Save like a business

Lizl Budhram

From managing your finances and reputation to networking and planning ahead, there are many parallels between organising your life to be an asset to your family and running a successful business.

Follow these seven essential steps to assure long-term success and financial stability:

1. Have a plan

A solid strategy is the base of any successful endeavour. Creating your plan begins with documenting all income and expenses to predict future cash flow. Then you can see which areas to prioritise and where to cut back.

2. Minimise ‘operating’ expenses

Key to running a successful business is keeping operating costs to a minimum. Similarly, cut back on any monthly expenses that don’t add real value to your life, e.g. an expensive unused gym contract.

3. Diversify/multiply income streams

Multiple income streams are key to business success and it’s no different with your personal finances. By investing your extra income, you can secure an investment return, on top of your income, so if any of your primary income streams suffer, you’ll have an emergency plan.

4. Insure against risks

Just as a business owner would insure the business against any possible incidences that may impact future revenue, insure yourself against risks of illness, injury or death. Ensure your assets (e.g. home and car) are adequately insured.

5. Pay yourself first

A business is nothing without a strong workforce; with your personal finances that workforce is you. It’s recommended that you pay yourself first every month (e.g. contribute to a savings account), before paying other expenses.

6. Watch debt

Don’t borrow more than you can afford to pay back. Short-term debt, e.g. store and credit cards, usually carry high interest rates, and can quickly get out of hand. Be disciplined and monitor your debts closely, monthly, to avoid getting caught up in a debt spiral.

7. Partner with experts

Successful business owners know their strengths and seek advice in areas that aren’t their speciality. Most South Africans would benefit from consulting a professional financial advisor. They can help you identify your needs, draw up a sound financial plan and give you peace of mind that you’re on the right track to reaching your long-term goals.

Lizl Budhram is head of advice at Old Mutual Personal Finance