How I Saved Money With Profit First
Many people may think that the Profit First method can solely be applied to business finances. Little do they know that this simple system can help them save money and better manage their finances!
That's right! One of the most life-changing things I've discovered while exploring and incorporating this principle into my own and my clients' businesses is that it can give us a better grip on our own money, plus a whole new perspective on how we can handle it. And if you're interested to know how you can leverage Profit First for your finances, here are the things that helped me apply the method to mine—in a way that helped me save money while still living life on my terms!
Knowing How Much You're Making
Whether you own a business or your income just comes from a regular monthly salary, you need to know how much of that paycheck goes into your spending account. Without being aware of every dollar that comes into your bank, it would be a lot more challenging to determine precisely how much you have to spend on your monthly expenses, leaving too little room for savings.
Evaluating Current & Future Expenses
Profit First is mainly about prioritising profit which you can then use to meet your present needs and future goals. And when applying the method to our finances, we focus first on the latter--how much we need to determine the profit or income allocated to our spending account.
Deciding What to Cut & When
Once you have evaluated your expenses, you can start cutting back on the less important ones. However, before giving up something that's not mandatory, it is best to think if there are any ways you can adjust your lifestyle so that you'd be able to save money while still enjoying some luxuries in life.
Being Intentional With Every Cent
This is where a significant part of the Profit First principle comes into play. When incorporating the method into business finances, entrepreneurs are advised to open five (5) separate accounts: the income account, tax account, owners compensation, operation expenses, and the profit account. These five accounts let business owners determine how much they're making for themselves while also tracking the business' actual expenses.
Determining Your Priorities
Setting up a similar system for your personal finances can help you become more intentional with every cent, determining how much you want to save and spend on your monthly expenses. Since most people don't keep track of their budget, they simply rely on what they make at the end of the month. With this new method, you'd be able to see exactly how much money is left after your monthly expenses, allowing you to monitor your spending better.
For example, for a certain month, you're planning to renovate your kitchen and save up for an out-of-country trip. Once you've determined your constant expenses, such as the monthly bills and debt repayments, you can start allocating your money according to your priorities.
Knowing How Much You Actually Need to Make
Once being intentional with your money has already become a habit, it'd be much easier to track all your finances and know if how much you're making is enough for all your priorities. This is the time you'd be able to see if there are any areas that you can cut back on, or where better opportunities lie.
Ready to get your money working for you?
Saving money is not a matter of nailing down the perfect budget, but rather of making sure that your expenses are covered first—leaving you with enough money to allocate for savings. It's a matter of making your money work for you, by taking a step back from the daily grind and applying systems that allow you to save more while still enjoying life.
And if you want to start taking charge of your finances and learn to make them work for you, let's have a chat! I'd be happy to help you come up with a realistic financial plan and share more of my secrets on how I make my money work for me.