It is true that in business it is extremely important to separate the personal and business expenses. However, there is a general tendency in the new business owners of neglecting their personal expenses completely and invest everything for the business. This is not a healthy approach as well. This might seem ideal at the first but neglecting personal necessities and avoiding to manage personal finances tend to create a pressure in the minds of the owners which in turn is harmful for the business itself. The list below contains few financial tips for small business owners to manage their personal finances-
- Keep an emergency fund:
According to popular financial experts, one should always have a decent saving amount to live off at least for six months. For business owners this sum should be bigger because they need an emergency fund for a sudden crisis in business. That is why it is even more important for business owners to plan their personal finances properly. In case of an emergency they should have enough saving for repairing a home, pay for medical expenses or to deal with a natural disaster. Having this emergency fund helps bring peace in the mind of the owner and in a way improves the business operations as well.
- Keep a track of personal credit:
Paying all the bills is a golden habit everyone should keep and especially the small business owners. Delaying payments is not at all motivating and it affects the business too. Apart from that, one should track the credit utilization ratio, which should ideally stay beneath 30%. It helps improving the credit score and getting easy approval of personal loans.
- Retirement savings is a must:
The general tendency of small business owners is to invest all the money back to business. This is unhealthy way of managing the finances. One should have a proper retirement planning. Depending on the business for income is natural but saving up for the retirement plan is wise and necessary and one should do it in a manner so that the invested money gets distributed among stocks and bonds and many other options.
- Identify the risk tolerance and invest likewise:
It is extremely important to identify the risk tolerance level and invest accordingly to manage personal finances. This depends mainly on the age of the owner. One should subtract their age from 100 and only invest that much in percentage in stocks. However, age is not the only factor here. One should pay heed to their aims and goals investment wise as well.
- Consult a professional:
Seeking a professional help is always useful. No matter how much qualified one thinks they are, when it comes to managing finances an expert is the best option to rely on. Consulting a professional is helpful to get specific advices based on the situations of a person. This also improves in looking at the business accounts more clearly.
Owning a business is not enough. Managing the finances both personal and professional is extremely important too. These financial tips might be helpful especially for that.