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Personal Finances

Entrepreneurs Should Manage Their Personal Finances Like A Business

Entrepreneurs care about their brands. But ultimately, it’s their personal finances that matter most to them. Without money piling up in their bank accounts, all their hard work is for nought. 

Figuring out how you should manage your personal finances as an entrepreneur isn’t always easy, though. Often, you can blur your personal position with your business, thinking that you are better off (or worse off) than you actually are. 

This post is here to help. In it, we take a look at some of the ways that entrepreneurs can better manage their personal finances to help them get ahead. Check out our advice below. 

Get Professional Tax Advice

Running a business and managing your personal finances can get complicated very quickly. There are rules that cover every eventuality, but you don’t always know about them. 

Getting professional tax advice is, therefore, essential. You need a professional by your side who can tell you how to save money on taxes and how much you should be paying. Tax authorities tend to focus their resources on investigating people with complicated tax affairs. So if you are a business leader, then you could be in the firing line. Having a professional who can defend you is essential. 

Smooth Out Your Cash Flow

As an entrepreneur, money comes into your business in fits and starts. Some weeks, you’re flush with cash, while in others you receive nothing. Dealing with variable cash flow like this can create problems. It makes it hard to know when to spend and when to save. You are always cautious in the good times because you want to make sure that money keeps flowing in the bad times. 

Many entrepreneurs get around this problem by paying themselves fixed dividends. They get a set salary every month and then they can add to it at the end of the year, depending on company performance. At the start, these salaries tend to be low. 

Max Out Retirement Saving Options

Another thing you can do is max out your retirement saving options. These plans allow you to defer tax or avoid it altogether, ensuring that you have more money available in your pension pot in the future. In some cases, you may be able to sock away all your disposable income without having to pay any taxes on it at all. 

Protect Yourself

You wouldn’t hesitate to take insurance out on your business, so why aren’t you doing the same for yourself? After all, your body is your most valuable asset. Without it, you can’t earn any money. 

Don’t assume that illness and disability will leave you alone. They could strike at any time, leaving you struggling. Take out life insurance policies that will cover you in the event of a serious illness. Get them to pay you in a lump sum so that you can invest the money you receive and continue building your wealth in the future. 

Work Out How Much You Need To Pay In Mortgage Interest

Just as you would calculate how much you need to pay in business loan interest, you should do the same for your regular mortgage. Finding out how much all those mortgage payments are going to cost you is a great way to incentivise you to pay it off early. 

Working out how much you’ll need to set aside by hand can take a long time. However, there are tools on sites like that do it instantly for you. Just type in the mortgage amount, interest rate, and how much you plan on paying off each year. 

Don’t Allow Your Expenses To Creep Above Your Income

As an entrepreneur, it can be tempting to allow your expenses to rise above your income. After all, if you get a raise, you can feel like you can afford to spend more money. 

However, you should resist this temptation if you can. Just like a normal business, you need to keep costs down and income high to remain solvent. If you don’t, you’ll start dipping into your cash reserves – and they might not last very long. 

Separate Your Personal And Business Funds

No matter what happens to your business or personal finances, don’t mix funds. There are legal reasons for this. If creditors believe that your personal funds are a part of your business finances, then they will be much more likely to claim them in the event that you go out of business. 

Always pay yourself via the official dividend channel. Get your accountant to make it clear that the money left your business account and is no longer considered part of that legal entity. 

Keep Planning For Your Future

Running a business can sometimes feel like an all-consuming task. So much so, in fact, that you can often forget about your personal financial goals. 

Always keep one eye on your retirement plans. And don’t make the mistake that many entrepreneurs do and start dipping into your funds. If you do and things with your business don’t work out, then you could remain poor in retirement for a long time. 

Plan For Rainy Days

Just as in business, you should plan your personal finances around the risk of “rainy days.” Along your journey, there will be some leaner months where you will have much less money in the bank to cover all your household expenses. We suggest, therefore, keeping a rainy day fund. This can cover your critical expenses, says, such as utilities, if regular income stops arriving for a while. 

Diversify Your Stocks

Lastly, avoid the mistake of picking stocks. Most investors don’t know which companies are going to perform well, and which aren’t. Diversifying helps you hedge your bets. It lets you buy enough stocks that yield positive returns to make your investment worthwhile. 

Remember, diversification makes sense. It is unlikely that your particular entrepreneurial adventure will work out for the best. Most fail, so diversifying helps to protect yourself and earn profits elsewhere. Many entrepreneurs find that diversifying opens up new and more exciting opportunities for them. 



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