5 Lessons that Apply to your Personal Finances and Business Financials
One of the longest relationships in your life is your relationship with money. While you can ignore your money (which nobody recommends), you can’t break-up with your money. You’re going to be in this relationship for the rest of your life. It’s time to take a more active role and confidently make more values-aligned money moves in your business and life.
Here are some considerations for your business and personal finances.
1 – The Ultimate Decision Maker: You or Your Business
With your Business Financials, I recommend you treat yourself as an employee of the business. Treating yourself as an employee is both a mindset and a technicality. Your business needs to be healthy to take care of you as an employee. As an employee, you make valuable contributions to maintain and grow the business. And as an employee, your business takes care of you with compensation and work-life boundaries.
When you consider your Personal Finances, you are the CEO of your finances. It’s your responsibility to build your Financial A-Team, professionals and peers to guide and advise you in the journey. Think of them as a Board of Directors, where you are the ultimate decision maker and you live with the results. Confidently step into the CEO role to make sure your personal finances are healthy, like you would in your business.
2 – Making Decisions in Alignment with Your Values
We spend a great deal of effort on crafting our business values and clarifying our personal values. Your values are there to guide your financial decision-making to provide more purpose and ease. When your values guide your decisions, you can arrive at decisions with more clarity and confidence.
My partner and I each have one main question we ask when decision-making. He likes to ask, “what does the business need?” He listens to the business: the employees, the customers, and the numbers to understand what decision makes the most sense for the business and employees (you being one of the valuable employees). I like to ask myself, “how can I use my superpowers to get the business to the next level?” We climb ladders rung by rung. For me, it’s easier to take action to get to the next milestone, so while I have Big Financial Goals, I like to take action on short and medium goals that align with my Big Financial Goals.
My partner and I share a business philosophy around the full-circle of the business. “If the business takes care of the employees, the employees will take care of the clients, and the clients will take care of the business.” This helps stay focused on roles and responsibilities within the business.
3 – Having the Right Systems and Tools
How are you going to measure success? What does success look like? When you start there, you can build the right financial foundation and tools for your business. We don’t need to track every data point if we are not going to make decisions based on the data.
For personal finances, I like tracking my Net Worth. Net Worth = Assets – Liabilities. Assets include cash on hand, investments, anything you own that you could sell for money. Liabilities are debts like a mortgage, car payment, or student loans. I emphasize tracking net worth instead of a budget because it shows the value of assets and reduces stress on taking on intentional debt.
In business financials, choose cash-based or accrual-based accounting based on your business type. And have basic financial forms like a Profit-Loss Statement and Balance Sheet. As you better understand how money moves in your business, you can make more confident decisions.
4 – Focus on Revenue Generating Activities
Money likes to flow and we want it to flow to you personally and professionally; so we need revenue! One of my former coaches labeled revenue generating activities as Hare and Tortoise Activities.
A Hare Revenue Generating Activity is a quick action you can take for quick results, like having a sale or following up on warm leads.
A Tortoise Revenue Generating Activity is the long-game. It may not provide quick results but it will be quality results over time. These could be drip campaigns on your newsletter. One opportunity that came to me in business was from someone who saw me speaker 18 months earlier!
You want to have a healthy mix of hare and tortoise activities. If you focus all on the Hare, you will tire out. If you focus all on the Tortoise, you may not have enough runway for your business to succeed.
The same goes for your personal finances too. Some Hare activities can be reducing your spending and a Tortoise activity could be saving up for a down payment on a house.
5 – Start with The End in Mind
For your personal finances, you are looking at a lifelong relationship. Your long-term goals will last a lifetime. You should be thinking about retirement, long-term care, even your funeral. Yes, I already went through an exercise on funeral planning and it was a great experience. You can also make some short-term goals and action for quick wins.
In your business, there will be an exit. There’s a high probability you will not own your business until the day you die (whoa, this blog became a little morbid, pretty quick but it’s just for illustrative perspectives), so you should have an exit strategy or a succession plan. If this is a family business, are you going to pass it on to a family member? Do you see your business being sold or acquired? Or will you shut your business down when you are done with it? There is not a right or wrong way to do it, it’s really about your goals and your journey.
Start where you are. Decide which one of these lessons you want to infuse into your personal or business finances and take action. As you increase your financial literacy and financial confidence, you will naturally take bigger risks and money moves to achieve your Big Financial Goals and have fun on your financial journey.
