It’s easy to get so caught up in the operations and finances of your business that you neglect the personal side of your finances. While the two are in many ways tightly tied together, they are in fact separate aspects of your life that each require attention and individual areas of focus.
Here are some of the most important personal finance tips for business owners. The wisdom applies whether you’re a young entrepreneur with a startup or a longtime business operator.
Personal Finance Advice for Business Owners
- Always pay yourself first, before you reinvest money into your business.
- Be as vigilant about personal budgeting as you are about business budgeting.
- Simplify how you manage your money and pay your taxes by separating your personal finances from your business finances, including the use of different bank accounts and credit cards.
- Having a business is not a retirement plan; contribute to retirement accounts and take other smart steps for retirement planning.
- Establish a personal emergency savings fund that can sustain you for at least a year as one of your top priorities.
- Buy enough life insurance and disability insurance to protect your personal and business assets and your family.
- Use a professional accountant and financial advisor to help you advantageously navigate personal and business taxes, create a solid financial plan for the immediate and distant future, and set up a business succession plan.
- Diversify your investments rather than tie all or most of your assets into your business.
- Structure your company as an LLC or other entity that safeguards your personal assets against bankruptcy and business-related litigation.
- Consider putting money into a health savings account, as contributions are pre-tax and deductible, and withdrawals are not taxed as income.
- Pay off your highest-interest personal debt first; know your interest rates and periodically look into refinancing options.
- If possible, own the property you use for your business for more control over it, the opportunity to build equity, fixed mortgage payments rather than rising rent, tax advantages, and a potential income stream when you retire.
- Automate all your personal bill payments (and business payments) to save time and ensure you don’t ever miss any payments; automate transfers to saving vehicles as well.
- Monitor and build your personal credit score, as it will affect many aspects of your life personally and professionally.
- Resist the urge to upgrade your lifestyle every time you start earning more money; this keeps you from paying off debt and successfully saving for emergencies and retirement, and can cause serious problems if your income scales back again.