When we talk about personal finance, it is a bit difficult for small business owners to manage their business finances with their personal finance life.
Sometimes the financial management for business and personal finance does not align and this can be a big issue.
Being a small business owner you cannot avoid your personal finances. Here are a few important tips to manage your personal finances while managing your business’s finances.
1. Build up a Retirement Fund
The basic tip for anyone like a small business owner or entrepreneur is to set up a retirement fund. It is essential to be prepared for retirement by setting up a retirement fund that will help you live life’s second inning.
You are not required to invest lots of money in a retirement fund, but whatever you saved now will help you to get tax benefits until and unless you have decided to use the funds for retirement.
There are a few separate retirement/pension plans for small business owners but before selecting any of the retirement funds to invest in, make sure you have done enough research work. It is good to know what are benefits offered by the retirement plan you are about to invest in.
If you are not sure how to set up a retirement/pension plan you can consider taking advice from a financial advisor or professional to help set up one for you. A financial planner who is certified can help you choose the right investment plan to fulfill your desired goal.
2. Keep Personal Finances and Business separate
It is a bit difficult for you as a small business owner/start-up entrepreneur to keep your personal and business finances separate. Usually, you feel interconnected that your business is you and you are the business because you have invested. While eagerness is the key to successful entrepreneurs but should not apply to finances.
Keeping your personal and business finance separate is essential for many reasons, likely:
- Help you manage your tax deduction during tax season
- You can give more credibility to your business as a business
- You can remove your personal liability when something wrong happens to your business
- It also lets you figure out if you are not putting your business expenses burden on your personal accounts.
Whenever anyone starts their own business they should open a business banking account and apply for a separate credit card for business. This can be a great start towards separating your personal and business expenses and this will help in building business credit.
3. Diversify Your Investment
One of the most important personal finance tips for small business owners is a diversified investment portfolio. As you grow and start investing you have been told to make your investment portfolio diversify. This is the most important tip that small business owner needs to follow. One of the bad situations is your business will not be bumming month after month.
You are likely to deal with irregular income throughout the year. If your business is seasonal then it is very necessary to keep enough emergency funds for the down months. Likewise, other individuals cover expenses like housing, insurance, food, utilities, and welfare of any dependents you need to cover too. So keep these personal financial needs in mind. You can also take advice from a mortgage professional to get the answer about a mortgage.
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4. Register for Auto Bill Payment
It is most important you should register for automatic bill payments for personal and business accounts to avoid any late fees. This way you can save time too, so entrepreneurs should follow this. There are some expenses like insurance premiums that you should always automate because if you lapse your salon insurance premium, you will lose the security it provides to your business.
if your bank allows it you can register for automatic bill payment set an alter for the amount and review them before payment is required. By doing so you can avoid unnecessary expenses such as late fees and other fines and save lots of time.
5. Take Professional Tax Advice
When tax season comes it is better to take advice from a professional accountant to settlement of tax and save on tax. These tips are also beneficial for small business owners. It totally depends on your business entity and how you can file business taxes easily. There are so many ways one can file taxes for their business. Sometimes it is difficult for busy entrepreneurs to get it right due to complex tax laws.
Taking advice from an accountant or tax professional can help people to figure out tax liability based on the business entity. Another way you can go through the tax process on your own then make sure you start early for the same. Keep a record of all the bill payment receipts and other expenses to avoid the unnecessary headache of arranging your expenses during tax season.
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6. Keep an Eye on Personal Finance during Business Succession
Whatever is your purpose to sell, pass on, or simply end your business, you going to need a strong business Succession plan to proceed. So many individuals are involved in a business and affected by its Succession like the Business owner, employee, clients, contractors, investors, landlord, and so on.
Making a good business succession plan will ensure that each and every involved party’s financial goal is met during ending your business or passing on your business. So many tax and financial considerations come during the success of a business so better to consult a lawyer while creating the financial side for your business succession plan.
7. Try to Stick to Pre-Define Budget
You should keep a budget for your business expenses ahead of the year. There is nothing wrong with keeping the budget for business because it helps to reach desired goals.
Sometimes it might feel difficult to manage personal finance expenses while sticking with the budget for business expenses but do not let your money fall down while managing your growing business expenses.
You can start by setting up a budget based on your monthly expenses and make things simple by using a budgeting app.