Treat your money like a corporation would and turn a profit
Years ago I had a girlfriend, Suzi, who worked as an office manager. Boy, she was good at her job. She kept the receivables and payables balanced, she negotiated contracts like a master, and she kept the bank manager at bay - all for her bosses, the owners of the business. But at night, this master of the corporate coffers would sit at her kitchen table weeping because she couldn't decide which credit cards to make minimum payments on, or how she was going to get to the end of the month before she got to the end of the money.
It's not a unique story. You probably know someone who is responsible for an enormous departmental budget, but bounces cheques at home. Perhaps you have woken in the wee hours wondering when your line of credit would be revoked. Tired of those sleepless nights? Then it's time to incorporate some new ideas: Welcome to We Inc.
I can't take the credit for the concept of We Inc. It's my husband's phrase. While he gets most of his bright ideas from me, this winner is all his.
Boss, Employee and Shareholder
What does We Inc. mean? It means treating your family's finances as least as well as you would some stranger's money. It means making a shift in the way you think about your money. Your focus changes and you begin to acknowledge that whomever else you work for, your number one financial priority should be you and your family.
We Inc. means creating a mission statement, following the rules of money management so the auditors--anyone who has an interest in your record keeping such as your banker, the tax man or your spouse--won't have a hissy-fit, and making sure you stay afloat, so you can continue to pay your primary employee: you. And it means paying attention to the details so the corporation (your family) continues to function and meet the expectations of the major shareholder (you). If Suzi had spent one-tenth the time managing her own finances with the vigor she poured into her role as office manager, she'd have been in control of her money.
Set Some Goals
Corporations have finance departments, controllers and internal auditors. Yet only 25 percent of us regular folk have a written financial plan. So three-quarters of us are walking around without a map.
As the Chief Financial Officer for We Inc., you need a strategy for managing your money. That means setting some goals and establishing the priorities for how money will flow in and out.
First, what's your personal mission statement? Do you want to retire by the time you're 55? Do you want to be debt-free by the year 20..? Make sure your mission has a time line and outlines the specific step you'll take to achieve it.
Second, what are the spending and earning goals that will help you accomplish your mission? Without a budget it's hard to determine if you're working to meet your priorities, or just keeping your head above water.
Manage the Details
Corporations are disciplined. They do cash flow statements monthly, reconcile their bank statements at least that often, and keep meticulous records. So should you. Handling these details isn't hard, but it does take time. Unfortunately, we are more willing to watch television than actively manage our money. That wouldn't fly at the office ("Sorry boss, but Idol is on right now--make your own copies"), and it won't at We Inc. either, once you begin to take your own money seriously.
Doing the details at home means setting up files, meeting deadlines, and administering your portfolio. Monthly contributions to a retirement savings plan, regular repayment of debt and serious attention to cash flow (read: don't bounce any cheques) are all examples of this discipline. The shoe-box full of financial records and the last-minute scramble to find those tax receipts are good examples of what not to do.
Corporations hire consultants, financial advisors and independent external resources to help them get the job done. You, too, should recognize that different tasks require expertise in different areas. Seeking independent financial information or advice is a good thing to do, especially when you are out of your particular area of expertise. Use a stock broker for your investing and an estates lawyer for your will and powers of attorney. Don't go the route of the generalist and expect your accountant or banker to be your only advisor: the world of money changes so quickly no single generalist could possibly keep up.
Result? Happy Employees
As the president of We Inc., it is also up to you to ensure your employee - that would be you, again - has a good pension plan, is covered for health and disability and has sufficient life insurance. You want to keep your best employee happy, right? Remember, low employee turnover and high levels of motivation will keep the company on course toward its mission. And the right attitude - We First - will help to keep everything else in your life in perspective.