Many people set new goals for the New Year…losing weight…stopping smoking…cleaning out closets…but what about your financial goals?

If you set your financial goals, business and personal, and get to work figuring out how to reach those goals, you can improve your financial condition.

Make your goals realistic but make them a bit of a stretch too…after all the point is you need to be able to plan on how you are going to reach the goal. Don’t just pull a number out of thin air and then getting discouraged because there is no way you are going to make it.

One way to start your plan is to work backwards, starting with what you want to achieve.

Wealth can be measured by your net worth, so that is the place to start. Figure out what your personal net worth is right now by adding up the value of all of the assets you own and subtracting everything you owe (mortgage, car loan, credit card debt, etc.) Then set a goal of increasing your net worth by some percentage. Work out what you will pay on the amounts you owe without adding any additional liabilities like paying for things you can’t afford with credit cards, and then add a goal for some cash savings that will increase your net worth. That’s two more goals, spend less and save more.

Actions to increase your net worth:

1 – Pay down the principal on your liabilities like the mortgage or car loans

2 – Pay down credit card debt and stop using the cards unless you can pay off the balance in full when you get the monthly statement.

3 – Find ways to cut expenses – we all spend on items that are optional, right?

4 – Put a portion of every paycheck into cash savings toward an emergency fund (set a goal for the amount you want to reach in that fund)

5 – Once your emergency fund is built up, start putting some cash into investments that will grow (don’t overlook the benefits of a retirement savings plan account which can also reduce your income tax liability)

Next step: How much more personal income will you need to achieve that increase in net worth and pay all of the bills you will incur during the year? That number is the basis for setting the goal for an increase in your personal income. If you are earning $60,000 a year now, and you will need to earn $70,000 to make the net worth goal, then figure out what you have to do to make that happen.

The actions you take will differ based on whether you are a business owner or an employee, of course.

If you work for someone else, then the assets you have to sell to increase your income are skills and time. You can increase your skills and make yourself more valuable to your current company and ask to take on more responsibility for more pay. Or, you can get a second job or start your own money-making entrepreneurial activity that you can work on in your spare time.

Don’t overlook cutting back on discretionary expenses. You can save money on restaurant meals when you dine out by buying gift certificates for your own use for a fraction of their worth at http://tinyurl.com/restaurant-gift-certs-4-less and they make great gifts for giving to others.

As a business owner, your increased personal income demand is placed on your business. That means working out a plan to generate more sales and cut expenses wherever possible to pay you a salary increase and cover the increase of the cost of doing business in the coming year.

So, working backwards in the equation, how much of an increase in sales do you need to make that goal? How can you use your cash flow more effectively to generate more cash? Where can you cut expenses without harming the income production and profits of your business?

Becoming financially fit is not all that different from becoming physically fit. You start where you are and train yourself to use discipline and your brain power to perform better and make small, consistent improvements every day. Before you know it, you’re on your way to achieving your financial goals for the new year and better money management habits become second nature.

Money Saving Tips:

Save money on restaurant meals;  buy gift certificates for a fraction of their worth

Lose the fax phone line: Send and receive secure faxes by email and never miss another fax

Buy ink and toner at deep discounts and opt-in to receive the additional coupons by email to save an additional 10 – 15%

Buy shipping supplies at good prices and get cool FREE stuff for yourself or gift giving

Automatically protect your computer files for pennies a day

Do you have other great money saving ideas? Leave a comment and share them with our readers.

What do you do when you get your Profit & Loss Statement (P&L) from your accountant, or when you print one from your accounting software? Do you ignore it, or look at the total income and the bottom line net income and then toss it in a drawer or file folder without analyzing it? If that’s the case, then you are missing out on some potential opportunities to increase your sales and your profits.

Smart money management practices include staying in control of how your company’s income is being used and to make adjustments that are in the company’s best financial interest. There are many ways to analyze your P&L to identify some lost income opportunities; here are just a few.

1 – Pull last month’s P&L statement so you can compare it with the current month’s statement.

2 – Compare the Total Income figures and the bottom line Net Income figures. Whether you are up or down compared to the previous month, you can use the rest of the report to figure out why that may be the case. Financial management is easier when you do some analysis.

Cost of Goods Sold: Look at your cost of goods sold to see if your inventory was replenished fully or you were out of stock on some items that you could have sold.

Investigate whether the costs have gone up and you need to pass on the cost increases. You can lose sales by being out of stock as well as not passing on price increases from your suppliers. This would eliminate the strange sensation that you may have experienced when you are ‘selling more’ but ‘making less’.   And you think, “What the heck is going on here?”  So be sure to look this over with a critical eye.

If your suppliers have raised prices, you should increase your pricing structure on the products you are selling. This ensures the sales you make have an adequate profit margin built into them. Sometimes suppliers raise their costs and forget to inform you, or the announcement gets lost before it reaches your in-box, and you don’t notice the increase right away.  For example, some express parcel shippers tacked on a $20 fuel surcharge increase when gasoline prices surged to over $4 a gallon.  They did this because their prices increased, so they had to pass them on to you – their customer.

Tip: Get all of your suppliers to fax you their latest price sheets and compare these figures to the costs you have for the items in your accounting system. Then decide if you should raise your prices to pass any increased costs on to your customers.

Tip: It’s better to increase your prices a bit by bit over time, rather than increase them by a large amount all at once.  Notice how a well -known coffee shop raises its prices for coffee a nickel or a dime every 3 – 4 months and customers keep right on buying.

Advertising & Promotion: The first expense item(s) to look at are your marketing expenses. Did you cut back or increase promotion? Did you change your promotion and is working better or perhaps not working as well? Too many businesses cut back on promotion funding in tough times. That’s a big mistake. Deciding to cut back on talking to your current and potential customers can cause them to forget your company and to shop at your competitor who is still promoting.  Consumers have not stopped buying, they are just being more selective about what they buy and where they shop.

Other Expenses Lines: Compare each expense line to the matching expense from the previous month. Are expenses creeping up without you realizing it? If so you can decide where to cut back. Did previous cost cutting measures help the bottom line profit? If so, congratulate yourself.

Balance Sheet Items: If the bottom line Net Income is up, but you don’t have that cash sitting in a bank account where you can see it, it usually means that you paid out the profits to principal owed on debt. Your balance sheet shows you the credit debt (liabilities) you owe and paying those is not deductible except for the finance charges or interest.

For more of these business profit tips, check out our downloadable e-book Business Checklist to Increase Profits.  This checklist is the shortcut to an MBA on money management to generate more profits.  It costs a lot less that an MBA degree, and it’s easier to understand!

What have you learned from your P&L statement? Share it with our readers by submitting a comment.

Tampa, Florida, 2009 – Money Management Solutions, Inc. is pleased to announce the release of the new Russian language version of its popular business cash flow management software in Russia. The software, created by Sandra Simmons, President and Founder of Money Management Solutions, Inc. is designed to help millions of Russian businesses with solvency and debt issues. The software will be made available through an independent distributor, Larissa Lobova, through her company in Moscow (www.moneysolutions.ru).

‘This is the first foreign language version of our English language software that is currently in use by business owners in 21 countries around the world,’ Ms. Simmons said.  ‘We plan to make the Money Management Solutions software and training course available in several other languages in the very near future. The recent worldwide economic crisis has caused financial problems for businesses worldwide. The sooner we can make our cash flow management software available to business owners who are not conversant in English, the faster they will be able to improve their financial condition and generate increased profits. That will help the larger economy as well.’

When asked why Russia would get the first translated version, Ms. Simmons replied, ‘The Russian business owner is much attuned to dealing in cash and not relying on lines of credit to operate their businesses.  Our cash flow management software is based on this simple principle as well, and it is a good fit with the Russian economic philosophy. Business owners who learn to run their operations without relying on credit cards or lines of credit will be the survivors.’

These successful time-tested principles of paying cash, spending less than you make, and not relying on credit, have long been practiced by the people of Russia.  The Russian national debt is reported to be the lowest of all the G20 countries. According to Ms. Simmons, ‘These same fundamental principles, used in the United States until the introduction of credit in the early 1920’s, are being re-introduced to businesses as credit becomes less and less available. Companies that are able to implement these financial principles quickly will make it through the current economic crisis.’

Money Management Solutions, Inc. has been in business in the Tampa Bay area for 8 years offering business owners worldwide a range of products and services that include money management software, courses, books, financial rescue services, and business consulting.

Sandra Simmons, Founder and President of Money Management Solutions, Inc. oversees the Research and Development division of software and information products distributed to business owners worldwide.  A national speaker, the creator of the Money management Solutions software for business, and author of several business books, Ms. Simmons has delivered training seminars to thousands of business owners and Executives across the United States. Chief Operations Officer of Money Management Solutions Inc., Brian Dawson stated, ‘We are pleased to have the benefit of Ms. Simmons’ 30-plus years working experience with Fortune 500 companies and multiple industries including advertising agencies, retail chains, food service chains, engineering firms, construction companies, health care providers, veterinarians, accounting firms and other service providers.’

The following is an interview with Sandra Simmons, Founder and President of Money Management Solutions Inc. on the state of  business money management in the United States.

The current economic crisis should serve as a harsh money management lesson to all of us. Every economy, whether large or small, be it a large corporation or the household income, will always be at risk to the degree that it relies upon credit for its survival. It is not that credit is inherently evil or bad; rather, credit and living beyond one’s means is a tempting financial seductress which will always threaten to wreck our financial ships upon hidden fiscal shoals.

The problem with credit is risk. Whenever you take out a loan, use a line of credit, or even use a credit card, you are taking a financial risk to some degree. That risk is that you will have enough money at a future date and time to pay back that financial obligation in full and in a timely manner. There is nothing particularly wrong with using credit as long as there is virtually no risk involved in paying the money back.

There is a lot wrong with living way beyond one’s means and spending virtually every dime one makes to pay off creditors. This can be risky in the extreme, because with just one slip, the whole house of cards can tumble down very quickly.

“I am not against the use of credit,” says money management expert Sandra Simmons. “What I am against, however, is the overuse of credit to create a lifestyle or a business situation which is basically false. Living in a condition based on credit and debt is very, very risky. Done on a national scale, you can see what has now happened.”

Simmons, who is President of Money Management Solutions, Inc. (www.MoneyMgmtSolutions.com), a business-to-business consulting and money management products and services company, located in the Tampa, Florida area, has been warning for years now that the economy was dangerously overextended. Even at the virtual height of Wall Street, Simmons could see the writing on the wall and the danger that was lurking just beneath the surface of the credit markets.

“An economy on a national scale is really just the sum of its parts,” says Simmons. “I could see that individuals and businesses were over extended and relying too much on credit. Because credit was easy to get, people took advantage of it and were living beyond their ability to pay. When an entire national (or world) economy is built upon such a shaky and risky foundation, it makes it vulnerable.”

Simmons’ approach to wealth and financial success is rather old fashioned: You work for it. She says that the best and safest way to be financially successful is to practice good money management: pay your bills, set aside savings and reserves, and avoid using credit.

“Now I know none of you reading this article fall into this category, BUT I call people who are overly tempted to live beyond their means and use credit “Gratification Groupies”. I say this because they fall victim to the credit trap of having to have it now, and worrying about how to pay for it later,” Simmons says in reference to our instant gratification oriented society. “Instant gratification, however, is not the road to wealth and financial freedom. Oftentimes, it is a path that leads to heartbreak and financial failure.”
What is interesting is that it is not so much how much money is made; it is what you do with it that determines wealth and economic condition.

“I have clients who have made millions who were in dire financial straits, and who, despite all of the money they were making were always behind and never had enough to meet their financial obligations,” says Simmons. “And I’ve also had to fix businesses that had millions in sales, but weren’t profitable. In either case, the real problems had to do with the handling of their cash flow and money management. Solving those problems put them on a firm financial footing.”

Simmons’ money management strategies are fairly straightforward. The difficulty is not in understanding them so much as having the fiscal discipline to implement them.

Some of her principles are as follows:

Money Management Principle 1 – Use CASH Not Credit

“Each time you buy something using lines of credit or credit cards because you don’t have the money to pay for it, you are promising your future income to the credit card company,” says Simmons with emphasis. “Those future earnings will undoubtedly be needed to pay your regular household or business operating expenses. That’s when you end up in the pay-for-life program known as the credit trap.”

The only exception is buying property that increases in value, such as usable business assets, or investing in commercial buildings that put more income in your pocket and more profit on your bottom line. Using your money to make more money is smart money management.

Money Management Principle 2 - Don’t Spend More Than You Earn

The most direct route to financial disaster is spending more than you make. You can keep a good quality of life for your business while reducing optional spending. This can be accomplished by acts such as buying used equipment rather than new, or negotiating better buying margins for your raw resources and supplies. Don’t buy something because you only want it, but don’t really need it. It’s just a plain good money management practice.

Money Management Principle 3 - Money Must Be MADE Before It Gets Spent

“If there is some future large purchase you need to make, begin by setting aside small amounts of cash into cash reserves for that purchase and keep that up until you can pay for it with cash,” Simmons says in reference to the safest way to make larger purchases without using credit or going into debt.

On a company level, if you will need to purchase or upgrade equipment for your office, then figure out what the costs will be and work out how much money you have to set aside every week to have the full amount in the month you will need to make that purchase. Plus look for and negotiate to get the best deal possible.

“I know this takes a lot of discipline,” says Simmons, “but it keeps you out of the credit trap. And I would argue that in the end it is more satisfying because once owned, you don’t have to worry about how you are going to pay for it because it is already paid for. It may not be instant gratification, but it is definitely a sense of accomplishment.”

Money Management Principle 4 - Put Away Some Cash for Emergencies and Future Operating Expenses

“You will sleep much better at night with the financial security of knowing you have money stashed away in reserves for emergencies like unexpected repairs to a vehicle or an office machine, increases in employee benefits expenses, or experiencing a big drop in income,” Simmons says. “When you have a cash cushion you can get your hands on immediately, then magically, you don’t even worry about money, and your focus returns to living life and enjoying it, and earning money suddenly gets easier.”

In reality, the primary thing you have to be afraid of should there be another Great Depression or an economic downturn is not having enough (or any) cash reserves tucked away that you could immediately get your hands on.

Out of every bit of income that comes in the door, immediately set aside 10% and stash it in an interest bearing savings account that you have designated for your cash cushion.

The above steps, done on a national scale, would create an enormously stable foundation on which to build a true economy that is rock solid.

“I want business owners to know that there is something that they can do about their economic circumstances and that they do not have to wait and see what further actions the government is going to take in order to try and fix the economy,” says Simmons in conclusion.

“Whether you’re a large company, small business, or an individual, stop relying on credit, pay off your debts, and start setting aside money and get on the road to economic prosperity. I guarantee that it can be done, and my own clients are not worried about the economy because they have applied sound money management principles in preparation for the kind of economic circumstances we now find ourselves in.”
“Their weekly use of our Money Management Solutions software program to plan how to allocate their cash flow in their own best interests, and their implementation of the points in our Business Profits Checklist, among other strategies has put them on a firm economic footing.”