As you go through life, you will notice that there are two groups of people in the world: people with money problems, and people with no money problems. So that raises the question, what makes the difference between these two groups of people? One of the reasons is that people who do not have money problems usually do three things. And I am going to tell you those three things in today’s video. WATCH NOW
The tips I am giving you today, you can use if you are running a business, but also in your personal life. These are best practices that accountants use when they are managing money. And if you do these three things, you can avoid money problems.
These are three things accountants do in a well run business. They may sound simple, but you will be surprised at how many people do not do these three things. If you meet someone with money problems, I bet if you ask them, they do not do these three things. They do not plan. They do not create financial reports, and they do not analyze those reports. I am going to explain exactly what each of these three things mean. As we go through this, ask yourself if you do these three things in your business and in your personal life.
First is plan. You need to have a plan. You need to write down your goals and dreams. Where do you want to go in your business and your life? Write it down. The reason this is important is because we all have limited resources. We can all look at our bank account, and there is not going to be as much money in there as we want. So if you know where you want to go in your life, you can take the money in your bank account and focus it towards reaching your goals. These keeps you from wasting your money on things you do not need.
We need to be specific here. Your plan needs to include financial information. You need to fund your goals. For example, how much money are you setting aside every week to fund your goals. Let us imagine one of your goals is to buy a house, and you need a down payment. Well figure out how much you have to save every week in order to have the full down payment after twenty-four months. That is just one example, but you can plan any number of things like trying to grow the revenue in your business, trying to pay off your debt, or trying to reach your investment goals. Number one is have a goal.
Second is report. Now that you know your goal, you need to track your progress against your goal. You do this by updating a financial report every week. This is very important. Every week, you should count your money. Some people do this once a month. That is not often enough. That is only twelve times a year, you are checking on your money. You need to update this report every week. A lot of people also automate their finances and reports. That is fine, but you need to do this one report that tracks your dreams manually. It needs to be manual so you are sitting and looking at each number. Have enough respect for your money that you are going to sit down once per week for 15 minutes and update your financial report. It does not take a lot of time. Set up a simple excel spreadsheet that will track the progress you are making towards your goal.
The simple act of watching your money every week will change your behavior. What happens to people who do not watch their money is that their money tends to evaporate and they do not know why. The fact that you know you are holding yourself accountable will make you more careful with how you spend your money, because you know at the end of the week, you are going to check your activity.
Third is analyze. It is not enough to have a plan, or have a weekly report. You need to spend time to analyze what is going on. Are you making progress towards your goal? Why or why not? A helpful idea is to imagine your money is whispering to you. It is giving you information on what is working and what is not. But you really have to pay attention in order to hear it.
For one example, imagine you have a business with a number of different products. Look at your sales for all those products. Which products are generating a lot of demand, and what products do people not seem to care about. That information is going to guide your decisions on things to change going forward. The same thing with your personal life. Maybe you should focus more on areas in your life that are really going well, and focus less on areas where it feels like you are bashing your head up against the wall.
It is important to remember that analysis requires judgement. A lot of time it makes sense to make less money in the short term, so you can make more money in the long term. That is judgement and it takes time. You need to spend time thinking about what is going on with your money and what it means to you.
So these are the three things you can do to avoid money problems.
You should do this once per week.
Let us take a step back and describe a money problem. What is happening when someone has a money problem? It is really simple. They run out of money. They have things they want to do, not enough resources, and it is causing all sorts of frustration. This can cause really large problems, even bankruptcy. What is really going on is they are making decisions without understanding their money situation. Their money is trying to whisper to them information, and they are ignoring it. Or they are taking on financial risks without protecting themselves from those risks. When you go through these three steps, it will force you to understand your money, and you will make better decisions.
One of the main concepts here is that money problems are separate from your income. It does not matter how much money you make. There are really rich people who still have money problems. On the flip side, there are poor people with really low income, that do not have money problems. The amount of money you have is not the problem. The problem comes from making poor financial decisions. So no matter how much money you have, you want to be making good fiscally responsible decisions.
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Neither Zach De Gregorio or Wolves and Finance shall be liable for any damages related to information in this video. It is recommended you contact a CPA in your area for business advice.