Without question, habits are essential. And while beneficial, good personal habits may or may not correlate to success in business.
However, when it comes to money habits, things are different. Poor money habits are almost guaranteed to affect success in business negatively.
“The Chains Of Habit Are Too Weak To Be Felt Until They Are Too Strong To Be Broken.” ~ Samuel Johnson
What Is A Habit?
Habits are routine behaviors. Most often, they are unconscious patterns of behavior acquired through frequent repetition.
And just for the record, not all habits are bad. Unfortunately, there is the tendency to view habits as something negative, as being stuck…
However, if there would be no habits, life would be overwhelming, difficult to manage at best.
Just think how time-consuming it would be if every morning you had to re-think and re-learn how to brush your teeth, shower, get dressed, make coffee, etc.
That’s why, over time, we develop countless habits that connect all areas of our lives, including how we deal with money.
We all have them! And while we may not think in terms of “habit,” many of us deal with money habitually.
The question is: do your money habits work for or against you? And, do they contribute to your success in your business?
So what areas are affected by our money habits, both in business and personal life? Here are some examples:
- Spending, how we spend money
- Saving, if and how much we save
- Investing, if we decide to invest money
- Budgeting, how or if we budget our money
- Retirement, how or if we plan for retirement
- Credit & Loans, how we utilize credit and loans
- Monitor, if, and how we monitor & track our income, spending, investments, credit score, etc.
- Financial responsibility, how we manage our financial obligations
Bad Money Habits
At one time or another, many of us will pick up a “bad” money habit. And even though bad habits work against us, what’s important is to recognize and work to improve them.
Here are some of the worst offenders:
- Overspending; spending more than bringing in
- No savings, spending every last dollar
- Buying on impulse
- Over borrowing, running up debts
- Paying late, overdrawing accounts
- No budget, or not sticking to the budget
- Not paying bills on time or not at all
If you’ve picked up some of these bad money habits, you must work to improve and eventually eliminate them. If they don’t get corrected now, they will lead to personal financial problems down the road.
Bad Money Habits In Business
If you struggle with any of the bad money habits listed above, chances are you’ll also struggle with them in your business.
Again, let’s look at some examples…
Not paying bills on time or not at all: Bringing in enough money at first may be a struggle, but there is no excuse for not paying your bills, ever! If you find yourself in a tight spot, take out a loan to pay your bills, or ask vendors to extend credit or payment terms.
Working without or not sticking to a budget: Creating a budget for your business and sticking to it is crucial, particularly when you’re getting started. Your budget comes from your forecast and lets you know what and how much you can spend. Working without a budget is like walking around with a blindfold over your eyes.
Buying on impulse: No, impulse buying is not limited to one’s personal life; all too often, it happens in business also. There is a shiny new piece of furniture, a powerful new computer, or the beautiful artwork to decorate the office. While it may be a necessary purchase, ask yourself if it is in line with your budget and your current line of income? Or perhaps, could the purchase wait until later? Too many new business owners spend far too much on fancy new equipment and machinery without ever knowing if they can support it with current income.
Failure to monitor & track: while you may get away with it in your personal life, you will not be so lucky in your business. Habits are habits, no matter if business or personal!
It is essential you know where your business stands at any given time. And while you may not know every detail, you must have a sense of your financial standing or where you can access the information. Failure to do so may result in problems with cash flow and impact your ability to service the financial obligations of your business.
Correct Bad Habits
If you’ have developed some bad money habits over the years, take steps to correct them now. Not only will your personal finances benefit, but so will your business.
If you know you have bad money habits, don’t stick your head in the sand and ignore them. You don’t want to set yourself up for failure in both your personal life and your business.
What To Do Next
Meet challenges head-on; do not stick your head in the sand. You know as well as I do, problems and challenges will not disappear on their own; if anything, they will escalate and become worse.
Today, there are countless programs and resources available to help individuals and business owners deal with financial challenges. Many organizations offer help free of charge, including the SBA (Small Business Administration), Banks, Credit Card companies, community organizations, and various websites.
And sometimes all it takes is another set of eyes. Getting input from another person can help you see a solution or another option you couldn’t see before, on your own.
Continue to learn about finances, educate yourself. By now, you understand personal, and business finances are not that different after all. When you improve your understanding of your personal finances, you’ll boost your knowledge of your business finances as well.
Check your local library, check Kindle, and check out all the information available on our website @ NPBusiness.org. We have hundreds of articles on the site, use the search function to find what interests you.
Let me end this article with a quote by the famous Vince Lombardi, Football coach…
“Winning Is A Habit. Unfortunately, So Is Losing.” ~ Vince Lombardi
Join the conversation by leaving a comment or question below.
By Johanna Hofmann, MBA, MAc., EAMP; regular contributor to the NPBusiness blog and author of “Smart Business Planning for Clinicians.”