As a business owner, you’re no stranger to keeping a watchful eye on your finances. It may not be easy to do – but it’s always necessary. Well-organized books are a fact of life for you – but does this financial organization carry over into your personal finances? In many cases, business owners who are experts at creating a business budget and following it to the letter, aren’t as apt to use the same strategies at home.
This happens for a variety of reasons. More often than not, if you’re a business owner, you live and breathe your work. In your mind, you are your business. So, when you make an effort to organize your business finances and consistently stick to a budget in order to turn a profit – you view that as a personal success. However, it’s critical that you make the distinction between your business bookkeeping and your personal financial life.
When you lose sight of personal financial goals, your business loses out.
You may tell yourself that the reason you prioritize your business’s finances is because it is what sustains you. In many ways, this is accurate. Your income and financial well being depend on the success of your business, and as such your professional bookkeeping should remain a priority. But if you lose sight of your personal finances, things are bound to get messy.
That’s because although you depend on your business’s success to provide financially for you and your family, the opposite is also true. Your family’s personal finances directly allow for your business’s success. When you own a business, you bankroll many small costs without thinking about it – even if they’re technically budgeted for. If something were to happen that caused your family to require more income, or forced you to tighten your belt and spend less – your business may be negatively impacted.
This is why it’s important to clearly define your personal financial goals separately from your business’s financial goals. In order to find success in both areas, you need to make sure all of your needs are met – and that you always have a backup plan in case costly events arise either personally or professionally.
What personal finance goals need to be met in order to have a successful business?
You don’t always need to have your personal finances perfectly squared away in order to run a successful business. But there are a few personal goals you should set and strive to meet to make sure that you’re never caught in a bad situation.
- Have an emergency fund. You and your family need to have an emergency fund to protect yourselves against financial pitfalls. Whether it’s that your business has a slow month or two where money is tight, or you have an unexpected medical bill that needs to be paid out of pocket – an emergency fund can cushion the blow of operating on a semi-unpredictable income. A good rule of thumb is to have 3-6 months of expenses saved in cash in case something were to go wrong. Find a number that works for you and your budget, and do what you can to set aside those funds.
- Create a budget – and stick to it. Just as your business needs a budget to run smoothly, your family needs to operate on a budget, too. Having a budget will help to ensure that your personal financial needs are always met. If you’re a business owner whose income largely depends on the month-to-month success of your business, set a budget that allows you to meet your financial needs anticipating a low-end income coming from your business each month. That way, if there’s extra, you can use that money to pay down debt, put in savings, or reward yourself with a small “treat” for the whole family.
- Get organized. Tax season is right around the corner, and organizing your financial documents should be top priority right now before the holiday season makes your schedule crazy. Create an organization system that works for you – either by keeping your financial documents saved in an online hub or by printing them out and filing them the old fashioned way. Keeping your business and your personal expenses separate will be key for you when it comes time to file. Plus, if you get organized now, you’re more likely to be able to maximize your tax benefits before the end of the year.
Separating your finances is the fastest way to financial well-being.
Once you separate your business and your personal finances, you’ll be on your way to financial wellness. The key for you, as a business owner, will be to continue to keep those finances separate. The best way to do this is to follow the simple “get organized, stay organized, stick to the budget” plan. This way you’re never jeopardizing your family’s financial situation by relying too heavily on your business’s success. You’re also more likely to feel a sense of peace and joy when you experience business success.