Managing your personal finances

The problem is, you feel like you’re never able to save.

It’s no surprise. You’re a business owner, you have the ins and outs of your business’ financial health to worry about. But that doesn’t mean you should simply forget about your personal finances. Don’t lose sight! Having a successful future means taking care of both sides.

We’ve put together 6 of our top personal finance tips to get you into the habit of financial mutli-tasking, pluswe’re giving you a free cashflow forecast spreadsheet so that you can put all of these points into action today.

Here’s how to manage your own money whilst you manage your business:

Start planning for those rainy days

Many business owners have to deal with irregular income, so one of the most crucial tips is to have a budget for your personal finances. At some point, you may find yourself in the position of having to reduce the amount that you draw from your company. It’s so important to know how much you’re going to need to cover the essentials – housing, utilities, food. Add up these critical expenses now and start to put aside enough to have those covered for at least a few months, so that when the rain comes, you’re ready.

Think seriously about retirement

We find a lot of Business Owners think about the money they need for the present – houses, holidays… but they’re not effectively planning for their retirement. When you get to retirement age, it’ll be too late to plan for it, and the reality for many is that they didn’t put away enough during their working life to live the retired life they worked so hard for! Even on a fluctuating income, it’s really important to try and squirrel away a small amount of savings for your retirement each month. Find out how you can make sure you’re in pocket in the future here.

Keep your business finances and your personal finances separate

Not only will this give your business more credibility and a greater sense of legitimacy, but it may also reduce your personal liability if something were to go wrong down the line. Think of it this way: A CEO of a business with 100 employees wouldn’t use corporate accounts as his own, so why should somebody with 5 employees? Keeping the two apart from each other will also make it easier to deal with your taxes, bills and payments, and is essential if you’re going to either sell your business in the future or face bankruptcy.

Negotiate your costs and beat Parkinson’s Law

When it comes to your business, I’m sure you’re always negotiating everything to keep costs down and get the best deal. Are you doing the same with your personal finances? Parkinson’s Law says that our expenses always rise to meet income. I.e. No matter what you earn, you’re always likely to spend the entire amount. So, the trick is to treat your personal finances like your business. Keep your expenses below your income by carefully assessing your expenses, creating a budget, and negotiating your bills to within that budget.

Pay off existing debts

Debt is a huge obstacle to reaching your financial goals. Once you have some surplus money, start paying off your debts, by making minimum payments on one debt. One that debt is paid, move onto the next. To pay off the debts quicker, look at areas of your budget where you could cut costs. Refer back to point 4 – are your costs within your budget? Once all your debts are paid, avoid creating new ones. Now that you’re not putting the surplus into your debts each month, you can put that money into an emergency fund – this can be your standby “loan”.

Always think about return on investment

In your business, you make decisions on projects and purchases based on the return you will get on your investment. It’ll benefit you to do this with your personal finances too. Avoid projects and purchases that are going to cost more than the expected benefit.