While you’re analyzing your business goals and objectives, don’t forget about your personal financial condition at home as well. Many times, personal finances are the most often ignored aspect of very busy business owners’ lives. A mid-year review is warranted.
Preparing a personal financial statement on a periodic basis is of vital importance. Avoiding this assessment of your personal financial condition puts you and your family at risk of financial instability. You should not only prepare it but also analyze it and make sure your personal assets and level of liabilities are consistent with your goals and objectives. Oftentimes people don’t want to prepare it, as they are fearful of what it might tell them. You must face reality.
If you’re not accustomed to organizing your finances in this manner, start by thinking of it as a simple inventory. It all boils down to keeping track of what you own and what you owe. What debts are lurking? Credit card and home mortgages? Money borrowed for business ventures? Are these at a level that is prudent and commensurate with your personal cash flow?
Many people lack a clear understanding of net worth, which is basically every significant thing of value that you own (assets) minus your debts (liabilities). Assets include your home and any other real estate as well as cash, investments, cars, etc.
You must also be committed to taking action if warranted; for example, if you own a home with a mortgage — 30-year fixed rate mortgages are at an ALL-TIME low — refinancing your current mortgage could reap significant interest cost savings over the long term.
Think about what will provide you financial security in the future. Is it time to start making (or increasing) 401k contributions or simply setting aside more emergency funds in a savings account? It’s easy to get caught up in the habit of living paycheck to paycheck. Spending can easily be more tempting and FUN than saving. But, down the line, you’ll definitely be glad you SAVED.
Keeping a close eye on your personal finances and taking a periodic, in-depth look at your financial condition will not only improve your financial stability, but it will also provide peace of mind.
If we can assist you further with achieving success in your business or personal financial matters, please reach out to us.