Why should run your personal finances like you would run a business? As an Operations Analyst working for a large financial firm, there are many lessons that I learn daily from working “under the hood” of the business. From this perspective, I have to make sure company transactions settle correctly and ensure minimal risk. In Operations I also work to improve the processes that make the wheels of the business turn.
One area where I bring my job home is in personal finance. I often ask myself what processes can be improved that can ensure there is minimal risk in my finances, this is not the same as investment risk. Where I work, the risk is a loss of money due to issues with transactions settling, this can be in the form of penalties, charges, and loss of business. This is the risk I speak of when referring to risk in my personal finances. I like to think of my finances as a pipeline and my cash flows inside the pipes, I think of the leaks in the pipeline as my risk exposure. I search for leaks in order to fix them using many of the great personal finance tools out there free of charge. My bank has a functionality where I can view all of my finances regardless of who they are with, but if your bank does not offer this, Mint.com is another great tool that serves the same purpose.
Little fixes go a long way
When my cash in was less than my cash out, my first reaction was to “stop the bleeding.”I looked at the pipeline of my personal finances, for example, I looked at my magazine subscriptions when renewal time came up and realized they cost far more to renew than to initially subscribe, I also realized the magazine’s website offered many of the same articles free on-line after the magazine came out. By not renewing and waiting longer to read articles I saved 50 dollars a year. I also paid 17 dollars a month to use health tools, but I was able to find an app on my phone that was just as effective for a one-time cost of 2 dollars. This switch saved me 194 dollars a year. Also, I refinanced my car. This saved me 20 dollars a month and 900 dollars over the course of the loan. These little fixes and decisions helped me to free up needed cash when cash was tight.
In Conclusion: Run Your Personal Finances Like You Would Run a Business is a Great Life Lesson
Before my experiences working in operations my financial firm, and thinking how to run your personal finances like you would run a business, I always thought that the only way to increase cash flow was to bring in more revenue from the outside, but by making the pipeline of my personal finances run more efficiently and leak-free I can get the most value from every facet of my cash flow. By doing this I am able to free up a lot of money I never thought I had. Businesses not only increase their profits by increasing their revenue but they also do it by reducing their cost and by running more efficiently internally as well. That is one the one key lesson I bring home with me every day from working under the hood of my business.