Your Small Business Should Work For YOU

A big part of being a successful entrepreneur is managing money. Your business can be doing well, but if your personal finances aren’t in order, it can still be a stressful time for you. Your business needs to work for you, too. It is important to balance risk and make sure you are paying yourself. Entrepreneurs tend to wear many hats and underpay themselves for the work they do. Don’t sacrifice your well-being for your business. Here are some tips to help guide your personal finance, so your dream job can support you. 

Emergency Fund 

Business is cyclical. That means that, if you don’t plan ahead, you will live in the land of feast and famine. Your income may vary from month to month. That is why it is vital to have an emergency fund. This account should contain enough money to cover your living expenses for those leaner months. Keep in mind that this is in addition to extensive insurance coverage and not instead of adequate insurance.

An emergency bank account should have about six months’ worth of living expenses. Whether you decided to use a money market account, savings account, or checking account, it is important that this money be easily accessible. 

Pay Yourself 

Businesses, especially startups, have a way of soaking up large quantities of money if you let them. That is why it is important to establish boundaries by setting up distinct bank accounts. The main accounts should be profit, owner’s compensation, taxes, income and operating expenses. Each account is assigned a percentage. Twice a month money is moved from the income account, which is the main business account, to the other accounts. You never steal from one account to cover an expense accrued by another account. 

That means that if you decide your business can survive off of 15 percent of its earnings, then you make it work. You would be surprised what you can accomplish running a lean business. 

It actually promotes innovation. It also allows you to pay yourself a regular income plus some. 

Taking a profit allows you to reap real personal benefits from your business. At the end of the fiscal year, the profit account is distributed to owners. It is essentially an end of the year bonus. Plan a vacation, or buy that big dollar item. Paying yourself consistently and allowing your business to make a profit will relieve some stress and make owning a business fun. By making money you will actually work harder to make your accounts larger. 

Owning a business can be a stressful affair. It is easy to let it take over your life. Personal finances are just as important as business finances. Make sure your company is working for you and not the other way around.

I hope you enjoyed this article about why your small business needs to be working for you and not the other way around.

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