Do you know how your money works? I bet you don’t. Don’t take that personally! It has been my very real personal experience that most people don’t understand how to use, save or manage their money. Until recently, I didn’t even understand it, and I still struggle with managing it and planning ahead for it sometimes.

There are three main parts to financial IQ that can be broken down into hundreds of sub-topics. For the sake of simplicity, we’ll focus on the three basic areas of financial IQ.

• Income
• Expenses
• Investing.

These three areas make up the stable foundation to build your financial IQ. Let’s take a look at what goes into each of the three basic categories of financial IQ.

Income

This category is pretty self-explanatory; it is the money that goes into your pockets. For businesses, this has many different names depending on what stage the fiscal process is in. This can be called Net Income, Retained Earnings, or even Gross Margin.

For individuals, your income usually comes from your job or any other sources which provide money, such as retirement, social security, or side jobs. Your income also comes from assets. The more assets you can build up, the more income you are considered to have – also known as capital. Using income to do more, have more, and live more comfortably is one way to use your money. Using your income to increase assets is wise; using income to create liabilities is not wise.

Expenses

An expense is, you guessed it, the money that is taken out of your pocket. This can happen at any point in the payment process, either before the money ever reaches your bank account or well after it is deposited. Often referred to as liabilities, the money you pay out can come from paying employees, household expenses, putting gas in your car, or even giving good-ole Uncle Sam his due.

It is important not only to know where your money is going, but also to protect it from being taken without reason. Each household has tax incentives and deductibles to be aware of to keep the most hard earned money they possibly can. On another note, there are many tax advantages for being self-employed, but they are only effective if you understand them and the record keeping.

Investing

Let’s say you understand how your money is coming in, where it is going out, and how to hold on to as much as possible. Now you need to figure out how to make your money work for you. I bet you didn’t know that money has a job to do, too. If we define a job as a way to make money, then money has a job to do; be invested properly to make more money.

Creating a budget and savings plan are important, but it is just as important for your financial IQ to understand how to leverage your money in order to make more money.

If an individual doesn’t understand this, a family suffers. If a business does not understand this concept, their profits will ultimately fall to the floor. Investing is not just about the stock market or about collectables, but in knowing where to put money so you or your business can reap the benefits of making that money do its job working for you.

Investing is the hardest of the three basic categories to understand because the right choices for one person or company aren’t the same for the next person. Unlike income and expenses, you cannot look directly at the investment machinery and see where the money will come from or where it will need to go if something within the investment breaks. Investing is a living, breathing entity that needs care.

Once you have a good handle on these basics, you will have the beginnings of a healthy financial IQ. Then, you’ll be able to move forward with more confidence, and make friends with your money.

 So, where do you need to start? Do you need to organize, see or understand better your money streams for personal or business reasons? Try our tracking forms for business - or use them for personal finance too.

Thanks for the guest post by Neville Mcintyre

I’m so glad that I finally decided to sign up for 4G internet from Clear. I was thinking of changing for a while and have been so happy since finally taking the plunge. I don’t know why I was so worried about it.

I work from home so my internet service is really important. I need to stay available at all times so that I know what’s going on with my team. My company’s preferred method of communication is always email, so if I can’t respond immediately during business hours it’s a huge problem.

Now I can just keep my laptop in my car and break it out wherever I am. This is such a huge help. I used to try and do everything on my phone, but sometimes that is just impossible. I remember having to drive around and search for places that offer free wifi connections too. That was terrible and such a waste of time.I’m really glad that is in my past.

Now I have my own wireless hotspot, which has changed everything. It is so nice not being chained to my desk every day!

Has it occurred to you to send out holiday or New Year cards to  your clients? Even a simple holiday post card thanking them for their business would be a welcome surprise in the day of email and online communications. 

Before you do, get organized.

Find each customers name and mailing address. Then organize by alpha bet, or most recent order, or highest amount of orders. Whatever criteria is most important to you.

Figure out what you want to send. Just a greeting and thank you, or a coupon code or special gift? Again, it’s up you to to figure out what fits best with your company brand and what you want to encourage from you customers and clients.

Now that you know what you want to send and who you are sending it to, go mail them!

For the new year, try a greeting card organizer. What would you like to remind or thank you customers for during the year? Their birthday? Their anniversary of their first order with you? 

A card organizer would look like a regular notebook or accordion file, but would list the important dates, names and addresses of the client for that month. So, you can pull out the list and a card and then send it out at the beginning of each month. Nothing like planning ahead! Everything will be right where you need it and you won’t have to search through a ton of info or paperwork to find who gets what and when. 

You know how many times people say to me, “you are one strong mama!” But, in reality I don’t always feel that way, and I don’t always manage that well either. Seriously managing yourself, and the time you do things in is a serious aspect of running your business.  You probably already know how to use the kid’s naptimes to get some work done, but maybe there are a few things you haven’t even realized that you can do..

Have a clear purpose when you get on the internet. 

Before you sit down at your computer every day, make sure you have one purpose in mind. I like to use my daily To-Do list by writing down the top 3 things to do today, the night before. It keeps me from just checking email and goofing off with lots of useless time wasters.

Analyze your activities

Before taking any action, make sure you know the steps involved. Think about what you’ve been doing so far. Is it working for you? Is it actually moving you forward? So many times we mom entrepreneurs join safe lists and traffic exchanges. But does that actually get you sales or customers? Maybe, but you’ll need to analyse each action to see if it moves you forward or keeps you stuck?  mean you should be spending time doing it.

The best $20 you can spend on your business

If you have younger kids, spending money on a Mommy helper or some type of child care to keep your kids busy for several hours at a time.

Assembly Lines 

Put similar activities in groups. Start one task and keep going with it without interruptions. Check email once or twice per day and answer it all at once. When one child asks for a story gather them all around. Same thing for snacks. Run all your errands at once. Try to schedule blocks of time for each type of task.

Utilize Technology 

Can you get mobile? Wireless and a laptop are awesome. You could work from your living room, the front porch or even from your bathroom (if you have to hide from the kids).  Or, while the kids are out with friends, you can hit your local coffee shop with free wifi and do your work from there.

Use autoresponders, mailing lists and other resources to automate your business. If you find yourself typing out answers to the same questions over and over again, add pages to your website or create an ecourse or downloadable report that addresses those topics and refer your customers or downline or whomever to those.

We have to constantly work on being creative in our business management, working in time for kids and everything else that is required of being a mom. Throw in a business and it feels like too much some days, but you’ll get through it and you’ll even be happy you did.

To  help you out with your own Survival Kit, I’ve made a package of downloadable, printable forms that will help you start your business and track your business as it grows. Get the Idea Evaluation Worksheet for free right now.

Thinking of Buying a Business?

It won’t matter if the asking price is $1 thousand or $1 million, you’ll have to do some serious homework before deciding if it’s right for you. Here are some key points to consider before getting out your wallet.

Comparable Prices

Each business type is evaluated based on different factors. Cashflow, profits and growth potential are just a few. Consider how you would look at a local restaurant compared to evaluating a website or local pawn shop. They would all have similar, yet different factors to consider. How much traffic do they get? Are they in a good location? What keywords do they target with their advertising?

One way to figure all this out is to see what other similar types of companies are selling for right now. See what factors determine their value and compare them to the business you are considering buying.

Tax Returns

How much did the current business owners report on their tax returns? How much did they owe on the business? Don’t pay more than they reported. Don’t base your buying descisions on what the owner say, but on what was actually reported.

It’s dangerous and scary to pay for a business only based on someone’s word. As a rule of thumb, only pay for revenue that can be proven, like IRS statements or audited financial statements only.

Track Traffic and Sales Yourself

Alright, sit in the business and pay attention. Watch, count, track customers coming into the business for a day. Is it really as much as the owner says? Compare it to the average being reported.

Buying a website? Ask to have your own tracking widget installed for a week so you can see what kind of traffic is coming in, and where it is coming from.

In other words, no matter what kind of business you’re considering, check the stats for yourself. The only exception is if they have audited statements from a Big Five accounting firm. If they do, the accounting can probably be trusted. (And if there’s a mistake, you’ll have the recourse of suing the accounting firm.)

 Any Undisclosed Problems

I’m not trying to make business owners sound dishonest. However, they may not want to tell you all the drawbacks, or they may not even consider them a drawback because they’ve dealt with them so long it just feels like part of the every day routine.

So, it’s really your job to dig in and find out what kind of negative crap is out there about this business, because you’ll have to build up or around or on that negative feedback. Do a Google search with their name, plus words like “lawsuit” “sued” “complaint” “BBB” “scam” “review” and so on.

Are there just general complaints about the business? Was there good reason for it, or are these the type of customers who like to “complain” for sympathy?

Can you also see what the future looks like for this company? Maybe future repair costs for equipment, or traffic generation for a website?

Financing

Have you fully understood how the current owners want to be paid? Are they willing to help finance for a period of time? Are they willing to help train you in their current process? Many sellers are willing to help you continue their legacy or help you build a success one of your own. Just ask.

There are many more factors to consider before you whip out the credit cards or checkbook to pay for this new business. Take your time. Don’t feel rushed, and if you do, then let this one pass. Rushing in, or feeling rushed, spells disaster.

If you are considering a new business purchase, download our new Business Evaluation Worksheet for free!