In an uncertain world, we crave control. We want to do everything we can to be physically, mentally, and emotionally healthy. And we want as much financial control as we can get.
What can you do to get more financial control? You can become your own CFO (Chief Financial Officer).
When you hear, “CFO” what comes to mind?
Do you think of a buttoned up executive sitting in a corner office? Maybe you think of brilliant investor Warren Buffett. Or maybe you think about the great American entrepreneur Peter LaFleur.
Peter rose to prominence from his portrayal in the movie DodgeBall: A True Underdog Story.
If you recall, Peter was the owner of Average Joes gym. He was also the facilities manager, the human resources leader, and the CFO. We’re introduced to Peter’s love interest, Kate when she shows up from the bank to audit Peter’s financials. We learn Peter doesn’t have the firmest grip on his finances.
And what about you? How organized are your finances? Would you benefit from taking a more business-like approach to managing them? My goal is to help you better understand what a CFO does and how you can apply some of their best practices into your life. Doing so will help you get more financial control.
As a financial advisor, I’ve been helping people gain more financial control for 20+ years. I’m honored to be named to Investopedia’s list of the top 100 financial advisors many years running.
Here’s what we’ll cover:
- What is a CFO?
- What is their role within an organization?
- What principles do they follow?
- How can you be your own CFO?
Let’s get started.
What is a CFO?
“The chief financial officer is an officer of a company or organization that is assigned the primary responsibility for managing the company’s finances, including financial planning, management of financial risks, record-keeping, and financial reporting.”
A CFO is the officer of a company or organization who handles the financial affairs. This includes, but isn’t limited to:
- Financial planning
- Managing financial risk
- Record-keeping and reporting
- Data analysis
- Analyzing financial strengths and weaknesses
They are a top-level executive (often the third highest), and commonly hold an MBA, Masters Degree, CFA, and or come from an accounting background.
What is their role within an organization?
Over time, CFOs have become an increasingly integral member of the C-suite. They advise the CEO on strategy and help shape the vision and direction of the organization. As the financial authority, they handle accuracy and compliance with accepted accounting and financial standards.
Bottom line- they are a really important person in a really important role.
What principles do they follow?
As with our personal finances, an organization decides based on its financial situation. Because of that, it’s essential the financial data be accurate and up to date. Therefore, the CFO needs to follow principles and processes.
This is done by following Generally Accepted Accounting Principles, or GAAP. It’s a rules-based set of standards that has 10 key principles. As companies grow, adherence to these principles becomes more important.
When a company goes public, its stock is traded on the markets and its financial statements must comply with the SEC. Following GAAP standards and principles helps position organizations for success.
So, what does this have to do with you?
How can you be your own CFO?
Imagine if Amazon or Google didn’t follow GAAP principles or have great processes? Would they be as successful if they didn’t track their cash flow or budget? Maybe, but certainly not as successful as they are.
Just as organizations benefit by following standards and having processes, you and I can as well. Doing these five things will get you started:
- Monitoring your cash flow
- Maintaining a budget
- Building your credit
- Doing planning
- Accepting the title
Monitoring your cash flow
This simply means paying attention to, and knowing how much money you have coming in, and how much you have going out. To monitor your cash flow, login to every one of your financial accounts on a monthly basis. Look for any transactions that shouldn’t be there, as well as for opportunities to optimize your spending.
Learn more about cash flow in this post.
Maintaining a budget
When we budget, we make a plan for our money. A budget tells us if we’re on track to reach our financial goals, or if we’re behind. When we review our budgets on a monthly basis, we can catch any negative trends early, and make any needed changes.
Learn more budgeting in this post.
Building your credit
Credit plays an important role in our lives. Bad credit can keep us from living where we want, driving the vehicle we want to drive, and having the job we want. Good credit can save us a lot of money over the long-term. To build your credit, check your credit score and your credit report at least once a year.
You can check your credit report at sites like FreeCreditReport.com. When looking through your report, keep a lookout for names and addresses that aren’t associated with you, as well as inaccurate information. These could be signs of fraud or opportunities to clear up any discrepancies.
You can check your score by contacting one of your existing creditors. Your initial goal should be to get your score to at least 620. That will allow you to qualify for conventional financing.
Learn more about improving your credit in this post.
Financial planning is a needlessly complicated topic. A financial plan can be as simple as deciding what you want in the future (to retire at 65), looking at your current situation (how much you have saved), and creating a plan for closing the gap (how much you need to save).
To help you in your goal planning process, you can access our Goals course for free.
Learn more about planning in this post.
Accepting the title
Will you accept the title of CFO? To gain more financial control, you need to accept personal responsibility for your money. You don’t need to do everything, but you need to take an interest in every aspect. For example, you don’t need to prepare and file your own taxes, but you need to make sure it gets done correctly and on time. This is true for every aspect of your financial life.
When we do these things, we give ourselves more financial control and position ourselves for long-term success.
You can become financially successful and have more control over your money. Take ownership of your financial future and become your own CFO.
If you’re ready to take control of your financial life, check out our DIY Financial Plan course.
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