11 Jul How to be the CFO of Your Household
Ever wondered what it would be like to control millions (or even billions) of dollars? For chief financial officers, it’s an everyday reality. The financial controllers of large companies spend their days reviewing income and expenses, working on profit improvement projects, approving expenses, and making tough calls when it comes to company capital.
Sounds stressful, right? Have you ever considered that you’re the CFO of your household? It’s true – but don’t worry! By applying our 6 simple principles you’ll be well on track to building your savings and getting ahead.
1. Better budgeting
You wouldn’t start a house extension or renovation without a plan and a budget, so why take a laissez-faire approach to your general finances? It may be because it’s hard to see the bigger picture. Try projecting out your household budget to one year, or even five years. This will help you see how small changes in the short term can eventually make a big difference. Apps can really help you get on top of your incomings and outgoings.
2. Calculate your net worth
When you can put a number on your net worth, you’re in a better position to make tough decisions about what you can and can’t afford. To calculate your net worth, take away what you owe from what you own. If you’re in the red, make a plan to get back in to the black. If you’ve got a surplus, we can help you work out how to increase it.
3. Audit your costs
It’s important to keep an eagle eye on your household expenses. The first step is really knowing what you’re spending. Review your credit/debit card statement on a regular basis. If you find you’re spending a lot of cash and don’t have much to show for it, try keeping a spending diary. For each expense, ask yourself whether it’s a need or a want.
4. Slash your overheads
In business, an overhead is an expense that isn’t directly related to income. Overheads are also known as operating expenses. Your household’s overheads include groceries, your mortgage interest or rent payments, and utility bills.
To cut your overheads, start with the biggest item and work down your list. For example, you might begin with your mortgage arrangements. Ask yourself whether you’re really getting the best deal on the market. Then, take a look at your electricity, gas, phone, internet etc. There’s so much competition amongst suppliers, it really does pay to shop around.
5. Boost your savings
Do you have bad habits when it comes to spending? Perhaps you buy snacks and coffee on a daily basis, splurge on treats when you’re feeling bad, or spend money on the kids to keep them quiet? Just remember – not spending is a habit you can establish too. The easiest way is turning it in to a game. Try downloading one of the many smart phone apps designed to help you visualise your goals and make savings fun. Remember to set rewards for yourself when you hit targets – like your own personal bonus program.
6. Minimise taxes
Tax planning is an important part of boosting your financial position in the long run. It’s especially important if you run a business, have a family trust, or have significant investments, including property. But you can save on tax in a number of other ways, such as salary sacrificing in to your super. Take note though – it’s important to get professional advice on tax matters, so give us a call to discuss what your options may be.
Ready to start thinking like a CFO? Make an appointment with us today to discuss your household budget needs and goals.