Brought to you by Old Mutual Investment Group

For the many South Africans who had the wind taken out of their financial sails the past two years, the thought of getting into financial shape again may be overwhelming. However, applying some key business management principles can make the process smoother, making financial fitness a possibility in 2022.  

Four simple words can help you get back on track: think like a boss! The secret to success in personal finance is to think of yourself more as a enterprise and business owner than an employee. Many South Africans understand the principles of small business financial management, like the principle of generating a profit. But if you view yourself and your finances as your prized business, how well are you actually running it?

Instead of beating ourselves up over past money mistakes, it’s important to first forgive yourself. The past year swept the carpet out from under us, and every individual on this planet has made some bad money moves somewhere along the way. But it’s never too late to turn the situation around. 

To do this, we need to first take small steps to start our financial recovery journey. It’s just like getting fit. You start with small training exercises and build from there. Fortunately, the new year is an exciting time to sit down and do some planning. To reap the benefits, you must keep training and keep at it.

Here are three ways to apply small business management thinking to your personal finances.

1. Balance your books 

To increase your profit, you need to cut back on unnecessary expenses and find opportunities (like working extra hours or starting a side hustle) to increase your income. You also need to plan your expenditure so that you don’t overspend or misspend. In other words, you need a budget. 

People really hate the word budget because they associate it with deprivation, but instead think of it as looking for opportunities to save and increase your wealth. Like in business, if you allocate your money before the month begins, you’ll know exactly how much you have to spend on what you enjoy.

2. Track your spending

Small business owners understand the need to keep an eye on overheads. Because small leaks can sink a ship, it’s really important to keep track of everything you spend your money on.

In fact, we should all be checking our current accounts as often as we check our social media! By tracking spending regularly, you will get a better sense of what you have left to sustain you for the month. This allows you to make the necessary adjustments and even spot opportunities to spend less.

3. Own up to your financial truth

When it comes to finances, business owners understand the difference between good debt and bad debt, and they use them wisely. Good debt creates opportunities to increase your income in the future (such as upskilling with a student loan ) or purchasing an asset that holds or increases in value (such as a home loan). 

In other words, with good debt, there is a reasonable expectation that your overall wealth will increase in the future. Bad debt (such as using your credit card for a holiday getaway), however,  is used to purchase things that quickly lose their value and do not generate a long-term income or wealth. 

For every Rand spent on bad debt, you’re losing the opportunity to invest that money and growth your wealth instead.  

The main thing to take away is the importance of planning and putting in place the right measures to get your finances on track. The journey of financial fitness is not a sprint but a marathon. Start training slowly and locking down those good habits, and eventually, you’ll reach your financial goals.