I suppose that one very good definition of a Chief Financial Officer would be that they are the custodian of a company’s finance. A custodian is ” one that guards and protects or maintains.” It has been my conviction that a CFO can only be effective if he has been and is a proper custodian of his own personal financial affairs. I have learned a great deal about managing personal finances during my life. This knowledge has come from three main sources.
- My Dad ( The best money manager I know )
- The late Larry Burkett ( taught biblical principles on managing personal finance )
- Experience ( failures and successes )
From the above sources I offer below what I believe to be the five best pieces of advice for effectively managing personal finance. Many of these would apply equally to a business.
- Prepare a budget every year. Preparing and thinking through a budget forces you to set priorities and serves as a valuable control tool when comparing actual performance to the budget and making needed corrections along the way.
- Pay first things first. I don’t know your religious affliation but my first priority has always been to determine the percentage and then give that percentage first to the Lord and then live on the remainder. My next breath is from the Lord and without him I could do nothing.
- Keep your standard of living below your income level and then even further below your income level as it increases. I know of no better way to save money.
- Have and keep an emergency fund that is at least six times your monthly living expenses. Unforeseeable events that attack your finances will happen. An emergency fund gives you options and peace of mind.
- Be content with your material possessions. My grandparents did not have much in the way of material possessions but they were extremely rich because they were content, lived right, and had a loving family and friends.