5 Tips on Personal Finance for Business Owners
Your personal checkbook deserves the same attention as your P&L.
Here are 5 tips on personal finance for business owners:
- Set up a retirement fund
- Stick to a budget
- Keep business and personal expenses separate
- Be smart with your investments
- Seek professional guidance
As a small business owner, you think a lot about your business’s financial status, but you shouldn’t overlook tips on personal finance to keep your own prosperity as healthy as your company’s.
Your business books need to be prudently managed, and your private checkbook deserves the same careful attention. Here are some tips to think about when it comes to your personal finances.
5 Tips on Personal Finance to Keep in Mind
TIP #1 ON PERSONAL FINANCE
Set Up a Retirement Fund
People who work for corporations are usually offered a 401(k) plan along with company contributions to build their nest egg. When you’re your own boss, it’s up to you to provide your own retirement plan. Fortunately, tax law gives you incentives to do so.
Small business owners have a number of qualified plan choices, including:
- Simple IRA
- Solo 401(k)
- Simple 401(k
- 401(k) Safe Harbor
These all allow pre-tax contributions.
Another option is a Roth IRA; contributions are taxable but withdrawals in retirement are tax-free. IRA rules are subject to change, so it’s wise to consult a financial planner to help you select the option that best suits you.
TIP #2 ON PERSONAL FINANCE
Stick to a Budget
If you have a business plan and a budget for your business, then you ought to have a plan and budget for your private finances as well. This becomes especially important in times like these where the economic environment is uncertain, especially as it pertains to inflation.
If you use an automated process for your business budgeting, why not use one for your personal finances? It’s not difficult to set up a spreadsheet that tracks your personal income and expenses. Also, there are free or inexpensive apps available to help you out.
When you can readily see exactly what you’re spending, it’s easier to adjust as needed to keep your checkbook healthy.
TIP #3 ON PERSONAL FINANCE
Keep Your Business and Personal Finances Separate
In one sense, it’s all your money. After all, your business earnings belong to you. However, allowing your personal and business finances to intermingle can lead to a world of problems. You could expose yourself to personal liability for business losses. You could find it difficult to segregate personal and business tax reporting, which may run you afoul of the IRS.
One of the best ways to keep business dollars separate is to automate business accounting. And if you track your personal finances on their own budgeting app, you’re more protected from compounding the two.
TIP #4 ON PERSONAL FINANCE
Be Smart with Your Investments
Some small business owners plow every penny they make back into the business. That might be necessary when you’re starting out, but at some point, you should diversify your investments.
There ought to be income and savings that belong specifically to you as an individual. It’s a wise practice to invest in places outside of your own company.
When you’re successful, your company generates earnings and experiences growth. However, there are other assets available that also offer earnings and growth of principal. You help ensure your personal prosperity when you expand your investment horizons to include some of those.
TIP #5 ON PERSONAL FINANCE
Seek Professional Guidance
Your business finances require careful attention, and smart business owners don’t hesitate to call on a professional accountant to help them plan, budget, and track business income and expenses.
However, personal finance also requires prudent management, and a trusted accounting partner can play just as large of a role in your personal finances as they do in your business finances.
U-Nique Accounting is an expert in consulting and automation for your business financing. We can help you with your personal budgeting, investment decision-making, and tax strategy as well.
Contact us today. A 15-minute call can put you on track for more business profits and better management of the personal income they generate.