We have got some great financial planning tips that some pros have sent our way to share with you, especially those to be newlyweds soon!
It may seem that personal finance and corporation revenue should be managed in two entirely
different ways. However, managing your finances as if your marriage were a Fortune 500 company is a great way to avoid the many arguments that can arise between you and your spouse around such a contentious topic. Here are a few pointers on how to do just that:
Have A Plan
The first thing that any business consultant or investor will require from a new business is a business plan which includes a startup and operating budget. A business plan is a management tool. It is used to set the goals, visions and outcomes for the company and enumerates the expenses and revenue. Your new marriage has the same requirements. Sit down with your spouse and come up with your short-term and long-term life goals. Create a budget for your current expenses, then write out how this may change compared to your vision of five years from now.
Make Use of Financial Ratios
When running a business, you need to know how well it is doing at any given time. To do this accurately, businesses use quantifiable amounts called ratios. There are a whole host of financial ratios, but the best one for your marital finances is the current ratio. This is your current assets divided by your current liabilities or, in other words, cash divided by bills. A current ratio over one means that you have enough cash on hand to pay all of your debts. To give you the best current ratio, use the Pay Yourself First philosophy, where the first thing that you contribute to is your savings account.
A typical mistake of new couples is to put all of their financial eggs into one job-defined basket. One or both of you goes to work each day and the money that you earn is your revenue stream. But this is not the way that large companies work. Apple and Kellogg’s are constantly looking for new ways of diversifying their revenue stream, launching new products or remarketing stale ones. In your marriage, you will want to do the same. Try earning certifications, finding freelance work through a site like Upwork or trying your hand at entrepreneurship by selling Amway products to generate more income or increase your earning potential.
Whether you do it by adding a second revenue stream or by getting a promotion, you'll want to expand your financial base. This does not happen by accident. In a corporate environment, this would be called expansion and it's very carefully thought out. As a fiscal marriage practice, ask yourself how you're going to make more money. What steps do you need to increase income? What will you do with the money that comes in? Extra income might go to paying down old debt or to buying new assets like a house. Both have merit, but you should think them through in advance. When it comes to finance, surprises are never good.
Do a SWOT Analysis
One of the strongest corporate management tools a company can use is called a SWOT analysis, the acronym standing for strengths, weaknesses, opportunities and threats. Create one of these for your marriage. What are your strengths? These can range from the tangible, like a PhD or money in the bank, to the intangible, like support and good communication. Do the same for your weaknesses, the opportunities that you see in your marriage and the threats to your lasting love. Be honest and do this every year to keep it fresh and accurate.