Part of my work involves designing processes and systems to help organisations achieve their objectives. I have come to realise that most times the process is more important than the outcome. Once you have the process figured out the result is inevitable.
A process is simply a series of actions or steps taken in order to achieve a particular end. A system is simply a group of processes working together to achieve the ultimate goal.
For instance if you want to lose weight don’t focus on the actual weight loss. Instead set up a system to eat healthy and exercise frequently. It may mean restocking your fridge with healthier food. It could imply installing a pedometer on your phone to track your steps. Once you implement and follow these processes you will automatically lose weight.
Now let us look at the systems you need to implement to improve your personal finances. Once you set up and follow these processes your finances will improve.
1. Planning and budgeting. You need written money goals and a detailed budget. The bible says my people perish for lack of a vision. Your budget is your vision for your money. Without written goals we just drift through life.
2. Income generation. You need a system to generate cash. It could be employment, self employment, business or investments. Without some kind of income generation it is impossible to accumulate wealth.
3. Expense management. You need a system to manage expenses. It starts with a written budget coupled with an expense tracking tool. The expense tracking provides a feedback loop for your budget.
4. Debt reduction. One needs a system to manage and reduce debt. I have personally used the debt snowball strategy to eliminate debt.
5. Investment management. To build wealth you need a system to manage your investments. The idea is to maximise return while reducing risk through a diversified portfolio of investments. That is why I hold assets in land, property, shares, treasury bills, business, forests, etc.
6. Performance management. Finally you a need a system to track how you are progressing on your money goals. I use a simple spreadsheet to track my monthly performance on my finances. From this analysis I am able to adjust course as necessary.