Building good financial management habits requires a wide range of interrelated practices paired with a growth mindset. But aside from saving money, what are the other habits you need to achieve financial success?
Good financial management habits to develop
Every day is a good day to start developing healthy financial habits. However, the time before action can form into a habit ranges between 18 to 254 days, a study from the University College of London suggested. It’s also essential to note that it takes conscious and intentional effort. Promising yourself to create positive changes in your business finances is different from doing the actual work.
Here are some good financial management habits you can practice to improve your financial wellness:
Preparing a financial plan
A financial plan gives you a bird’s eye view of your business’ financial health. Using this, you can assess and determine your strong points and the areas you still need to improve.
At the beginning of each year, quarter, or month, make it a habit to create a detailed financial plan that lays down all necessary information about your business’ finances. Some data you can include are your recurrent expenses, target revenues, and income streams, among others.
In the same document, list your SMART goals. SMART stands for Specific, Measurable, Attainable, Relevant, and Time-bound. These are goals you can realistically achieve with your available resources and efforts.
Another detail you should not miss is the budget. This will help you understand how your money moves — serving as your guide for saving and spending.
Once you know where you stand in terms of finances and goals, you can make better strategic decisions to push your business forward.
Regularly reviewing and updating the financial plan
Creating a financial plan is a good start but reviewing and updating it regularly is another matter. To acquire the benefits of your plan, revisit it at least once a month. Update it whenever a significant event occurs like a drastic change in market conditions or setting new goals, to name a few. A good start can get you moving but it is consistency that can guarantee good results.
Cutting down unnecessary expenses
Take another look at your business expenses. Are there any overheads you can get rid of? Cut expenses that don’t benefit your business. For instance, instead of buying expensive equipment, you can purchase a different brand with the same purpose and quality.
Having a growth mindset
The future is an unsolvable mystery — you can never guess what surprises tomorrow will bring. Take the economic impacts of COVID-19 as an example.
Smart entrepreneurs are always a step ahead of others. Even if they, too, are unaware of the future, they’re doing their best to solidify their business. They do not take comfort in earning just enough to sustain their daily operations. Instead, they always think about its future growth opportunities.
Building an emergency fund
An emergency fund acts as your business’ safety net. You can use it to pay for emergency expenses instead of accumulating credit card bills. Ideally, your emergency fund should cover three to six months of your normal business expenses.
Finding other streams of income
Finding other legitimate income-generating activities accelerates wealth creation. Moreover, it can also diversify and lower your financial risks. Some activities worth considering are investing, building a passive income, offering other products and services, and many more.
Automating manual processes
Time is money. That’s why if you’re still doing manual tasks, it’s the perfect time to consider automation. For example, cloud accounting software enables you to manage your finances more efficiently. It also reduces errors which can negatively affect your bottom line. Additionally, you can directly link your bank account to the accounting software — allowing you to schedule an automatic transfer from your business checking account to your company savings.
Preparing for tax day
Make it a monthly habit to set aside a portion of your business income for your tax payments. This way, when tax day arrives, you do not have to shell out a huge amount from your business savings.
It’s also important to understand and apply tax write-offs and deductions to lower the amount you’ll need to pay for taxes. If you find yourself lost in the complicated world of taxation, consider hiring a tax accountant.
Increasing market awareness
Give your best effort to stay updated on market and consumer trends by reading business and economic news. Being aware of what’s going on in the market enables you to take quick and timely actions to diversify or protect your assets.
Leveraging other people’s expertise
As an entrepreneur, you must also learn to rely on other’s expertise, talent, and time to maximize your business’ efficiency and return. You do not have to wear all hats; there are areas in your business that are better off in the hands of another person. Your business can be more profitable when several people are working towards its growth and development.
Are you in need of expert advice regarding your finances? Get in touch with us today. You can also download our whitepaper, Outsourcing: How to Make it Work, to learn how outsourcing can help you save more while maintaining service quality.