Personal finance is important for everyone. It doesn’t matter how much money you make, what line of work you’re in, or what your goals are. You need to be mindful of your finances and how the decisions you’re making now impact your future. But as an entrepreneur, personal finance takes on an entirely new level of importance. The question is, are you where you need to be?
5 Personal Finance Tips and Suggestions
As an entrepreneur – particularly one who is early in your career and still trying to get that first successful business off the ground – income can be irregular. This creates friction on the financial front and heightens the importance of being smart with cash, savings, investments, and debt.
Here are some powerful tips you can use to stay focused and on track:
- Focus on Growth
First and foremost, you need to focus your attention on growing your business by whatever means possible. A sizable and stable income is the number one ingredient to financial success. (You’ll still have to make smart choices with this money, but a healthy income can neutralize a long list of challenges.)
Growing a business is a very situation-specific endeavor. You have multiple options, including reinvesting in the business, innovating new products and services, or even acquiring another business via a merger or acquisition.
- Keep Accounts Separate
Armed with the confidence that your business is moving in the right direction, you can turn your attention to how you’re managing the money that you bring in. And one of the fundamental keys in this process is to keep your accounts separate.
The best thing you can do to avoid legal/tax issues and enjoy optimum peace of mind is to keep your business accounts separate from your personal accounts. And if you zoom in even more, ensure each business you own has its own accounts. This makes accounting easier and allows you to know what’s “yours” and what the business “owns.”
- Budget With What’s in Hand
For the vast majority of working professionals who are employed with a steady and predictable paycheck, budgeting is done in an anticipatory manner. You know how much money you’ll make over the course of the next month, and you develop a budget that reflects that. Entrepreneurs are advised to work in reverse.
As an entrepreneur, you don’t always know what your income will be over the next month. So the better option is to budget this month’s expenses based on the previous month’s income. This gives you a concrete number to work with and prevents a scenario where you inadvertently spend more than you make.
- Strip Your Personal Expenses Bare
When you’re actively trying to grow your business and increase your income, you have to be smart about managing the resources you have available to you. This is not the time to live large or keep up with the “Joneses.” Go through your budget with a fine-tooth comb and strip all expenses down to the bare necessities.
Saving, for example, $500 on your personal monthly expenses could allow you to keep $500 in the business each month. That might mean the difference between being able to afford a Facebook advertising campaign that drives revenue and having to bare-knuckle your way through organic, grassroots marketing.
- Be Smart About Retirement
Many entrepreneurs count on the sale of a business in the future to fund their retirement. And while this does work out on occasion, it’s not something you want to bet on. A lot can happen to your business over the next 10, 20, or 30 years. And the chances that you’re able to sell it at the right price and at the right time are slim.
You’d be wise to begin contributing to retirement accounts and other tax-advantaged savings vehicles today, rather than waiting for some future date that may never come. If you happen to sell your business down the road, great! You’ll have two separate pots of money to fluff your nest egg.
Make Smarter Choices
At the end of the day, so much of personal finance hinges on making smart choices today to benefit tomorrow – even when every emotional fiber in your body tells you to live for the moment.
Personal finance is about patience, forbearance, and resolve. Your ability to make wise decisions and trust your decision making will bode well for the future. And as your business grows, so will your flexibility and opportunities.