For my day job, I own a business, and one of the most important things I've learned is that if you want to keep your business on track, you need a great framework to operate under.
There are a lot of different business models you can use. The right one will identify your aspirational goals, your medium and short-term goals, your priorities, possible roadblocks and your critical numbers, at a minimum.
It keeps you on track and makes sure everyone in the business is singing from the same song sheet.
I believe a great business framework can also be applied to your personal finances. That's because all the things you need to run a great business are necessary if you are serious about taking control of your finances.
So if we used a model like that of US management guru Verne Harnish and applied it to your personal finances, it would identify:
Your BHAG: This is your Big Hairy Audacious Goal. Maybe it's owning your home within 10 years, going on a round-the-world trip in five years or retiring at 50. It is a target that's achievable, but a stretch, and the key is you need to be excited about it.
Your three-year goal: This is where you need to be in three years in order to achieve your BHAG.
Your one-year goal: Again, this is where you need to be in 12 months' time in order to be on track to achieving your three-year goal and ultimately your BHAG.
Rocks and roadblocks: What are the things in the next 12 months and the next 90 days that are in the way of you achieving your goal?
Maybe it's a car repair that is going to eat up a lot of cash, or a string of weddings that might become expensive. If you don't identify these things, it's harder to deal with them as they turn up.
90-day priorities: This is how you are going to deal with the roadblocks, as well as what you need to be doing now in order to achieve your 12-month goal.
It might include having a 90-day priority of saving $5000 so you can pay for expenses coming up identified as roadblocks, or taking on a part-time job so you don't have to dip into savings. It also might mean doing some homework around an investment you're interested in, so you are ready to go after 90 days.
Critical numbers: What are the three critical numbers you need to focus on for the next 90 days in order to reach your 12-month goal? It might be saving $100 every week, salary-sacrificing $200 a month or not dipping into your savings or home loan redraw at all for the next 90 days.
Your 90-day theme: This is where you can have a bit of fun. If it's critical that you don't dip into your savings, you might give these 90 days a ''no deal'' theme and put signs up around the house, or have a screensaver on your phone to remind you.
If it's to save $100 a week, your theme might be ''Saving Private (insert your name here)'' or MoneyPenny. The idea is to turn it into a bit of fun, rather than feeling that it's deprivation or punishment.
Sometimes you just need to create a system that is robust enough to keep you on track. Give either the model above or another great business model a go to make sure you're achieving your personal money goals.
- Sydney Morning Herald
Do you feel better off than at this time last year?