Educating yourself about personal finances is crucial for the survival and growth of your business. Not only will good financial management help your business flourish, but it also allows you to use your resources and achieve business objectives efficiently. You can fulfil your commitments to stakeholders and gain competitive advantage while preparing for financial stability in the long run.
The basics of personal finance should be taught to children early on, starting with basic tools such as piggy banks. Many schools across the UK also teach money management and financial education to make children understand and realise the importance of planning for their future. Moreover, the common use of debit and credit cards has made it even more crucial for people of all ages to learn money management.
Here are a few tips through which you can effectively manage your personal and business finances.
1. Save More Than You Spend
It is important to carefully budget your expenses and save a percentage of your income. Even though this sounds fairly simple, budgeting can be tricky. To prevent yourself from going into debt, it is essential to save by focusing on necessities and controlling needless expenditure. This means saving more than you are spending. This rule applies to both businesses and individuals.
Follow the steps given below to ensure that you are not spending more than you are earning or saving:
- List down your daily/monthly income
- Make a list of daily expenses
- Analyseyour spending habits to understand if your money is being spent in the right place
- Through creative budgeting, cut back on expenses
- Build an emergency fund to take care of unexpected expenses.
It is important to remember that you should spend less than you earn and save at least 20 percent of your income. This will free you from the stress of living pay cheque to pay cheque and also allow you to invest in your future.
2. Keep Investing
In order to achieve financial stability and security, it is important to make a few sacrifices. To beat inflation, regular bank savings are sometimes insufficient due to minimal interest rates. Therefore, investing in stocks or mutual funds is a better option, especially for long term savings. Unless you have a sizeable pension plan from your employers, depending on social security should not be your main source of income. Without you having to lift a finger, compound interest can help you earn more through your investments. Some investments can prove to be more valuable than others, such as investing in property or real estate. This is because real estate has a higher probability of increasing in value, leading to more profit in the future.
3. Use a Faster Payment Software Provider
Using faster invoicing and payment software enables mobile, internet, telephone and other standing order payments to move securely and quickly with the touch of a button. Such softwarecan allow customers the freedom to manage their expenses and payments efficiently. I found this faster payments service whose software runs on cloud-based Bacs, meaning they are able to offer clients key benefits that non-cloud competitor would be able to match and businesses looking to benefit from quick, easy and affordable fast payments should use their module.
The benefits of faster payments include:
- Payments can be processed quickly
- A large amount of money can be transferred without hassle or stress
- Quick transfer offunds
- Greater transparency and cash flow control
- Protection against fraud
Using faster payment software can help your business to manage payments and implement a smooth collection process.
4. Multiply Your Income Streams
Having multiple sources of income can help you become independent and protect your finances. As the saying goes, it is not wise to put all your eggs in one basket. This means that relying on a single source of income or investing all your funds in one place can lead to disastrous results. When you have more than one source of income, you avoid financial hardship resulting from economic downturns or emergencies. Similarly, it is important for businesses to have a diversified portfolio in order to reduce their risk and gain higher returns.
5. Use Technology Wherever You Can
Recent studies have shown that an average person picks up his/her smartphone at least 1500 times a week. In the business world, incorporating technology into your daily activities can lead to increased productivity and efficiency. There are cloud-based tools that can help you manage your personal and business accounts better. Through these, you can stay updated about pending orders, payments, expenses etc.
Overall, the main aspects of good financial management include careful planning, organising, monitoring and controlling your resources. Hence, it is important to use financial management tools such as faster payment software to track your expenses and manage your resources effectively.