Freedom Debt Relief: Personal Finance and Entrepreneurs
Entrepreneurs become deeply invested in the success of their businesses. The business begins to feel like part of themselves. They refuse to believe that the business could ever fail. However, this kind of blind faith can have negative implications on your personal financial situation.
An entrepreneur must practice more discipline than a regularly employed person. Businesses become our children and we will sacrifice ourselves for their success. But businesses must be kept separate from personal finance to ensure a failing business doesn’t lead to personal ruin. Establishing rules about your personal finance and business finance practices before you start your business is essential to ensure you maintain discipline.
Freedom Debt Relief gives entrepreneurs three tips to help with finances.
Build A Nest Egg
Business, like life, has ups and downs. Freedom Debt Relief always advises people to have nest eggs and business owners are no different. Even the stablest industries see variations in profit and must continuously adapt. In order to improve the chances of not losing everything if your business sees a downturn, you must establish an emergency fund. Calculate what you would need for daily living expenses for three to six months. This amount should be saved and put away somewhere easily accessible in case your business can no longer afford to pay you or you have an emergency. Having a nest egg could prevent you from needing to dip into business funds or take on debt.
Separate Personal and Business Spending
Freedom Debt Relief recommends having separate accounts for personal money and business money. You must pay yourself each month and make personal investments in line with your own goals. If your business goes under tomorrow, you will still be around and have obligations. You must have the discipline to pay yourself regardless of whether your company is making huge profits or modest ones. Belief in your company is one thing, but mortgaging your future is another.
Freedom Debt Relief has seen that the temptation that comes with running a business is difficult to manage. With potentially hundreds of thousands of dollars in a business account, you may begin to feel like money is no object. Anytime you run out of monthly cash flow, you simply dip into the business account. This lack of discipline can seriously damage your business. Create a personal budget that includes your monthly expenses including entertainment. Pay yourself accordingly but if you need extra, take from your emergency fund and not the business.
Track Business Expenses
Freedom Debt Relief has seen many entrepreneurs who fail to track business expenses. Mixing your personal money with business money creates an accountant’s nightmare come tax season. By creating a business account that you use for all business-related expenses, you can ensure you get a nice tax write off come April.