As an entrepreneur, it?s up to you to bring in the money in your business. And as you know, it?s up to you to manage the money to help the business grow. It?s no different outside of your work with your personal finances.
If your own finances are in order, you?ll protect your family, reduce stress and free up time to help you focus on your business. Take these steps to better manage your money at home.
? Separate your business and personal finances. If you?re a new entrepreneur, you might have fallen into the trap of not separating your personal and business accounts. It feels more convenient to combine them, but it makes keeping track of them difficult. Keeping separate checking, savings and credit card accounts makes sense at tat time, too. And in some cases, separating your assets reduces your liability risk of losing everything if something negative were to happen down the road.
? Track your income, expenses and cash flow. You need to be very clear about whether or not your business is making or losing money. Once again, it?s just the same in your personal finances. You can get that clarity by tracking your income, expenses, and cash flow. If your expenses are regularly exceeding your salary from the business, you need to know so you can make changes sooner rather than later.
As an entrepreneur, you probably have a variable income. That?s why you have to take it one step further and plan your cash flow. Cash flow can be tight when a large expense and a lower income month hit at the same time. It?s not just how much you make and spend; it?s also about when the income and expenses appear.
Take a look at the whole picture so you can see if you need to save in advance for a big purchase. Paying attention to both your income and cash flow will make it easier to meet your monthly obligations and still have some left for fun, too.
? Create a budget that works on an income that fluctuates. Managing cash flow on a variable income is not a simple task. A budget helps make it easier.
Separate your spending into necessary expenses, discretionary ones, short-term and long-term savings. You now have a monthly income target. If you ever have a lower income month, you?ll know exactly what you need to pay the bills. Then you can allocate the rest according to your priorities.
? Build up your emergency fund. As an entrepreneur, you will probably have some months where you make less money that you?d like. Your emergency fund is your first defense against an income that alternates from month to month with slow or busy periods.
The general rule of thumb is that you keep at least three to six months of expenses saved. Since your income is more volatile, you deal with more risk ? and that means creating a bigger fund. Aim to save six to 12 months? worth of expenses to protect yourself against the unexpected.
Take the time to bring your personal finances to a better place. By managing your money well, you?ll reduce your financial worries so you can focus on taking yourself ? and your business ? to next level.