Running your own business can be a fun experience, and you have the freedom to make all the decisions. Successful businesses can be incredibly rewarding, both personally and financially. But as many business owners will soon learn, running a successful enterprise involves more than just taking care of your customers. Knowing that while your business finances are certainly important, so are your personal finances.
Maintaining a healthy relationship with money in all areas of life can mean greater financial stability, especially if other areas are lacking. It might not be fun, but it’s always good to make sure the line is clear between the various entities because it ultimately comes down to one big wallet.
Let’s explore some 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 separating them from your business. This means opening separate bank accounts and credit cards for each party. Having two separate accounts keeps track of all your transactions and expenses – both personal and business-related – saving you time when it comes to tax preparation, budgeting and budget tracking. Additionally, having a separate account helps protect you if something goes wrong with the business. It also prevents legal or financial issues related to the pooling of funds between the two entities.
Create a budget
Having a personal household budget is key to managing your business finances so that your money covers all your personal needs. A smartly crafted budget allows you to document exactly what you need while ensuring you spend wisely and keep yourself in the financial bind. This system allows you to estimate upcoming expenses, which means you’ll be prepared when they arrive instead of missing payments or borrowing money from friends or family.
By keeping track of your budgeted expenses, you guarantee you’ll have enough money to cover them when the time comes and allow you to focus on running a successful business without stress or anxiety.
Set financial goals
Setting financial goals is key to managing your personal finances as a business owner. Whether it’s paying off debt or saving for retirement, setting financial goals can help keep you accountable so everything stays on track. You can also use these goals to measure over time and adjust spending habits to make these goals faster or easier than expected. When setting goals, make sure they are achievable enough, but always challenging enough to motivate you to focus on achieving them!
The bottom line is that managing your personal finances as a business owner takes dedication and discipline, but it can be done with proper planning and organization! By identifying accounts for both parties, creating a budget specifically tailored to fit specific needs and circumstances, and setting achievable financial goals. You can control your money now before it controls you later! With consistent effort over time, owning a business doesn’t mean sacrificing financial security. Instead, making sure it’s safe 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 helping successful business owners increase their profit margins and keep more money in their pockets and increase their net worth.
The opinions expressed in this article are not intended to replace any professional or expert accounting and/or tax advice.