I know that in the age of the 99 percent versus the 1 percent, the word “business” can sound like a four-letter word. But the reality is that we can all learn a great deal from successful businesses. All we have to do is apply those lessons to our personal lives. (This is true no matter what your political views are.) Let’s examine this to determine if you think the argument holds water.
The first task any business owner undertakes is to understand the risk he is taking with his business. Will I have enough sales? Will my product or service have long-term demand? And, of course, do I have enough and the right kind of insurance to run my shop?
Apply this to your own financial life before you worry about making investments. What are your risks as CEO of You INC? From a financial standpoint, there are two great risks. One is that you will not have enough money while you are alive. The other is that you won’t have enough money after you are no longer alive. We’ll deal with the first issue in a minute. For now, let’s talk about running out of money after you pass away.
While this is often not a huge concern for single people, it’s the number one headache for people with families. The quick-end solution is cheap term life insurance. But folks don’t like talking about this issue for a few reasons. First, they don’t like to discuss mortality. It’s as if just discussing the issue brings bad luck. The other reason is because they just don’t like life insurance companies or life insurance.
I understand and respect both these attitudes. But I can tell you firsthand that it’s rather short sighted—and I have firsthand experience in the matter. My father had no life insurance for years. Then, shortly before he was killed in an airplane accident, he was forced to buy cheap term life insurance in order to facilitate a business transaction that he was party to. The deal didn’t go through, but the insurance did.
He made one payment on his policy before his accident and if it weren’t for that my siblings and I would never have been able to attend college. I am a firm believer in term life insurance if you have a family. Please make sure you have enough term life.
2. Cash Flow
I mentioned that every good business has to have enough cash flow in order to survive. You are no different. If you want to advance in life and have more financial freedom, your first order of business is cash flow. It goes without saying that you will need to track your spending and make sure you earn more than you spend. But beyond that, you need to look ahead. If you are just getting by, that isn’t good enough. You need a solid financial plan.
The best financial plan for cash flow is also the simplest. Figure out what you need to save every month in order to reach your goals and save that money before you do anything else. If it means taking on a weekend job, do it. If it means working part time, get on it.
You don’t need to do any more research. You don’t need to read any more blogs or books. You already know more than people who have the success you want. In order to reach the next level of financial success, all you have to do now is get to work. Are you willing to put in the extra effort? If not, why not?
3. Long-term Goals
The last “secret” to business success (that you can apply to your own financial life) is to always keep your eye on where you are going. Of course, this includes checking your credit score at least once a year. But it means much more.
You have to think out 10, 20, 30 years and beyond. This is true no matter what your current age. Think about how the decisions you make today are going to impact you and your children and grandchildren. I am not asking you to forgo your own life for the sake of the next generation. But I’m asking you just to think about what the future looks like for your family based on the decisions you make today.
I don’t believe this is simply a matter of bestowing a large inheritance to your children. I don’t even think leaving your kids a big pile of cash is important or even good. This is more an issue of what kind of example you provide. Are you financially responsible? Are you living below your means? Are you debt-free or close to it? If not, what are you doing about it?
Success in your financial life boils down to taking responsibility and taking action. Businesses who fail to learn this lesson aren’t in business very long. What lessons have you learned about your own personal financial success from business?
Neal Frankle is a Certified Financial Planner and owner of WealthPilgrim.com — an extremely popular personal finance blog.