If you were given the option to (1) get rich quickly or (2) have a skill that allowed you to make money over time, which would you take?
If you make money by luck, chances are, that money will dwindle away. However, if you make money by skill, there’s a good chance that your money will continue to grow.
Far too often I come across people and businesses who make plenty of money, but never seem to have enough to pay their bills. The truth is, you don’t have to make a lot of money to operate comfortably if you develop your ability to manage money. And once you learn how to manage money, you’ll discover how to make more money.
Let’s dig in.
In order to have more money you need to understand the basics
In order to develop money skills, it’s important to have a solid understanding of the basics.
- Cash – money in your bank account that you use to operate.
- Current assets – investments that can be converted to cash quickly, if need be.
- Fixed assets – investments that are harder to convert to cash.
- The goal – increase your “net worth” over time (not just your “cash”)
You MUST Budget
One thing that I am continually amazed by is when a business owner tells me they don’t have time to budget. I understand that it can be boring, but how can a business make progress if they don’t have a plan? The truth is, business owners should be on top of their business’s finances, as well as their own personal finances.
For personal finances, I prefer to use Mint.com. It’s a free, online, and very secure software that allows you to bring all of your finances into one place.
Things I like about Mint.com:
- User-friendly layout.
- Once your accounts are setup, transactions are automatically recorded.
- The “Budget” feature provides a great way to create and keep track of your spending.
- The “Trends” feature provides a very practical way for you to analyze your progress.
For those of you who are interested in an accounting software for your business, I would suggest purchasing one of the Quickbooks Online subscriptions.
Things I like about Quickbooks Online:
- It’s in the cloud.
- It’s accessible via smartphone (useful when I’m on the go).
- Helps automate the billing cycle.
- Allows me to compare data against relevant peer group.
- User-friendly interface.
Improve your cash
In personal finance, and often business finance, this is where people tend to trip up. They can’t make it to the investing part yet because they haven’t been able to manage their cash flow properly.
Good cash flow is made possible by timing. One way to better control the inflow and outflow of your cash is to setup your recurring bills to be automatically paid by credit card and then setup your checking account to automatically pay off your credit card each month. Essentially, credit cards (if paid off in full each month) act as a free 30-day loan. This allows you to pay vendors on time, while keeping your cash longer.
If your business offers some type of recurring service to consumers, credit cards can also help you receive money faster. One way to do this is to offer clients the option to have their credit cards automatically charged at the beginning of each month. This provides a convenience factor for clients and allows you to get paid before you even provide the service.
Conclusion
So there you have it; a few simple ideas to keep in mind when trying to get a better grip on your money. It should be noted that businesses are not always the same and should always consider their specific situation. Nevertheless, at the end of day the fundamentals stay the same; make more money than you spend and use money to make money.
What are some techniques that you’ve implemented to help improved your finances?