24 Nov How To Manage Money: Best Practices For Organizational And Personal Financial Management
Not everyone is an expert when it comes to managing money. In fact, the majority of Americans struggle with their finances. If you are having trouble keeping tabs on your finances and managing your money wisely, you’re in luck.
Whether you’re a nonprofit owner who could use some financial advice or just want to better manage your personal money, here are 11 tips for improved financial management.
Organizations Financial Tips
Stay on top of deadlines
One of the most important things you can do as the owner of an organization (nonprofit or otherwise) is to stay on top of your financial deadlines. Whether it’s bills to pay, payroll, taxes, or anything else in that vein, being on top with these deadlines is a great way to improve your financial outlook. When you pay bills and meet deadlines on time, you’ll see where you stand financially at all times as opposed to guessing your profits because you haven’t paid all your expenses. In addition, you can avoid costly fees that come with missed due dates.
Be conscious of your spending
Easier said than done, being conscious of your spending is essential for maintaining a profitable organization. Before making purchases, ask yourself if it is worth it, and if it improves your organization. If money is tight, hold off on upgrading your software or going all out at a company party. Making sacrifices when it comes to spending is something all organizations must do at some point, especially smaller companies. In the long run, making these tough decisions will benefit your organization greatly. One way to ensure that you’re smart with your spending is by creating a budget.
Create a budget
Budgets are great for multiple reasons. First, it’s a great reference point for making decisions, especially if you’re consistently updating it and keeping tabs on your spending. Second, it holds you accountable. Creating a budget is similar to creating a goal. For each area of your organization, you’re putting down in writing how much you want to spend over a given period of time (weekly, quarterly, yearly). Creating and actually using your budget can help you make smart, informed decisions, as well as help you meet your financial goals.
Manage your inventory wisely
If your organization has inventory, make sure that you are taking the time to manage it correctly. One of the biggest mistakes an organization can make is being sloppy with their inventory. When you have too much inventory, you’re wasting money that could be spent elsewhere. When you have too little, customers may become angry and frustrated because they can’t buy the products they want. Finding the line between having too much or too little inventory is tricky, but you can greatly improve your finances by using an inventory management system.
Cut unnecessary costs
Cutting unnecessary costs is another easier said than done financial management tip, but still well worth the effort. To do this, take a hard look at your current expenses and rank them by importance. Take your time on this exercise, as it may take some discussion with your employees. When deciding which expenses to cut, start with the least important. This doesn’t mean that those ranked at the bottom will all be cut, but they are more likely to be struck from your budget than those ranked as more important. Some of these cuts may be only temporary and can be reintroduced into the budget once revenue starts increasing.
Have cash on reserve
One of the smartest things an organization can do is to keep plenty of cash on reserve in the case of an emergency. By keeping an emergency fund ready to go whenever you’re in a pinch, you can rest assured that if you do need some extra cash, you have it waiting for you at a moment’s notice.
Personal Money Management Tips
Determine your monthly pay
Not enough people take the time to determine their monthly income. Sure, they can estimate it, but that doesn’t give you the best understanding of where you stand financially. By actually doing the math and calculating your exact income, you can make smarter financial decisions going forward. This is especially true for individuals with multiple sources of income, such as someone who does freelance gigs on the side.
Create a budget and stick to it
Just like business owners, individuals should create budgets for their personal finances and do their best to stick to them. If you’re not sure how to get started or how best to format your personal budget, check out this awesome article from The Savvy Couple which lists 10 of the best free budget templates. Sticking to the budget is the tough part. To add a little incentive to follow with the budget you created, perhaps tell yourself you’ll treat yourself if you meet your budget for consecutive months.
Live within your means (to a point)
People are always saying that it’s important to live within your means, but what does that exactly mean? Some folks interpret that as saying you should only spend money on what you absolutely need. But, life isn’t meant to be played safe at all times. Sometimes you have to spend a little money on a memorable experience or to have some fun. For example, maybe you have committed to not eating out at all for the month. But, a friend is visiting that you haven’t seen in a long time. It’s okay to splurge every now and then and enjoy yourself without any guilt. But, while you shouldn’t be overly strict about living within your means, make sure you don’t go overboard with your spending. Again, creating a budget will help with this.
Keep track of expenses
We mentioned this on the organizational side of things, and you should also be doing it personally as well. If you create a budget but don’t even bother keeping track of your expenses, then what’s the point. Getting into the habit of immediately logging groceries, utilities, entertainment, and miscellaneous spending will set you up for success because you can see how much progress you’re making on your budget.
Creating actual goals to strive for is a great way to make sure you’re managing your money wisely. For example, you could create a goal stating your want to save up X amount of money by a certain date. Another solid goal is to set a timeline for paying off any debts you have. Most financial experts agree that the best way to pay off your debts is by focusing on your smallest debts first and gradually working your way up. By doing this, you can collect little “wins” that make you feel like you’re actually making progress (because you are!).