Do You Manage Your Household Like a CEO?

Practically everyone is familiar with the role of a Chief Executive Officer (CEO).  

Most companies will have someone in charge to help manage the organization, and that’s typically the CEO.

A CEO is a generalist type of role.  This means they’re involved in all aspects of an organization but leave the expertise or detail management of specific functions to other leaders.

There is one aspect of a CEO’s job that cannot be delegated to others.

The Most Important Job of a CEO

There are many areas where a CEO adds value, ranging from leadership to communication, and things like operational excellence.  But if you had to boil down their job to one thing above all else, it would have to be laying out a Strategy.

The most important job of a CEO is to create and implement a long-term vision and strategy for the organization.

While everyone is below deck rowing the ship blindly, the CEO’s job is to stand at the wheel above deck charting the course and navigating the rough waters.

The Three Dimensions of an Effective Strategy

When a CEO crafts a strategy, they need to incorporate three dimensions to make sure it’s as effective as possible.

1) The Vision / Long-term Focused

This is the overall vision of an organization.  A long-term strategy is usually beyond 5-10 years and might be a bit vague.

Since it’s difficult to predict the future, an excellent long-term strategy would be more directional.

It’s like a CEO pointing out to the horizon, and determining a general direction to start navigating.

2) The Goals / Short-term Focused

Once a course is set, the CEO will layout a short-term strategy over the next 5-10 years to put in motion all the actions to make the vision come to fruition.

Several goals are established and communicated across the organization; all of them specifically tailored to support the long-term vision.  The goals are specific enough to be actionable, with milestones to ensure a focused approach.

This is where the CEO charts the course of the journey, pointing out the obstacles, and coming up with solutions to overcome them.

3) The Grind / Focused on the Present

Once the goals are clear, specific objectives are set for the year to help achieve them.  This is the daily grind of rowing relentlessly until the objectives are met.

It’s sometimes hard to see progress during this period.  Your head is down, and you’re grinding away. But since the actions you’re taking are tied to an overall strategy, they eventually lead you to your ultimate destination.

All three of these dimensions need to work in concert if a CEO is to be successful in running an organization. Each of them will fail without the other, and they must be prioritized in the order shown.

So you might be wondering what any of this has to do with personal finance.

Manage Your Household Like a CEO

Managing the financial health of your house requires you to think and act like a CEO., Especially if you happen to have some bold financial goals, like building wealth or financial freedom.

If you’re operating your household with no real strategy, and your finances are being managed haphazardly, you’ll be doomed to float the waters aimlessly.

So put on your CEO suit, plop yourself into that plush executive armchair, and start drafting your household’s strategy:

1) The Vision / Long-term Focused

Come up with the purpose behind why you’re currently slaving away at life.  Write down what the vision of your future household looks like.

Ask yourself some of these questions to help capture that vision:

– What do you want your life to be like beyond the next 5-10 years?  

– What does a happy household look like?

– How much of that vision is tied to financial independence? 

– What are some of the things holding you back?

Your vision should be the reason why you decide to get up every day.  All major decisions in your life should revolve around, making that vision come true.

2) The Goals / Short-term Focused

Once you have your vision outlined, you can focus on the specific goals that will help you achieve it.  Write down all the short-term goals over the next 5-10 years that will help make the vision a reality, along with the specific actions needed to accomplish them.

Make sure that these goals can be measured so you can track your progress and make adjustments as needed throughout the journey.  Set some targets and milestones to keep yourself motivated.

3) The Grind / Focused on the present

Now that you have an overall plan, you can tackle the actions you need to take every day, week, and month throughout the year to meet your objectives.

These could be income goals for the year, savings rates, expense reductions, or new investments.  When you’re trying to make a financial decision throughout the year, you should always evaluate the impact on your goals and ultimately your vision.

A CEO is part of a team, and its success is highly dependent on the support of others.  If your household is made up of multiple individuals, make sure that you get everyone’s buy-in on the vision and the goals necessary to achieve it.

This will reduce the number of conflicts and will make the journey more enjoyable.

Final Thoughts

This all might seem basic, but don’t underestimate the power of laying out a strategy.

I’ve seen many companies and households alike work tirelessly while getting nowhere.  Often it’s because everyone shows up, they do a bit of rowing for the day, they get tired and sweaty, and then repeat the next day.

With no CEO to lay out a strategy for a company or a household, most people end up rowing in circles.

Posted by Michael Dinich

Michael blogs at Your Money Geek where he shares his experience, unique insights, and profiles inspirational success stories. When he is not writing about personal finance Michael can be found enjoying a sci-fi book.

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