retired. There are some obvious savings on commuting as an example but what about increased medical bills that many face as they get older? There is a counter argument to spending. When people have more time on their hands it is likely they actually will spend more as they do on holiday during their working lives.

Those Americans that understand the conflicting evidence within this survey can act to improve their futures but time is a constraint. The number of Americans keeping a proper budget is just in excess of 30% if a Gallup poll of 2013 is to be believed. It is an essential part of good financial management.

Debts need to be reduced, especially expensive debt such as that on credit card balances. Personal loans are a cheaper way to organize your finances and can be used to pay off card balances by regular instalments which can be entered within the budget.

Living to a budget takes self-discipline though not necessarily sacrifice. You have to be realistic or you will be discouraged when preparing your budget. There is the chance of savings on utilities, insurance and telephone with comparative websites doing much of the research for you.

The aim behind living to a budget is saving each month towards the future. You will know how you stand at any one time and that clearly helps you make good decisions about every aspect of your life. There is nothing wrong in getting expert advice as well.

The good news if there is any is that the younger generation appear to understand the limitations of the Social Security System and are prepared to do something about it. The bad news is that older people don’t and time is not on their side.

The Recovering Spender

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After hearing about her and seeing Lauren Greutman‘s name often over the past couple years, I was excited to learn more about her through her new book, the Recovering Spender.

This book is not just for someone who needs a little direction in making a budget. It’s not just for someone who needs help picking a stock. As Lauren puts it:

I wrote the book for the not-so-saavy spenders. The forgotten people when it comes to money management. We are the black sheep in the finance class, sitting in the back of the room slouched down with our heads hung low.

She wrote the Recovering Spender for the person who spends as a compulsion – an addiction – and she frames the book through that lens, starting with herself.

The first half of the book is Lauren’s story of getting her family into $40,000 worth of debt and the trials and errors of getting out of it. She is very open with her flaws and missteps, and this genuineness allows the reader to easily find where they can relate to her story.

I really liked the way Lauren weaved stories about her childhood and upbringing into the narrative, and explained that a lot of our behaviors and attitudes toward money have been ingrained from youth. She gives a really good example of how two people with different value systems about money, based on social class, can have serious conflicts in a marriage as a result.

We don’t often realize how our views about money start from a young age. Whether it is directly from lessons taught to us by our parents, or by our reactions to experiences in our childhood (e.g. I am going to give my child everything I couldn’t have as a child). Lauren stresses the importance of acknowledging all these thought patterns in making steps toward  a successful recovery.

The 12 Recovering Spender Steps

In the second half of the book, Lauren takes the reader through 12 steps of recovery… similar to the 12 steps of Alcoholics Anonymous. From her experience working with people with addictions, Lauren was able to diagnose her own issues with spending and create this plan which she is still utilizing in her own life.

12 recovering spender steps

Each of the 12 steps contains practical information, application, and a real-life example of someone’s recovery experience. Having real people with real experiences is always a helpful tool, and having Lauren share tips that she uses everyday makes the information seem more realistic.

At the end of the book, Lauren provides worksheets to help you sort out your financial state of mind, budget, and more.

Overall Thoughts

If your spending is out of control, if you have tried and failed to budget or save, or if your relationship is in trouble because of monetary issues, please read this book. I love that it is not just a book on how to get out of credit card debt (let’s say), but it looks deeper at the source of the issue.

It is equally important that she does give good, applicable advice to change your situation once you realize what is going. Do I think spending is an addiction for many? Yes. Do, I think everyone who shares some of these issues has an addiction? I am not quite as convinced as the author is, but I DO believe that we should all do the same work she prescribes to figure out the problem from the root.

I also believe that for many, the changes do need to be life-long. For varying reasons, we need the ‘fences’ she talks about to protect us from old thinking and habits.

This book is a really good one.

 

No-Credit Loans Are Helping Millions of Small Businesses

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Owning a small business is not supposed to be easy. If it was then everyone would do it.  But trying to run a small business with no credit or poor credit can be nearly impossible.  The pressure of trying to pay bills and grow a business without credit has undone a number of entrepreneurs.

Part of the problem is the fear that having no credit or bad credit induces.  Many business owners in this situation simply put on blinders.  Convincing themselves that if they can make enough money they can work their way out of this situation.

While making money is important, it also takes money to make money.  So not having the flexibility to get extra cash fast can force a small business owner to be too conservative in their approach.  Eventually missing opportunities when they come knocking.

However, it does not need to be like this.  A number of lenders who specialize in no credit loans have come on the scene in recent years.  Lenders such as the San Diego-based Mulligan Funding, provide loans based on cash flow, not credit scores.

These loans can be used for working capital, inventory or even equipment purchases.  Repayment is often flexible and can be made based on a percent of the day’s receipts.  This allows a small business to borrow with confidence as they don’t have the stress of struggling to make a monthly payment.

Other advantages to a small business owner with no credit or poor credit include faster application and approval.  In the case of businesses with no credit, the loan amounts tend to be smaller and are often used for emergency purchases or ramping up for a growth opportunity.  As such, business owners need financing options which can be approved in a matter of hours, not weeks.

While these sorts of programs are not new, ‘alternative lending’ has only made it onto the mainstream in recent years.  This was brought on by the financial crisis which saw banks and other financial institutions reduce their leveraged lending and small business activities.

In many ways, this was a blessing in disguise as mega banks are not well equipped to deal with small businesses, even when the owners have perfect credit.  The void created by the withdrawal of banks has created opportunities for more flexible lenders to take their place.

Some of these financing options have been caught up in one of the hottest investment trends the world has seen since the dot.com boom of the 1990’s. That is Fintech.  Don’t take my word for it.  This New York Times article profiled how these lenders helped a small business owner when banks wouldn’t.

For small business owners with no credit or bad credit, these lenders have been manna from heaven.  All they need is a business banking account, cash flow, and in some cases a merchant account – used for processing credit card payments.  With these, a small business owner can get as little as $1,000 or more than $250,000.  Granted the amount will depend on a number of variables, but this means that business owners with no credit now have place to turn to.

Another plus for small business owners is the sheer number of funding options out there.  The commercial credit agency, Dunn & Bradstreet, has an excellent website called Access to Capital.   This site provides in-depth information about a number of programs on the market today and even has checklists on what you will need to prepare for a potential lender.

This sort of information is extremely beneficial for a small business owner with no credit or bad credit as they can educate themselves about the options on the market today and how to apply for them.  As such, the fear that comes with having bad credit or no credit fades away and the business owner can make decisions based on what is best for their business.

In the end, millions of small businesses with no credit or bad credit are finally able to get the funding they need to grow their businesses.   This helps to strengthen our economy and our communities as these businesses will be able to grow, hire more people, and maybe even change the world.