You are the CFO of your life, the Chief Financial Officer of You, Inc. What does that mean? What are the duties of a CFO? A CFO has many responsibilities, but the essential ones boil down to managing cash flow, budgeting, and planning for the future financial needs of the company. Sound familiar?
If a business wants to become successful and stay that way, information needs to be gathered about sales or revenues, cost of goods sold, and overhead expenses. The owners need to know when money is coming in and when it needs to go out, when do the bills need to be paid. They make cash flow projections to make sure they will have enough money to pay the bills. By having a good understanding of their expenses, they know where they can trim if needed and they know what is essential.
It is no different with our personal finances. In order to be successful in reaching our financial goals, we need know what is coming in ~ our income, and what is going out ~ our expenses. If we don’t have a clear understanding of this, it makes it difficult to know if we are making progress or not. We need to understand what our weekly, monthly, and annual expenses are and when those bills come due.
By planning for our expenses, i.e. having a budget, we know that we are paying our bills and we know how much is going to saving and paying down debt, if any. (See this blog on how to divide up your spending using the 50/20/30 budget.)
Planning for the future means taking stock of your goals. When do you want to retire, how much do you want to spend? Do you want to start a business, travel? Do you have college tuition to think about for your children or grandchildren? All of these goals come with a price tag. Work backwards to see how much you need to save for the future and this will help you prioritize how you spend and save your money now.
One of my favorite quotes comes from the tagline on Positively Positive:
Your attitude + your choices = your life.
Take charge of your finances like a CFO – after all, it is your life!