Manage your personal finances as a business owner
Running your own business can be an exciting experience and you have the independence to make all decisions. Successful businesses can be incredibly rewarding, both personally and financially. But as many business owners soon learn, there’s more to running a successful business than just serving your customers. It would be helpful if you also recognized that while your company’s money is vital, so are your personal finances.
Ensuring a healthy relationship with money in all areas of life can lead to greater financial stability, especially when other areas are falling short. It might not be exciting, but it’s always wise to make sure the line between each unit is always clear, as it ultimately boils down to a large wallet.
Let’s examine some of the best practices for managing your personal finances as a business owner:
Separate business from personal bank accounts
The most important step in managing your personal finances is to separate them from your business. This means that separate bank accounts and credit cards must be opened for each unit. Having two different accounts ensures that you clearly record all your transactions and expenses – both personal and business – saving you time when it comes to tax preparation, budgeting and budget tracking. Also, having separate accounts protects you if something goes wrong with the company. It also prevents any potential legal or financial issues related to the commingling of funds between the two companies.
Create a budget
A personal household budget is key to managing your business finances so that your money covers all of your personal needs. A smartly created budget allows you to record exactly what you need while ensuring you’re spending wisely and committing financially. This system also allows you to anticipate upcoming expenses, meaning you’ll be prepared when they arrive, rather than missing payments or borrowing funds from friends or family.
By keeping an eye on your projected expenses, you ensure that when the time comes you will have enough funds to cover them and can focus on running a successful business without stress or worry.
Set financial goals
Setting financial goals is key to taking control of your personal finances as an entrepreneur. Whether it’s paying off debt or saving for retirement, setting financial goals will help you take responsibility to keep things on track. You can also use these goals to measure progress over time and adjust spending habits to achieve those goals faster or easier than expected. When setting goals, make sure they are specific enough to be achievable, but challenging enough to motivate you to stay focused on achieving them at all times!
The bottom line is that managing your personal finances as a business owner takes dedication and discipline, but it can be accomplished with the right planning and organization! By separating the accounts for both companies, creating a budget specifically tailored to individual needs and situations, and setting achievable financial goals. You can take control of your money now before it takes control of you later! With consistent efforts over time, owning a business doesn’t have to mean sacrificing your financial security. Instead, ensuring security should be part of the plan from day one.
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Melissa Houston, CPA is the host of the She Means Profit podcast and blog. She is a financial strategist for CEOs, where she helps successful business owners increase their profit margins so they keep more money in their pockets and grow their net worth.
The opinions expressed in this article are not intended to be a substitute for professional or expert accounting and/or tax advice.