Business money management tips that can help individuals

According to the famous American entrepreneur and author Robert Kiyosaki, “It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” This might sound like a mantra for investors and the money-minded rather than for everyday spenders and savers – and with good reason, because it is.

Whilst many members of the public believe there to be a gulf between their own money management and those of a business, the reality is that they are one and the same. The world’s richest people run their current account as if it were the coffers of a business, which would fail should funds drop too low. By achieving a level of financial literacy and adopting the same practices as some of the most successful companies, anybody can make their money work harder for them whilst handling difficult situations with a greater chance of success.

Moving away from the glossed teachings extolled by financial prophets such as Kiyosaki, here are some of the greatest money management tips that entrepreneurs and ordinary members of the public can borrow from the corporate world’s hottest properties.

Don’t rely on a single income

One of the most valuable financial lessons anyone can learn is that dependence on a single source of income just doesn’t make sense. Whether you sell products of your own, or rely on a regular paycheque from an employer, what would you do if your income dried up or you were unable to continue in your current position?

The world’s most successful corporations generate income from multiple sources, and as an individual you can classify your own earnings as active and passive. Active income is the money that you earn from primary activities – such as working a 9-5 job or generating your own sales income from a product or service. Passive income, by contrast, is money that you can earn even when you’re sleeping. These are the funds that come from stocks, shares, mutual funds, and other schemes which generate money without continual active involvement.

For those who need more convincing that diversifying your source of income can pay dividends, McDonald’s serves as the perfect illustration of why this strategy works. Whilst the golden arches are perhaps best known for their efficient food service, few people know that the corporation earns much of its huge annual income from the ground rent for its 36,000 plus restaurant locations. With just 15% of these premises run directly by McDonald’s, much of its business model relies on semi-passive income from franchisee rent payments. Whilst there’s no need for individuals to adopt quite the same approach to achieve success, McDonald’s embodies the spirit of a diversified income base – something that could see a person’s finances skyrocket with little need for ongoing input.

Avoid bad debt

Avoiding debt is perhaps an obvious strategy for those trying to reach a level of financial stability, but modern life often gets in the way. This is a phenomenon perhaps best summed up by 1930s performer Will Rogers, whose timeless speeches included the following passage: “Too many people spend money they earned to buy things they don’t want to impress people that they don’t like.

When it comes down to it, credit, borrowing, and debt are not necessarily a bad thing and they can be an essential part of both managing a business and supporting your own personal finances. The key is to avoid bad debt – or in other words, debt that cannot be repaid within a reasonable timeframe or that will leave you subject to extortionate interest rates and fees.

One of the most effective ways to avoid bad debt is to make sure that you have a comprehensive budget in place. This is something that comes as second nature to business owners who need to evidence their financial wherewithal when approaching lenders or filing their annual accounts, but individuals tend to be less aware of how important effective money management can be. For those looking to improve their financial literacy, Credit Action is a site providing debt knowledge and insights to the UK public and offers the chance to learn about best practice for dealing with debt issues.

Ultimately, a level of debt is an inevitable part of life for many businesses and individuals alike. Despite this, managing it properly can make all the difference to your money management success.

Proposed alt text: A person using their phone calculator with paperwork in the background.

Know how to handle a crisis

Perhaps the most important lesson anybody can take away from business strategy is the ability to cope with difficult situations whilst keeping a cool head. In the corporate environment, handling potentially company-crippling situations is all in a day’s work – but for the majority of individuals who do not occupy the business world, the thought of insolvency, bankruptcy or any other stressful financial issue can be daunting.

Just as some business owners may have an insolvency practitioner on speed dial to help save their company should the books fail to be balanced, so too can you safeguard your personal finances by developing a sound understanding of the debt solutions available to you. Armed with a basic knowledge of Individual Voluntary Arrangements, Debt Management Plans and other options, individuals will be much better equipped to deal with an emergency situation or financial crisis if they understand the financial system.

Make it your business to improve your finances

It can be difficult to make a start on improving your personal finances but learning how to make a difference is the key hurdle to overcome. Many of the lessons that can be learned from big business money management are easy to implement and can make a significant impact on the way you view, earn, spend, and save money. It’s never too late to start making sense of your finances, but the sooner you begin the more likely you are to experience real change.