Owning and managing a new business may be hectic task on its own, after all you have to manage your funds, profit and losses and at the same time invest in various avenues that will bring you good returns. But amidst all this, small business owners don’t realize the importance of managing personal finance. There may be times when the financial lines between your business and personal account may get blurred. This can cause conflict in your personal finances and your business may end up being a burden.
Hence, financial planning is very imperative especially on a personal level. So prioritizing on some of the basic financial tools can help you prepare a solid base for your money matters.
Separate business with personal finance
It is easy to get swayed by your business’s needs and invest your own money to grow it. Though it may sound like a hard task it is extremely beneficial for you and your business in various ways. It brings your business legitimacy and saves you from a lot of tax troubles when you are filing taxes. Apart from this, it limits personal liabilities when business faces loss.
Make sure that you have different accounts for business and a separate one for personal use. This will help you in the long run and won’t cause much damage if your business if you decide to shut it down
Start a retirement plan
We all earn money to fulfill our long and short term purposes and ensuring you have a safe and secured future is part of that long term need. Always have a retirement plan in place whether you are a businessman, salaried person or a freelancer. You may look for your business’s needs all the time but it is necessary to fulfill your needs first. Therefore, even it doesn’t matter if you are making tons of money or have a good amount of savings in your account because like all workers you must have a retirement plan in place to be prepared for the future.
Diversify investment options
Financial investments cannot be uniform for all purposes. Different types of investments may fulfill different types of objectives and needs so putting all of your investment in the growth of your business may be a risky decision. Therefore, think about your needs and diversify your investment options both for you as well as your company.
For example: Investing a small amount of revenue into group savings may boost returns that you can use to fund your business. You can also use the same from your own savings to get your hands on some extra cash.
Plan for irregular income days
It is imperative for a growing business to face losses and have irregularities that can hinder a stable income. For example if you have a business which generates revenue on seasonal basis or with time gaps then you must start planning expenses for these irregularities. You can do the following:
1) Note down your expenses and how much you will need and start saving to cover those needs.
2) Start preparing an emergency fund to secure you during an unforeseen emergency.
3) Create a monthly budget and stick to it, cut back unnecessary expenses.
4) Separate your business investments with your personal ones so that you can focus on creating an emergency fund.
Set up automated payments
The evil of managing dual finances is that you may tangle yourself in a plethora of taxes and find it next to impossible to cover all your taxes. To make this easier and save time you can start an automated payment system which will automatically deduct taxes from your accounts. Set this up for both your personal and business accounts, it will save you a lot of headache.
Keep an eye on the interest rates
Checking the interest rates of all your financing option is an important feat for any entrepreneur. This goes for personal finances as well. If you have unpaid credit like loans and borrowings and don’t have enough money to cover them then start considering other financing options. Small investments like chit funds group savings carry a small amount of interest and thus can bring in a good money to cover your finances.
Keep a track of your credit
Lastly keep a track of all your credit and make sure you make timely payments to avoid a big burden of debt in the future. One best option would to be set up an automated payment service for recurring credits like credit card bills, electricity bills and so on.
Managing a business may bring you good returns and prosperity but the way you manage your personal finance may negatively or positively affect your business. Therefore it is important to take care of your personal finances along with your business’ to sustain in the long run.