Although some people may not believe it, a person’s life is practically identical to the life of a company. Neither can run on autopilot. Both need a CEO to steer them. In the case of your personal life, the CEO is clearly you.
Companies face the same problems and obstacles as people. And in both cases, the advisable thing is not to get carried away by emotions and to follow some kind of method. Companies must remove the emotional side from their decisions and tackle problems logically. Should people do the same in their lives, given that one of the most popular sayings is to follow your heart (your emotions)? In my opinion, the answer is a resounding YES.
So we can learn a lot from business when it comes to running our lives.
Every decision a business makes is aimed at reaching a final goal in the medium and long term. At least, that is what successful companies do. As a rule, companies that go bankrupt do just the opposite: they improvise and fix problems as they come up.
When it comes to personal finances, if there is no plan and no strategy, it is only a matter of time before a person regrets not having had one.
Learning from companies
Define your vision
How can you know how you should act today if you don’t know what you want in 10 years? That is the million-dollar question, and we could add a few clichés to it that need no mention.
Simply having a vision, a plan, a goal already puts you ahead of most people, because few people spend any of their time working out what they really want in the long term.
If a company is not clear about what it wants to achieve, it will end up achieving its own disappearance. If a person doesn’t know what they want to achieve, they will end up achieving nothing.
Determine your values
Most companies set out a group of values they must live up to along their business journey. As a rule, these values are (or should be) behaving with integrity, honesty and social awareness, and adding value for others (customers, in this case).
They are the same values any person should have, and unfortunately, these days it is hard to find people who behave with honesty and integrity. And it is even less common to find people whose goal is to improve other people’s lives.
Not everything is fair game when it comes to achieving success or financial freedom. Not for people and not for companies.
If our goal is success or reaching financial freedom, everyone must determine their values before starting to pursue that goal. What is non-negotiable for me, whatever my vision? What am I not willing to give up, even if refusing to do so kept me from reaching the goal?
For example, you might not be willing to move to another city, you might not be willing to stop travelling the world, or you may not want to delay starting a family. Each person has their own values and non-negotiable principles.
From a personal finance point of view, the more non-negotiable things you have, the longer it will take you to reach your vision. That said, this is not about absolute frugality, and we would not advise living in a van to save as much as possible. But we do need to learn to prioritise our spending and to tell apart the wants we use to soothe our insecurities from the “truly necessary needs”.
See also: How this 23-year-old Google employee saves 90% of his salary
The SWOT analysis
Strengths, weaknesses, opportunities and threats. Companies have all of these, and so do we as people.
Once a company is clear about its vision, has determined its values and knows which of them it will not negotiate away to reach its goal, it starts this kind of analysis, which people should also do to reach a goal.
If your aim is to make a lot of money, that is not a goal but a wish everyone has. We need to know how we are going to make a lot of money, and for that we need to be very clear about our strengths and weaknesses, as well as our opportunities.
The most important point, without a doubt, is your strengths, because that is what we need to use and build on. Once we know our strong and weak points and the threats we face, we will be better prepared to draw up a strategy that leads us to our goal.
Determine and carry out your strategy
We have a vision, we have determined our values and we have assessed our situation with a SWOT analysis. Now it is time to plan a strategy that helps us achieve our vision.
But remember that if you don’t carry out the strategy, it is as if you had done nothing. Most people, like most companies, never put their strategy into action because they fall into the usual “It’s not the right time, I don’t have the means, etc.”
The secret is to start with what you have now and take whatever steps you can with those means. Do it even if you can’t see the path, because the path doesn’t exist. It is made as we walk.
Unfortunately, carrying out the strategy is where most people fail, because they are not consistent or they lack certain disciplines and habits. This is even more true when we talk about financial freedom, since few people are willing to make certain sacrifices in an environment that doesn’t make it easy. But…
Don’t have a plan; have a route
Let me explain this point. We have to keep evaluating whether our strategy is working because, as the saying goes, there are times when we will need to change the strategy, but never the goal.
That is why it pays more to have a travel route than a plan. We want to get from where we are to point B. That is our route. If our strategy is not bringing us closer to point B, we change it quickly, before it starts taking us further away.
That is why companies try countless strategies, and at certain moments they lay people off and heads roll. In our lives we will also have to do that on some occasions. And this brings us to the last point.
Evaluate and respond
Companies constantly evaluate whether their strategy is working. Not evaluating or measuring results is like shooting blind.
Since we will run into unexpected events and changes along the way, we need to be able to respond quickly and effectively to make sure we are on the right track.
In companies this process is more complex, because many numbers have to be measured and analysed. In our personal lives, on the other hand, it is much easier, because we only have to answer a few questions.
Has anything in my life changed for the better? Is my income/expense balance better than before? Are my savings bigger? Do I feel happier? Do I feel I am heading in a better direction?
If you think something is not going as it should, don’t hesitate to rethink your strategy and make whatever changes you need to make.
And that would be running your life, to some extent, with a method similar to a company’s. Whether it strikes you as smart or as too cold, the truth is that people and companies that follow a method usually end up better off than those who drive blindfolded.
See also: Stephen Covey’s 7 habits for getting ahead in life
Featured image: Calsidyrose, CC BY 2.0, via Flickr.
