Starting a business is a whirlwind not just emotionally but also financially. There’s a lot to do and a lot to learn.
As you take on the challenge, you can’t let your personal finances slip. Many business lenders require a personal guarantee. Even if yours doesn’t, you don’t need the additional stress.
Building a business is a lot tougher if your personal finances are a mess. Here’s how to keep them in good shape:
Set Financial Goals
First things first: You need to sit down and set goals for yourself. Knowing what you want to accomplish is half the battle.
Maybe you want to set aside 6 months’ worth of your expenses in case your company fails. Perhaps you need to purchase a more reliable vehicle.
Setting goals for your finances motivates you to take action. Without them, you’ll spin your wheels, no matter how much money your company brings in.
Too many entrepreneurs invest everything they have into their business, neglecting their own financial health. Don’t take the risk.
Though your business deserves your attention, your personal savings need just as much love. Make sure you’re making monthly contributions to a savings account.
How much you decide to save is up to you. You can set aside a percentage of your earnings each month, or use a program to automate the process. For example, some debit cards have a round up feature that adds to your savings every time you make a purchase.
Emergency funds and retirement savings are also important for entrepreneurs. Getting yourself out of a pinch and making the decision to stop working are both worth saving for.
It may sound odd, but you need to pay yourself once your business starts to bring in revenue. You’ll always have personal expenses, regardless of how frugally you live.
One word of warning: Keep your personal accounts separate from your business accounts. That way when you pay yourself, the money is marked solely for personal needs. Having only one account can jumble up your finances and make tax time more stressful.
Check Your Insurance
Should an emergency happen, your savings won’t have to take such a big hit if you have a solid insurance plan. You should already have a policy in place for your business assets, but personal assets like homes and vehicles should be insured as well.
Insurance premiums aren’t fun to pay, but they’re worth it if disaster strikes. If you can’t pay the whole tab at once, split it into monthly payments.
Rebuild Your Budget
When you become an entrepreneur, everything from your expenses to your tax deductions shift. Make sure your personal budget reflects that.
For example, your next computer might be a business expense, meaning it shouldn’t be on your personal budget. Crunch the numbers again, reconfiguring each category target to reflect your status as an entrepreneur.
As your business grows, keep your eye on those targets. Bringing in more money might tempt you to spend more on the personal side. Do your best to avoid lifestyle creep.
Set Bills to Autopay
Bills are a fact of life. Utilities, mortgages, car payments, and more will need to be paid no matter how successful your business gets. The best way to make sure these don’t slip your mind is by setting up autopay.
When your bills are paid automatically, it’s nearly impossible to miss payments and incur penalties. Autopay takes one more thing off your mind, letting you focus on your business.
Pay Off Personal Debt
No matter how far down the entrepreneurial path you are, you should always be paying down your debts. This includes any personal debt you might have collected.
Credit card debt is one of America’s biggest financial weak spots. Consumer debt drags down your finances, preventing you from seizing opportunities. Avoid it whenever possible.
Boost Your Credit Score
As you focus on the success of your business, keep an eye on your personal credit score. Your credit score will determine whether you can take out loans in the future and at what interest rates. The better your score, the lower the rates you’ll qualify for.
If your credit score is already solid, keep it that way. If not, make a point of paying bills on time and using credit responsibly.
Make Smart Investments
Relying entirely on your business for income is risky. The most successful entrepreneurs set up multiple revenue streams. Almost all of them do so by investing their personal wealth.
Investing your wealth is the best way to grow it. As you generate more revenue, you can make larger investments with higher payoffs.
Monitor Your Taxes
As an entrepreneur, your taxes aren’t deducted automatically. You’ll need to make quarterly tax payments, so start setting funds aside now. If you aren’t sure where to start, enlist an accountant.
You should also be on the lookout for deductions and write-offs. Everything from work miles on your personal vehicle to your software subscriptions may be tax deductible.
Prioritize Personal Growth
As an entrepreneur, you have to learn new things all the time. Otherwise, how are you going to keep your product or service on the cutting edge?
The good news is, many personal growth avenues are inexpensive. A library card is free and gives you access to all sorts of self-improvement books. Many online certifications are offered at no charge. Going back to school is costly, of course, but it might be worth it if you need to master a tricky subject, such as finance or management.
Implement Quarterly Check-Ins
Once a quarter, ask yourself: Have my goals changed? Am I bringing in more money than I spend? Is my insurance still sufficient?
Completing a personal audit will help you stay on top of your personal needs. You can’t adjust course unless you know where you might be going astray.
Embrace that entrepreneurial spirit, but don’t forget to take care of yourself. Follow these tips for financial health, and you’ll always have something to fall back on.