How to become the CFO of your life

November 22nd, 2013 Carol Petersen
Professional woman

Why is it so hard for some of us to manage our finances? Perhaps, if we started thinking of ourselves as the Chief Financial Officer (CFO) of our household, we would begin looking at money management as more of a challenge than an obligation.

Pretend for a moment that your household is a business. Is it a thriving, successful business? Or is the business failing? Is the company struggling with cash flow? Is it in debt? If you were the CFO, would you be fired or celebrated?

Managing the finances of a company – whether it’s a small business or a large Fortune 500 company – is not unlike managing your own family’s finances. The goals are pretty much the same:  establish a strong financial foothold so your family (or business) has the foundation to grow and prosper.

Here are some things that you can begin to do to become the CFO of your life:

Begin to take responsibility.

As a CFO you can’t surrender your financial obligations to somebody else. You can’t ignore the bills that are stacking up or “overlook” the mortgage payment. It’s up to you to shoulder the responsibility of your own financial welfare. Make a conscious effort to recognize that if you don’t take action, no one else will.

Analyze your situation.

Take a long, hard look at your current financial situation. Analyze your income, expenses, debt obligations, investments and your retirement planning. Understanding where you stand financially will make it easier for you to make decisions moving forward. For example – a one week cruise to the Bahamas may not be the best idea if you’re struggling to pay off your credit card debt.

Also, begin to track your expenditures. This will help you better understand your spending habits and keep a pulse on your financial situation.

Create a budget.

Creating a budget for your household is probably one of the most important things you can do as your own CFO. After all – there are very few well-run companies in existence today that don’t have some sort of budget. Create a budget that keeps your spending less than your earnings. You can set up a variety of categories, such as savings, housing, utilities, entertainment, clothing, gas, loan payments and so on.

By knowing what your expenses are, you can control them better. The most important thing of all is to stick to the budgeted amounts, especially for discretionary items, such as entertainment and clothing.

Make a profit.

We all know that if a company spends more than it makes it will stop making money and will soon go out of business. The same holds true for a household. If you maintain your budget, you’ll routinely earn more than you spend. In other words – you’ll begin to make a profit.

Moving forward, try to change the way you think about your household finances. Accept the role of CFO in your home and start making a difference. 

About the author

Carol Petersen is Retail Managing Officer at MidWestOne Bank. She specializes in checking and savings accounts, consumer loans, auto loans and home equity loans.

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