Applying business techniques to a personal budget includes both minor and dramatic tactics, such as:
- Setting small goals. The greatest financial gains often come from small behaviors that individuals maintain over a long period of time, such as packing lunches, clipping coupons, and purchasing used items rather than new ones. Although the benefits don’t appear immediately, they create greater financial stability over the long run.
- Considering cost effectiveness. Successful business owners use cost-benefit analyses to weigh financial decisions before they make them, but they may not think to use the same technique in their personal lives. You should avoid projects and purchases that cost more than the expected benefits.
- Making big changes. “Downsizing” can be a dirty word in the business world, but it can certainly furnish dramatic financial benefits in a crisis. Reducing spending by moving into a smaller home or trading in a pricey car for a more economical one makes more money available to save or spend on more essential expenses.
Navigating personal credit from a business perspective
For business owners, maintaining strong credit scores becomes a way to achieve their personal and business goals. When negative payment histories, outstanding judgments, and overextended credit lines reduce an individual’s creditworthiness, that impairs your ability to obtain financing for housing, transportation, and business investments.
Once your credit score takes a hit, it can take months – even years – to repair the damage. The best way to avoid credit problems is to make sure you never take on more debt than you can handle.
People who find themselves stuck with mountains of debt can take action to reverse their situation and prevent themselves from making similar decisions in the future.