My Personal Financial Operating Manual

Yesterday I wrote about what held me back in personal finance in a post entitle, “What’s Holding You Financially Trapped?” A key blocker in my personal life and a “wall” in my prison cube was insufficient Education about all things personal finance.

As part of my learning and discovery journey I learned that sometimes it is necessary to run your life like a corporation. While that may seem odd to some, it makes perfect sense when you consider most people spend most of their time at “work” usually for a business or corporation so why not take what you learn and apply it at home?

To that end, I created a personal finance operations manual which I have summarized below for ease of use.

1. Introduction
   • Purpose of the PF Operating Manual (a guide to how our family household will run our finances).
   • Scope and applicability (a summary of who this guide is for and when it should be applied)
   • Definitions of key terms (definition of acronyms, words and phrases for those not familiar with personal finance).
2. Strategic Financial Management
   • Alignment of financial strategy with our family goals (our family vision statement is to make our family’s life better through support, education, and access to the things needed to make a better life)
   • Long-term financial planning and investment strategy (While we work toward support our family in the immediate term, we also have long term retirement and bequeath goals)
   • Performance measurement and bench-marking (we will periodically check to ensure we’re on track)
3. Budgeting and Forecasting
   • Annual budget preparation process (We will create a family budget annually based on current and future needs)
   • Monthly/Quarterly forecasting methods (We will monitor monthly and quarterly our money flows)
   • Variance analysis and corrective actions (We will fix money problems as they happen either by cutting expenses or increasing income)
4. Accounting Operations
   • Chart of accounts setup and management (We will know where our financial position is at all times)
   • General ledger maintenance (We will keep a journal of our expenses and income)
   • Accounts payable and receivable processes (We will pay our bills and receive our income from our rental properties, businesses and other sources).
   • Payroll processing (We will have a system of allowances for our kids and each other)
   • Fixed asset management (We will manage our home and other properties and manage accordingly)
5. Cash Management and Treasury Operations
   • Daily cash position reporting (We will monitor our petty and emergency cash savings and invest accordingly in T-Bills or other high yield savings accounts)
   • Cash flow forecasting (We will monitor our cash flows and invest accordingly)
   • Short-term borrowing and investing (We will manage our credit cards and other lending as we deem necessary)
   • Bank account management (We will manage all of our bank accounts)
6. Internal Controls and Compliance
   • Segregation of duties (We will periodically check on our expenses and kids to ensure no waste)
   • Reconciliation processes (We will reconcile any discrepancies with our money)
   • Internal audit schedules (We will periodically check all of our statements and expenditures)
7. Financial Reporting – We will report on our financial situation monthly, quarterly and annually
8. Tax Planning and Compliance
   • Family tax strategy – (We will optimize our tax strategy (401ks, IRA, HSA, Flex accounts, etc)
   • Tax filing processes and deadlines – (We will file all our state and federal income taxes on time.)
9. Risk Management
   • Financial risk assessment framework – (We will have a risk matrix for our financial investments and other activity)
   • Credit and market risk management – (We will monitor our credit rating and ensure good use of credit)
   • Insurance and hedging strategies – (We will carry insurance for our key assets)
10. Procurement and Expenditure Control
    • Vendor selection and management – (We will have a process for selecting the best vendors, products, contractors and services)
    • Travel and expense policies – (We will have our travel policy that is prudent for having a good time but not going overboard, we have specific hotels and airlines we use to optimize our point scheme).
11. Financial Systems and Technology
    • Financial management software and tools (We will use software tools from our banks, brokers, and other apps to manage our personal finances).
    • Data security and backup procedures – (We will make sure we backup our data and keep it secure).
    • System upgrade and maintenance schedules (We will ensure our apps our up to date and secure).
12. Stakeholder Communication
    • Finance department roles and responsibilities – (We will communicate with our family, extended family and friends as necessary about our budgets and financial constraints).
    • Reporting lines and decision-making authority – (We will have a collaborative effort when making financial decisions).
    • Interaction with external auditors and advisors – (We will have a communication protocol with our CPAs, Advisors and other relevant people).
13. Human Resources and Training
    • Outsourcing – (We will have standards and protocols for outsourcing some services in our life).
    • Professional development and training programs – (We will ensure we educate our family with the best resources possible on YouTube, the internet, Universities and other places as needed).
    • Succession planning – (We will have a plan in case one of us becomes incapacitated including having medical and living wills).
14. Continuous Improvement
    • Process improvement initiatives – (We will take feedback and improve on all of this).
    • Feedback mechanisms – (We will have feedback provided to us in person, via email, text or other methods).
    • Regular review and updating of the manual.

I had intended on providing more detail but that would have been a post 100 pages long. I decided to provide the framework and some high level overview. I don’t suggest you can do all of this in one sitting. It actually takes years to build something like this but it’s best to have a starting point and get it done and pass it on to your kids and grand kids. Ultimately, everyone’s manual and book will be slightly different because we all have different priorities.

Personal finance is a journey and it’s best to have an operating manual so you don’t get lost.