How to develop a financial success system

Most of the time, people associate success with money and wealth. While that’s a biased view of success, it’s true that success often brings financial rewards; It is also true that many people who aspire to success are thinking about the financial rewards that will come to them when they succeed. But what if your idea of ​​success is purely financial? In that case, it could be that you are looking for a financial success system to help you achieve your financial goal.

In two other articles I discussed the use of project management techniques to achieve personal success. In that case, we discuss “project success” and how we might plan for it. Why not apply more trading techniques, this time to money, and develop a system or plan for financial success?

In most respects, your personal finances are no different than the finances of a business. The underlying principles are the same. As a former professional management accountant, I can assure you that the way a company’s or organization’s finances are, or should be, managed is fundamentally similar to the way your own finances should be managed.

Every business will have systems in place that are designed to promote the success of the business as well as protect its assets from misappropriation. In effect, they implemented a system of financial success that should allow them to run the business profitably and, in doing so, build assets.

The main elements of a company’s financial system can easily be recognized as good practices in your own personal financial system. The legal requirements are quite different, but from a financial management point of view, there are some useful similarities that a person can learn from.

If you apply some of the following business finance fundamentals to your own approach to personal finance, over time you will develop a system of financial success that will increase your wealth for the rest of your life.

1. Budget

Setting and managing budgets is a routine part of any business; they are a key tool in financial control. A household budget is vitally important as well. Get in the habit of setting and monitoring your personal income and expense budget, and you’ll have the foundation of a plan for financial success.

2. Investment evaluation

Every time a company decides to spend money on a capital-intensive item or a new product, for example, it can conduct an investment appraisal. You won’t have to make such big spending decisions, but the important thing is to consciously evaluate spending. Will it build your financial success or hinder it? For example, if you are buying a car, which will depreciate, there is a high risk that it will significantly decrease your personal assets and set back your plan for financial success. When it’s time to indulge, make sure it’s the right time.

3. Asset creation

A company builds assets by being consistently profitable, investing wisely and developing the business at a sensible and sustainable pace. Being profitable is getting more income than you spend on expenses. The same is true for you as an individual; always make sure you earn more each month than you spend. The balance (savings) goes toward your additional assets, which can add up over time, especially with a good investment.

4. Balance Sheet

Creating a balance sheet in a large company can be quite complex. A simplified version can help you monitor the status of your own assets. Preparing a rough balance sheet once a year, showing your assets on one side and your liabilities on the other, will give you an idea of ​​your personal worth, in financial terms. By comparing year to year, you can make sure you’re making progress.

If you use a home budgeting software program, it may have a balance sheet feature to help you.

5. Regular financial reports

Companies have a legal obligation to present accounts each financial year. Your legal requirements are for personal tax purposes only.

However, a company does not only depend on annual accounts, and neither should you. They are likely to have management accounts at least once a month, to allow management to track the progress of the business. You should also follow that example and keep a close eye on your budget each month and react accordingly.

6. Cash flow forecast

Even a profitable business can struggle to stay in business if it doesn’t properly manage its cash flow. In fact, it is a common reason for companies to go out of business. As part of your budget, be sure to incorporate cash flow forecasting, that way you can account for peaks and valleys in income and expenses without having trouble paying bills on time.

Missed payments can be costly to your overall estate, so it’s best avoided at all times.

7.Investment and Treasury

If all goes according to plan, you will have surplus cash. A company will have a treasurer for that, but in your case that treasurer is you. Take that role seriously, and in time, you will be a financial success. If you have a partner, it makes sense to involve them in this and other parts of your plan for financial security.

Investing is a fascinating subject, so if you can learn about it, you’ll be in a good position to do better than the average investor. Investing is about balancing risk and return, and if you can master that without taking silly risks, you should do just fine financially.

In addition to those purely financial aspects, there are other key areas for a business that will affect finances that you could learn about:

1. Marketing.

Keep an eye on the market to learn the kind of success you’re looking for and your areas of expertise. Try to anticipate how that market will develop and prepare before everyone else. You are worth more if you are ahead of the game, whatever field you are in. For example, when I was 20 years old I decided that it was a good idea, in the long term, to learn as much as possible about computers and finance, since they would eventually be key in all organizations. That was before there were computers, and it turned out to be a sensible decision, although my main goal was to be a writer.

2. Education and Training of Key Personnel

As an individual, the more you educate yourself on many aspects of life, both personal and business, the better position you will be in to become rich. Never become complacent with your own knowledge; over time it will lose importance, so you should constantly update it. Educate yourself, educate yourself, continue.

Those are just a few ideas of how you can use business financial practices to build your own long-term financial success. Follow them, and you shouldn’t go far wrong, and be prepared for a rebound should something go wrong, like a layoff or divorce, that can ruin even the best of financial plans.