There’s no better feeling than being in control of your money. Keeping on top of your business finances, whatever industry you are in, is essential and allows you to keep abreast of what is going in and out of your business.
Here are tips to help kick start your finances so that you keep on top and in good financial health.
1. Create streamlined systems for your financial paperwork and digital documents
Think bills, wills, insurance documents, tax returns and receipts. You’ll need one system for paperwork and another for digital documents. A system that lets you find things easily - so that when you need to put your hands on something, the thought of finding it doesn’t become a barrier to taking action.
You might decide on a lever arch file with labelled dividers, or a filing cabinet with labelled pockets for your paperwork. For digital documents, set up folders on your computer and back them up externally on a cloud system, such as Google Drive or Dropbox. If you have systems in place already, the start of the year is a great time for an annual tidy-up, making sure you keep paperwork and digital documents going back seven years.
2. Know your net worth
Assets are what you own. This includes the value of your property, and your savings and investments. Liabilities are what you owe. This includes your mortgage, loans and credit cards. The value of your assets minus the value of your liabilities equals your net worth. Knowing your net worth is part of facing up to your financial reality and helps with financial goal-setting. Click here for a document you can download that will help you calculate your assets and liabilities. Keep this updated regularly – ideally every quarter, but at least once a year.
3. Work out your income and spending, then set a budget
Does it come to the end of the month and, yet again, you wonder where all your money has gone? This one is for you. It’s usually pretty easy to work out your weekly or monthly income. In terms of spending, budgeting become easier if you think about 3 different types of spending:
- Fixed spending includes rent/mortgage, bills and food shopping.
- Discretionary spending includes eating out, takeaway coffee, and buying clothes.
- Occasional spending includes the things we know about in advance but can fail to account for until the moment is upon us. Christmas, birthdays and holidays are good examples of occasional spending.
4. Give yourself time to shop around for the best deals
Look at the renewal dates for your car and home insurance, utility providers, fixed-term savings accounts, mobile phone contracts, and lease car agreements. Put a reminder in your physical or digital diary a month before the renewal dates to give you time to shop around. Don’t simply auto-renew. Companies make money by taking advantage of your inertia. By putting a date in your diary in advance of renewal you’re making a conscious decision to shop around and you’re giving yourself the time to do so.
5. Review your app and email subscriptions
Is your inbox full of emails from mailing lists? From Hotel Chocolat to Boden to Easyjet, every brand wants your email address. The New Year is a good time to reduce the number of adverting messages pinging into your inbox and on your social media feeds. Unsubscribe from emails and unfollow them on social media too. You could also delete your card details from websites – the additional barrier of having to input your card details might make you think twice about spending.
6. Talk about money with your partner
If you share your finances with a partner, the New Year is a good time to make a financial plan for the year together. You both need to be clear on how you plan to pay bills, manage joint expenses and what your financial goals are. You could decide to schedule a ‘money meeting’ one weekend, so that you both put time aside to focus on your finances – rather than trying to squeeze it in at the end of a busy day when you’re both tired.
You want to be able to discuss money openly and honestly, and be able to voice your worries and concerns. Work towards creating a consistent dialogue about money so it’s not a contentious issue between the two of you. A good place to start is by agreeing that you want to find a way to navigate conversations about money in a harmonious way.
7. Set yourself some money rules
Rules help you navigate life - guiding your behaviour in a way you’d like, because you’ve rehearsed what you would do should that circumstance arise. If you don’t have rules, it can become a case of anything goes. Or it might leave you making a spending decision on the spur of the moment, or when facing peer pressure. Here are some examples of money rules:
- I don’t spend on the credit card unless it’s critical or can be paid back immediately
- When I overspend in one area, I must underspend in another
- I always ask for money owed immediately
- I prepare all lunches and breakfasts at home
- I keep online purchases in the basket for 24 hours before I buy
- When I feel compelled to shop, I only buy what’s on my ‘things I need’ list that I created especially for moments like this.
8. Prepare your taxes
Ensure that all your documents, statements and balance sheets up to date and in order. If you have been tracking your finances throughout the year then this should be an easy task. If not, you could find yourself having a rather large job on your hands. Start as early as possible so that you don’t receive a hefty fine should you be running behind schedule and ensure that going forward, you keep on top of your taxes.
9. Do an annual review
Have a look at where your money has come and gone from over the last year. What is your biggest expense? Where is your biggest income coming from? This review will allow you to work out where you need to focus your efforts in the New Year and where you maybe need to cut back.
10. Understand your numbers and then remember them
Do you understand what you need to be making to turn over a profit? What are you taking for yourself as a salary and should you be looking at either cutting back what you take or can you afford to take more? Keep an eye on your sales and what is coming in and whether you have had any dips in revenue. It may be the case that you start to see a trend forming over the previous years as to when you had more income coming in and when there was a dip. This will allow you to plan effectively for those times when the income may be low.
Article Source:
https://www.businessknowhow.com/money/organize.htm
https://financial-coaching.co.uk/blog/post/seven-ways-to-make-2020-the-year-you-get-your-finances-in-order
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