Manage your family finances like a business

Question: I want to prioritize my family’s financial habits and start making smarter decisions. Do you have any tips or strategies for family finances?

AN: The best advice we can give you is to start managing your individual and family finances the same way you would a business. Most people don’t think of themselves as “businesses” trying to make a profit. Looking at your financial situation from this perspective can be helpful in determining where you could cut costs, increase cash flow, and generally improve your personal financial situation. It can be especially beneficial if you anticipate a major financial commitment in your future, such as buying a home or starting an actual business. Here are some tips.

Tom Cooney with dimensions of wealth

examine your financesWhere an executive might look up financial statements to get a read on the company’s position, they can create or update a personal net worth statement. Essentially a monetary scorecard, a net worth statement shows where you stand financially and whether you’re on track to meet your short-term and long-term goals.

You can calculate your net worth by summing up the current value of all your assets, including cash and cash equivalents, brokerage account balances, retirement funds, real estate and other fixed assets, and personal property. Then subtract your liabilities, including mortgages, personal loans, credit card balances, and taxes owed. The difference between the total value of your assets and your liabilities is your net worth.

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