As entrepreneurs engrossed in our businesses we sometimes tend to overlook many of our personal aspects. The most important of which is the management of our Personal Finances. Just like the adage implies, ‘ One should not mix their personal and professional lives’ mixing your personal and business finances will only increase confusion, chaos and indecision. Manage your personal and business funds as two separate identities. Being an individual, playing different roles the decision in one sphere will affect the decision in another. Thus it becomes imperative to have distinct separator lines.
While it is very good to be optimistic here are a few pointers to be kept in mind as most start-ups don’t have fairy tale endings. So eventually though your business may not be okay you at least will.
1. Management of Business Finance is a different ballgame, no way equal to the Management of Personal Finance –
This distinction has both business and legal implications, not to mention the objectives are vastly different. Your business funds are to be utilized to increase the revenues of you business which is an entity separate from you under law. The prime objective of having a sound personal financial situation is primarily meeting your emergency needs and funding your retirement. Since the two objectives are so different, one cannot deal with the two in a similar way.
You have to have clarity in how much of your business income should come back to you as personal income for your personal uses only.
2. Don’t disguise one expenditure as the other –
A laptop for your child is not to be included in your business expenses. Certain expenses are tax deductible under law. These expenses are mainly associated with running your business i.e. operations.To avail the benefits, consult a chartered accountant.
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3. Keep aside the funds to insure yourself – When you were a part of that 9-5 job benefits like Health Insurance, PF and all were being taken care of. They were getting worked out. But as an entrepreneur you need to make the ideal choice yourself. Creating the right combination of benefits that will help you personally while minimizing taxes and not require huge compromises. You need to figure out how much money you’ll have to spend to replace those benefits for protecting yourself, your family, your assets and also fund your retirement.
4. Use your plastic cash carefully – It doesn’t require too much thinking to swipe that card while going out on meetings and paying for your potential investors and customers but it is absolutely essential to keep a budget for the same when the business is cash-strapped. The responsibility to use credit in a responsible way is a very important role as an entrepreneur. Mismanagement and debt will ultimately force you to dip into your personal funds.
5. Get External Help – As an entrepreneur you already have enough responsibilities yet not enough wherewithal. You have to sport different hats for your business every single day; you are busy creating your product or service, advertising, marketing, managing your people etc. Therefore the best option can sometimes be to get external help for your personal finance. It will benefit in having a more holistic view of what your money can actually do for you. As an entrepreneur, there is nothing more important than time. So while managing your personal finance is as crucial as managing your business, go out and seek information from someone who can manage it better for you by devoting their full time and attention towards maximizing the potential of your money. Since we live in uncertain times, a secure personal finance situation will is like a sound investment option with excellent ROI.
(GreynGreen is a young company working to make financial planning a consumer product for masses and empower people to take confident financial decisions. We offer tailored planning services from Certified Planners.)
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