When it comes to owning a business, it’s essential to stay on top of your company’s finances. You’re probably no stranger to handling cash flow and monitoring spending. But managing your personal finances is just as important!
Your personal financial health and the fiscal stability of your business go hand in hand, but that doesn’t mean you should treat them as one and the same. Here are five tips to help you stay on top of your personal finances and run a successful business.
#1 Separate Business and Personal Finances
We know you’ve put your heart and soul into your business. It’s wonderful to have so much passion dedicated to your enterprise. But when it comes to finances, it’s best to keep your business and personal accounts separate.
In a nutshell, having a separate business bank account and credit card simplifies your life when it comes to budgeting and expense tracking. Additionally, separate accounts are enormously helpful when filing taxes. If you’re ever audited by the IRS, you’ll be able to easily access your company’s financial history without wading through personal expenses too.
#2 Start Saving for Retirement
Saving for retirement is a financial tip everyone should follow. Small business owners in particular may have a unique opportunity to set up business retirement plans, like SEP IRAs, in order to save more money for retirement.
While it’s a great idea to take advantage of your status as a business owner, remember not to put all your eggs in one basket. You’re already relying on your business for income and insurance, so use retirement savings as an opportunity to invest money in other enterprises.
#3 Automate Payments
If you’re running a business, then chances are you’re familiar with small business accounting services which help you automate payments and manage your books. Extend the same convenience to your personal finances!
- Simplify Your Life – You probably spend a lot of time thinking about your business’s finances. Automating payments for your personal expenses will simplify your life, so you won’t feel as overwhelmed keeping track of business and personal payments.
- Avoid Late Fees – Everyone forgets to make a payment every now and then. Unfortunately, late payments often come with hefty fees. When you set up automatic payments on your personal accounts, it’s one less item on your to-do list, and you won’t need to spend unnecessary money on fees.
- Maintain Good Credit – A strong personal credit score is essential when you’re a small business owner. Automatic payments help you maintain your high score by avoiding late payments.
#4 Set Up an Emergency Fund
It’s hard to imagine the worst case scenario, but as a business owner, it’s essential to set up an emergency fund.
- Have a Specific Emergency Account – Keep your emergency fund separate from your business accounts so you have savings to fall back on in case business suffers (like when a pandemic hits). Remember, your business shouldn’t be your sole source of financial security.
- Plan Ahead– An emergency fund should cover about six months of living expenses. This way if you hit an off-season or lose clients, you’ll have a backup plan at the ready, without dipping into your personal savings.
#5 Seek Professional Help
Even if you’re the sole proprietor of your business, you don’t need to do everything on your own when it comes to personal finances. A financial advisor can provide investment strategies, budgeting advice, and tax assistance so you can stay on top of your financial health.
In particular, when you’re a small business owner, you may need to file your taxes differently depending on your business’s structure. A professional will help you navigate complex requirements so you don’t need to worry about making errors on your tax return.
The Bottom Line
Managing personal finances while also running a business might feel like a big task. Luckily, with smart savings, automatic payments, and professional assistance, your personal finances will be easy to handle. This way, you’ll spend less time worrying about tax returns and more time expanding your business!