Money management and personal finance are delicate subjects. Many people experience a lot of anxiety when they think about their financial lives, both as they are today and how they may look in the future.
The thing is, everyone must be carefully involved in finance even as an individual not to talk of when you are an entrepreneur. There are days you will be forced to handle a huge mess in the development of your business both in finance, take care of yourself, and make sure your team is paid. It’s easy to let your business finance take the backseat when so much work overwhelms you. But personal finance is crucial for everyone, especially someone running a business. You have to think strategically and plan carefully.
Are you overspending?
What can you spend the most money on, and why should you? Are your bills being paid on time, or are you barely making ends meet?
How well do you handle your finances?
In this article, you will get to know some basic financial tips that will help you properly manage your finance (total expenses). These tips include (for both business owners and employees):
- Open a separate business account
- Set a budget
- Be flexible
- Have a credit score card and report for your finance
- Be diligent in spending
- Stop taking in debt
- Learn to save.
- Have financial goals.
- Explore investment opportunities
- Plan for retirement
- Have good insurance coverage
- Start an emergency fund
- Eliminate what you can
- Keep learning
Open a Separate Business Account (if you are into business)
Opening a separate business account is one crucial financial tip that helps distinguish your personal expenses from your business expenses. It will help you know what you are spending on and know exactly how much profit your business yields on a monthly and yearly basis. However, when you begin your business, you have to use your personal money for funds and basic startup requirements but that changes as the business grows. You will begin to use your profits to fund your business. So it is necessary to open a separate business account where you deposit all revenue. It is from this account that you will pay all bills related to your business (business expenses) and pay employees.
You may have a day job that takes care of your personal finance, still you need a separate account where your day job funds your personal life, and your business account funds your business. Make sure you put all your business revenue into your business account. It will help you manage your business finance properly.
Set A Budget.
One way to manage your finance as an entrepreneur is by having a budget. Your budget could vary, it could come either on a daily, weekly or monthly basis. This is one core financial tip you need to boost your finance. Properly arrange your budget based on your priorities. Take note of your expenses including housing costs, utilities, groceries and entertainment, among others. From there, look for opportunities to make cuts. Also, look into a budgeting system that works for you. You could work with a spreadsheet or an app that helps you plan your finance like Mint, or PocketGuard.
In addition, you can follow the 50/30/30 pattern, where you allocate 50% of your funds to needs, 30% to wants and 20% to savings. However, every decision regarding your finance is up to you, and setting a budget will help you define your goals and stick to them. However, creating a budget is only one part of how to manage your finance better. Including mapping out your current finances and prioritizing your spending needs.
Furthermore, once you start doing a budget every month, stick with it. So many persons over the years that started using a monthly plan for their finance, did well for a while, but eventually got out of the habit. That’s when they started having issues with their finance. You must be consistent in making budgets. Consistency is the key to being successful at anything, including managing your money wisely. It may sound boring, but when you do it month after month, year after year, for the rest of your life, then watch your finance will take a while new look to your advantage.
Life is unpredictable so try to review your budget and your spending if there’s a change, or at least every couple of months.
You might get a pay rise, which means you can save more, or you might find your household bills increase and some other contingencies.
Have a credit score and report for your finance
As an entrepreneur, keeping records of your finance highlights how well you are doing, where you need improvements and a rundown on your finance. Credit score determines whether you are approved for a car, or even a home. It is that score (one number) that tells you how well you are doing in general. To make sure you are doing well, start checking your credit score but don’t forget your report. Let your improvements be based on the information you receive, as this will save you time, money, and hassle.
Be diligent in spending
To properly manage your finance, you need to know three necessary things:
- How much are you making.
- What’s your expenses like on a daily or monthly basis.
- How much are you saving.
Begin to account for all the money your business is bringing in. If your income varies on a monthly basis, select the lowest amount you have made in the last six months, as this will be a safe amount to assume you make on a monthly basis. If you make more, put that in savings. Also, to manage your finance as an entrepreneur, learn to spend below what you earn. Don’t make the mistake of spending as you earn or higher than you earn. You can boost your finance by curtailing your expenses.
Stop Taking on Debt
Lots of debt, especially credit card debt, is a sign you’re not doing a good job managing your finances. When you manage your money wisely, you don’t have to use debt to finance your life. Learn to spend on your needs not wants till you are able to take full control of your finance.
Learn to save
The growth of your finance depends largely on how much you save but first you must be honest about your expenses. Whatever is left after making expenses goes into your savings. This is the money you need to have at hand so you are not just making ends meet alone. With enough savings, you can purchase a car, a home, go in vacation, or even splurge on something nice and still your business will be intact and your finance will be smiling at you.
Have financial goals
What plans do you have for your money? As an entrepreneur, you must set out goals you want to achieve with your finance. This is to help you remain cautious of how you spend and things you spend on. You may want to speak with a certified financial expert who can help you develop goals and also help you work towards achieving them systematically over the course of several months or years. Every goal surrounding your finance must be carefully placed, which in turn won’t affect the success of your business on the long run.
Explore investment opportunities
Investment is one way to grow your finance as an entrepreneur. It saves you future risks attached to business. Don’t shy away from legit investment opportunities if you have futuristic plans for your business. You can look into vehicles like CDs, bonds, and stocks. Each has its own benefits and setbacks depending on where you are in life and the state of your finances. However, If you are just starting out in business, don’t in a hurry to make investments. Get your business balanced to an extent before embracing investment platforms and opportunities.
Also, as a young person, time could favor you when it comes to investment risks. For instance, if you make an investment in Bitcoin (or some other cryptocurrency), and it doesn’t go well, you will have enough time to recover. Play safe before you start living on a fixed income.
Plan for retirement.
It is never too early or too late to look forward to a time when you won’t be working. Your early stage venture may be an all-consuming passion right but that doesn’t mean you won’t prepare for a quiet future. Develop a specific retirement plan, you don’t want to go broke when your strength fails you. While you are investing and making sure your business succeeds, save for the future. You could consult an insurance advisor about guaranteed income products. This type of planning allows you to receive a guaranteed amount in retirement that recurs each year without stopping as long as you shall live. This protects you from running out of money in retirement. Sometimes these payments continue for your spouse after your passing.
Have good insurance coverage
They say that smart people expect the unexpected, and have a plan for what they’ll do just in case. Bad days will come and it’s good to be prepared. You never know when you’ll need a large sum of money during an emergency. Having good insurance coverage can really help tide you over through a crisis. Talk with your family about different kinds of insurance that you can purchase to help you in the event of an emergency:
- Life insurance (if you or a spouse unexpectedly dies)
- Health insurance (if you have to pay for unexpected hospital and/or doctor bills)
- Homeowner’s insurance (if something unexpected harms or destroys your home)
- Disaster insurance (for tornadoes, earthquakes, floods, fires, etc.)
Start an emergency fund
Emergency funds are an important part of a healthy personal finance plan.
In almost all cases, you shouldn’t touch or take money out of the fund, rather, let it stay there and earn interest. If you lose your job or an unfortunate or unexpected expense arises—such as your car breaking down or a health emergency—this is when you should tap into it. Emergency funds helps you manage unplanned circumstances that may be life-threatening
Saving is all about frittering away expendable income. Having expendable income means not having debt. Not having debt means being prepared for emergencies. Therefore, a rainy-day fund can really help you out when it comes to saving money.
Eliminate What You Can
Consider eliminating what you can. Maybe you should kick the Starbucks habit and the elaborate home decor spending that you don’t really need in the name of Instagram. Maybe you’re eating out too much or getting food delivered too often and should look into meal prepping.
Or maybe you’re hiring too many employees, and you honestly only need five people, not eight. It sounds harsh, but the reality is you only have so much money. And by eliminating what you can, you have more money to put toward savings.
Finance is something that changes and grows as the time goes by. You should go to bed smarter at the end of each day. Know that the best investment you can ever make is in your knowledge because knowledge is power. Continuously learn and educate yourself. Interact with people who have apt knowledge on issues concerning finance. Overall, stay well-informed, practice sound financial management, perhaps someday you will be the next finance guru and will be able to coach others on how well to manage their finance.
In summary, remember, you don’t need any certificate or special background to become an expert at managing your finances. If you use these financial rules and financial tips for your personal life or business, you can be as personally prosperous as someone with a hard-won MBA in finance. Also, managing your finance doesn’t have to be complicated, but it does take diligence and attention to what you’re doing. Finding any way you can to simplify and streamline how you do it will always pay dividends.