When it comes to finances, there is no doubt that entrepreneurs have their work cut out for them. Not only do they need to manage their business’s finances, but they also have to manage their personal finances. It can feel incredibly daunting and disorienting at times.
But as a small business owner, you can’t lose sight of your personal finances. Here are a few of my top finance tips to help you keep a tab on your own money while you manage your business’s.
- Set Up a Retirement Fund
You read that correctly. It’s really never too early to set up a retirement fund. Trust me on this one. When it comes to personal finance tips for small business owners, this first tip is an absolute basic.
You, like all other workers, need to be prepared for retirement—and setting up a retirement fund will help you get there.
Take a breath and don’t freak out. This doesn’t have to be pressured or overwhelming. Meaning: you don’t have to funnel a ton of money towards the fund, but what’s saved now will help curb your tax bill and grow tax-deferred until you decide to use the funds for retirement.
There are a few different retirement plan options for small businesses: a SEP-IRA, a SIMPLE IRA, a Solo 401(k) and a SIMPLE 401(k). All but the SEP-IRAs work for sole proprietorships, partnerships, LLCs, or corporations.
Before choosing any one of these retirement plans, do your research on what each offers and how that plan can help you meet your retirement goals.
- Plan for the Off-Season With an Emergency Fund
We’ve all been told at one point or another to keep an emergency fund for rainy days. Then this shouldn’t come as much of a surprise to you: this is a finance golden rule that small business owners should follow, too.
Odds are, business won’t be booming month after month. As a business owner, you’ll likely have to deal with irregular income earnings throughout the year. It’s normal. You’ll begin to notice what those seasons are. Instead of resisting them, work with them!
As a small business owner (especially as one of a seasonal business), it’s important to budget for those down months. Make sure that you have enough “emergency” savings on hand so you can weather any down months of business.
- Keep Your Business and Personal Finances Separate
As a small business owner or startup entrepreneur, this next personal finance tip is especially hard. You are so invested and interwoven with your business that it might feel like you are your personal and your business finances are one and the same.
Well, they’re not.
Keeping your business and personal finances separate is important for a lot of reasons, including:
- Saving you from headache during tax season when you’re deducting your business expenses.
- Giving your business more credibility as a business.
- Making sure you’re not putting the burden of your business’s financials on your personal accounts!!
When you start your business, open a business banking account and apply for a business credit card to use for your business expenses. This is a great start towards separating your business and personal accounts.
- Keep Your Expenses Low and Stick to a Budget
Do not let managing your own money fall through the cracks while you focus on growing your business. Having a monthly budget is essential to running your finances and your business smoothly. Plus, it helps keep you mentally at ease rather than anxious or overwhelmed.
You can set up your own budget based on your monthly expenses, or make it even easier on yourself and use a budgeting app. Mint is one of the most popular budgeting apps out there, but You Need a Budget and Wally are also good options.
- Check Your Interest Rates
If you’re a savvy business owner, you’re probably super aware of the interest rates you’re paying on all your small business financing. Checking your interest rates is a financial tip entrepreneurs need to do for their own money, too.
If you have student loans or personal loans, consider your refinancing options. Or, think about which loan you should pay off first based on how steep the interest rates are. The same goes for credit card balances: pay off the balances that come with the highest interest rates first.
The bottom line: paying attention to each account’s interest rates will help you pay off debt and managing your personal finances smartly.
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There you have it—5 personal finances tips that every small business owner should live by.
As a busy entrepreneur, you might have to put in a little more work towards getting a hand on your personal and business finances. If you need further support with creating budgets, setting tangible financial goals, or consolidating your credit, reach out! We’re happy to connect and guide you in the right direction for your financial vision and freedom. You can reach us at hello@spirebusiness.com!
Love,
Linda Brown
