How to Manage Your Finance?
Alwin Goh
Managing your finances is a very tedious task especially for the ones who don’t understand accounts and finance at all. Most of us, even the ones who have just stepped adulthood have a job. We may have our own startup, work in an MNC, or maybe a government employee.
We are here to let you understand some of the financial management skills which you should have learned before you started earning but it’s better late than never. Many of these skills have already been learned by you at your workplace and so we will help you in applying the same to your real life.
1. Budgeting
During prudence, most organizations, even the non-profit ones go through budgeting. Typically, in most organizations budgeting is initially done at the department levels and then after the departments submit their budget to the concerned team, the team then provides a consolidated budget to the management. This is done just to make sure that the company is not spending more than it is earning. They want to make sure that the cost never goes more than the revenue generated. If the companies are spending more than they are generating then they need to borrow the money from some financial institution at a hefty interest.
Same goes for you, you should follow a budget for yourself and your family and abide by it through the month. If you are a salaried individual then it should not be a very difficult task for you as you already have an idea about your spending and earning even before your salary credits. Simple budgeting would assure that you don’t fall into the hands of banks who will extract the robust interest from you.
The budgeting will also help you in analysing your savings and investments.
2. Expand your revenue streams
If you get to any company’s profit and loss statement then you might come across a common thing about them is that they have multiple revenue-generating sources. They might have a core business but with it, they also have a complementary business that might not even be linked to each other.
For example, ABC is a company that has a website and serves as a marketplace for the buyer and seller to meet. With every transaction, they charge a percentage from the seller which serves as being their core business. Now, this company also earns from Ad sales and Affiliate marketing which they earn through the organic traffic that enters their platform and gets to the other websites that come as an ad on ABC’s website. This serves as a complementary revenue generation and to your utter shock, let me tell you that these companies do better in their complementary business than their core ones.
As an individual, you can also choose to boost your income aside from what your salaried job gives you. A product manager can always be a content writer if he is passionate about that, a content writer in the day job can also be a marketer as a freelancer, a businessman can always choose to donate in the CPF account.
3. Spending on capital
After expanding your revenue stream, the best thing to do is to take a closer look to the “Personal Balance Sheet” and compare it to those of the company’s.
The balance sheet of the companies has some of the basic components on the asset sides, such as cash, patents, machinery and equipment, and investment properties. These are some of the assets that help the company in generating revenues. These are basically the elements that help companies survive in the market.
To an individual, an affordable home, food, and utilities are the asset which helps us to survive and help us to generate revenues. Without this, we will not be able to work or live.
Investing in some of the bonds, stocks, and properties are some of our retirement plans. These are the assets that come under the asset category of our balance sheet. Some of the intangible assets such as a home loan or education loan also serve as an asset to our livelihood. We sometimes chalk out some liability to fund these useful assets.
What comes under the liability section of your personal balance sheet is the extraordinary honeymoon or the party that you have bashed bring your bank balance to half. If you try to argue that the $3000 bed and the $2000 sofa set is an asset, let me tell you, it is not as it has a depreciating value of minimum 10% every year and by the time you decide to sell it, its price would have come down aggressively and you would really think hard if to sell it off or throw it away.
4. Educate yourself on tax breaks
Big corporates hire lawyers or consultants who assist them in maximizing their tax returns. In short, these companies spend to save.
As an employee, most of us do not hire any consultant to help you with our tax return. We also don’t need any of them unless we are into some illegal activities. Simply educating ourselves about tax and its benefits we will be able to save much of it in the long run.
Never underestimate the power of tax knowledge that might help you in saving big time. If you spend hours arguing with the credit card company to waive off your late fee charges then you should invest sometime in understanding the tax matters.
5. Prioritizing your spending
Anyone who runs a company will tell you that there a million needs of the company that needs to be met, for example, fancy pantry, old equipment needs to be replaced urgently with the newer ones, old computers with the newer ones, lovely meeting rooms etc.
These priority lists differ from company to company. An e-commerce company needs to invest in the computer in the first place whereas a manufacturing company needs to first change its equipment and the ad agency should first prioritize in going for a fancy pantry and lovely meeting rooms.
As an individual, you should also prioritize the needs of you and your family. There are families that spend heavily on a child’s education whereas your child goes to a less expensive school, you may prioritise the need for an expensive car that they need to chuck out from their list.
If you’re also a business owner and have some trouble with your fundings, don’t hesitate to connect with us for a business loan.
