Two weekends ago over “Family Day Weekend” I had a conversation with a relative about the importance of budgeting with respect to personal finances. I had assisted this same relative almost 20 years ago, with setting up a personal budget. At the time, he was about 17 years old and was in high school and working a part-time job. He was keen to learn about personal finance, and was determined to make good decisions. I can remember spending a few hours with this young man at the time, teaching him about budgeting and living within his means. He started our conversation two weekends ago reflecting on the many stories and examples from his life where he discusses issues of budget and finance with people in his friendship circle.
Through our conversation, he kept on emphasizing one key point, and that is that living on a budget is “freeing” and yet a lot of people think of it as restrictive. I will often use the example of a house when talking about a budget. Specifically, I say that living without a budget is like living in a house with no walls. Imagine living in a big open box, with no walls to separate off the bathroom, the office, kitchen, where to sleep etc. It would be absolute chaos, and nobody in the home would know where to put anything…you would be completely unorganized. Similarly, living without a budget and a financial plan is nothing more than a bunch of chaos. I don’t know anyone who has experienced freedom in their finances that doesn’t have a plan and a solid understanding of what is coming in and what is going out.
Just in the last year, I have had 3 new business coaching clients with whom I have ended up just months into our professional engagements, sitting in their respective living rooms or kitchens with their wives at the table, discussing and building a personal budget/financial plan. I frequently get into a business coaching/consulting relationship where we are doing budget and financial planning for the business, and it becomes evident to me that the client does not live within their means and does not understand personal finance. It is impossible to coach and support someone towards business growth and profitability, when their personal finances are a complete mess and they are getting further and further into debt each month.
It is incredibly rewarding to watch, once the client gets a handle on his or her personal finances and starts living within their financial means with some short and long-term goals in place, how this can translate into good business practice and management. The client finally gets in control of their personal financial situation and then he or she can begin to generalize that to their business by implementing some of the same good practices. And, guess what? That’s right; they CAN control what they DO understand.
Now back to the relative I referenced above…he now owns a small business, which in the last five years won an award for best small business in his province. He is applying what he learned about personal finance to his business, which is experiencing double digit growth year on year right now. He is a perfect example of how good and prudent financial management is absolutely critical for someone who wants to be successful in business. His business is thriving; he is a wise investor, is under 40 years old and already owns two homes in the most expensive real estate market in the country.
Oh, and one final thing…one of the clients who did take control of his personal finances last year, is already on track for at least 35 – 40% growth in his business this year…coincidence? I don’t think so…
Cameron’s Call to Action
- Ask yourself, “Do I understand and am I in control of my personal finances?”
- If so, then find someone not in your position and help them. If not, then sit down and become very clear on what is coming in each month and what is going out.
- If you do not have or cannot find the information you need, get a professional to assist you.
- Make it a priority to develop a clear budget and begin implementing it within the next 30 days.
- Adjust as needed, and enjoy the freedom that comes with controlling your finances rather than your finances controlling you.