Run Your Household Like a Business

All businesses have the goal of making a profit, otherwise they will not survive in the long term.  To get an easy snapshot of a business’ health you could look at their Profit and Loss Statement.  If every household ran their finances like a business, I bet people would have more savings and less debt.  I will admit that I only recently started to actively track my income and expenses (thereby creating my own P&L of sorts).  I previously would log in to Mint and see my spending there but it was not until I had my own spreadsheet where I spent time entering my data that I really had a full understanding of how much money I was taking in and where it was all going.

2015-05-01 15.23.56-2

I don’t believe there is any one magical way to budget and track the income and expenses of a household but I do believe that if you want to be financially successful, you do need to track this information.  It is more about creating a system that works for you and sticking to it.  If you need to do the envelope system touted by Dave Ramsey just to make sure you don’t spend too much on groceries, than certainly do that.  If you want to write everything down manually (I had a friend do this when her husband was getting his masters), then collect those receipts and write it down.  Maybe an online system like Mint or Personal Capital works for you.  Or you could create your own spreadsheet like I did, entering in everything that goes in and out.  Whatever the method, just do it.  Your own financial security and financial independence (if you are on that route) depend on your personal P&L statement.  If you don’t know where you stand, how are you doing to improve things?  And if you are always showing a loss (living beyond your means), your own success is unlikely.

Budgeting is a pretty easy concept but it does take at least a little bit of time.  Spend the time and invest in yourself to create a system that you can stick too and it will pay off in the future.

Leave a Reply

Your email address will not be published. Required fields are marked *