Managing your personal finances can be frustrating. You need to invest time to keep your finances on track. If you run into financial problems, you may struggle to find a solution. Many companies manage their finances successfully year after year. These firms can teach us something about personal finances.
The benefit of planning
Most successful companies invest a great deal of time in planning. Emerson is an international company that celebrated 125 years in business in 2014. This firm has consistently grown their sales and earnings each year.
Emerson makes a huge investment in corporate planning. Their planning department forecasts business financials for years into the future.
As individuals, we can all benefit from creating a financial plan. This includes putting together a monthly budget. The process does not have to be complicated- you can plan using a piece of notebook paper.
Creating a monthly budget
Write down your net income for the month. For most people, that amount is the paycheck they receive each month. Next, write down categories for each area of spending you incur. Some spending is fixed (home mortgage, car payment) and other expenses are variable (entertainment, food).
Some customers with poor credit may have trouble getting approved for loans at reasonable interest rates. The Consumer Portfolio Services New York Times profile explains that some firms provide financing for people who can’t obtain loans through a commercial bank or credit union. Once you get financing, add the monthly payment amount to your budget.
Write down amounts next to each area of spending. Make the commitment to check on your actual spending during the month. This periodic review will help you stay on track.
Cutting back on spending
If you need to cut your spending to make your budget work, consider those variable areas of spending. Maybe you can reduce the number of times you dine out. Instead of buying an expensive coffee each morning, start making coffee at home a few days a week. These small changes can make a big difference over time.
The importance of your credit rating
Standard and Poor’s (S&P) provides credit ratings for US companies. USA Today points out that, as of 2014, only 3 US firms had a credit rating of AAA by S&P. AAA is the highest rating issued by Standard and Poor’s.
These firms have a huge advantage over companies with lower credit rating. They are able to borrow to lower interest rates, and borrow larger dollar amounts from a single lender.
A good credit rating is also important for your personal finances. Your credit rating determines your ability to borrow and the interest rate you must pay.
The Consumer Portfolio Services LinkedIn page states that an indirect financing company can provide loans to customers with credit problems. As you borrow money and pay it back on schedule, your credit rating can improve. A better credit rating will reduce your cost of borrowing down the road.
You can improve your personal finance situation
Use these tips to create a budget, find financing and improve your credit rating. It may seem like a difficult task, but you can make meaningful changes if you plan ahead.
***Image thanks to Alan Cleaver***
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