99: How Personal Finances Impact Business Whether You Are Starting A Business, Self-Employed
- Financial Adventure, LLC
- Aug 31, 2022
- 12 min read
99: How Personal Finances Impact Business Whether You Are Starting A Business, Self-Employed, A Solopreneur, Entrepreneur, Mompreneur, Business Owner, Side Hustler, Freelancer, Bookkeeper, Virtual Assistant, Or VA
Understanding and having control of your personal finances is extremely important when you have a business. There may be instances in your business when you need to inject personal funds into the business if you are having issues with your business meeting its cash flow and financial needs. You need to know if you can indeed afford to put these funds into the business without negatively impacting your personal finances. On the flip side, you also need to know how much money you need the business to pay you so that you can continue to meet all your personal financial obligations. When you have a clear understanding of your personal finances as well as how your personal finances may impact your business, you can be proactive with your finances so that you can benefit your business in the best ways possible. In today’s podcast episode, I discuss how your personal finances can impact your business. As a business owner, there are many times that your personal finances, credit score, and even personal guarantees are taken into consideration. Knowing your finances and being prepared for the future could help you ensure your business is set up for success rather than the high failure rates we see in many business startups. Whether you are a self-employed individual, a solopreneur, entrepreneur, mompreneur, freelancer, small business owner, a remote, virtual, online, or in-house bookkeeper, or a virtual assistant or VA, make sure you are aware of how your personal finances could impact your business. These tips are essential whether you are using a computerized software system like QuickBooks, Xero, Wave, or FreshBooks for your business finances; or doing your bookkeeping manually with an Excel spreadsheet or even a Google Document…
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Show Notes:
Understanding and having control of your personal finances is extremely important when you have a business. There may be instances in your business when you need to inject personal funds into the business if you are having issues with your business meeting its cash flow and financial needs. You need to know if you can indeed afford to put these funds into the business without negatively impacting your personal finances. On the flip side, you also need to know how much money you need the business to pay you so that you can continue to meet all your personal financial obligations. When you have a clear understanding of your personal finances as well as how your personal finances may impact your business, you can be proactive with your finances so that you can benefit your business in the best ways possible. In today’s podcast episode, I discuss how your personal finances can impact your business. As a business owner, there are many times that your personal finances, credit score, and even personal guarantees are taken into consideration. Knowing your finances and being prepared for the future could help you ensure your business is set up for success rather than the high failure rates we see in many business startups. Whether you are a self-employed individual, a solopreneur, entrepreneur, mompreneur, freelancer, small business owner, a remote, virtual, online, or in-house bookkeeper, or a virtual assistant or VA, make sure you are aware of how your personal finances could impact your business. These tips are essential whether you are using a computerized software system like QuickBooks, Xero, Wave, or FreshBooks for your business finances; or doing your bookkeeping manually with an Excel spreadsheet or even a Google Document…
Welcome Back…Having your personal finances under control when you have your own business is extremely important. Not only should you have a system for managing your personal finances, but you should also understand how your personal finances can impact your business finances as well.
Let’s start with how you can make sure you are managing your personal finances effectively. You should be consistently tracking all your money coming in and going out of your personal finances. This will give you a good idea about how much money you are making as well as how much money you are spending. You’ll see any fluctuation you have in your income and expenses, and you should try to track this on a monthly basis. Once you have a good idea of where your money is going, you can decide if you are happy with these amounts. Often when you really start looking into each of the amounts you are spending, you become more aware and may decide to adjust your spending in different areas. Take, for example, you start tracking how much money you are spending on eating out. When you see a total for this at the end of the month, you may be surprised and decide to limit your eating out a little more in the future. Having your monthly amounts will also help you to create a budget. Does the thought of creating a budget make you squirm a little bit? If so, I want you to know that this doesn’t have to be complicated. All you need to do is take the amounts you find when you are tracking your finances and then tweak these amounts if you feel they are necessary. If you think they are okay, then you have budget numbers you can work with already. Having a budget will help you follow through with your plans and really allow you to start working towards your financial goals. Make sure when you create your budget that it is realistic so that you can stick with it. You don’t want to create a budget that is so strict that you consistently go over budget and feel out of control. You also want to ensure that you have an emergency fund set up. I would recommend that you aim to have 3 to 6 months of expenses saved up; I know for many of you, this may seem like it is unobtainable when in fact, it is obtainable. You just need to start small and then keep building on it. Make a goal of starting with a smaller amount…maybe $250, and then going to $500 and so on. If possible, I would also recommend trying to budget in an amount that you will save on a weekly or monthly basis and have that amount automatically transferred to your emergency fund. By doing this, you are making saving money effortless. I also want you to make sure that you are paying your bills on time. Again, if it’s possible to set up automatic payments for your bills, it will save you time and help limit late payments. If you are good at paying your credit card in full, you could set up your bill payments to be paid by your credit card and then have your credit card set up to automatically be paid in full by the due date as well. This will not only help you pay your bills on time, but it will also help you incur cash back or rewards if your credit card allows for this. If you need to cut back on your expenses so that you are able to save more money or pay off debt, make sure you are monitoring your expenses and stop any that are unnecessary or you are not utilizing, and have a plan for paying off your debt. Find out what the interest rates are on each of your debts and decide if you will work at paying off your highest interest debts first so that you can save the most money, or if you’d rather pay off your debts that have the lowest overall total so that you can gain some momentum by paying one in full, and have fewer debts outstanding, and then moving on to the next lowest debt balance. If you anticipate any large purchases, include them in your budget and save for them whenever possible. And lastly, make sure you are investing and have a plan for your retirement. Whenever possible, take advantage of retirement plans that have a tax break. You could look into a 401K, Simple plan, IRA, or even a Roth. I also recommend that you take some time to review your personal finances often. Book a time in your calendar when you’ll go over everything finance related and make it a priority. Do not cancel these appointments. This would be a great time to review your credit score as well. Review your spending, budget, and savings goals and set new ones once you’ve achieved them. Make it fun and pamper yourself a little or make it special when you do this so that you will look forward to doing it again in the future. Having all of your personal financial information will allow you to create your own personal financial statement, which lists all of your personal assets and liabilities. This personal financial statement will help you to see exactly how you are sitting financially. When you have your personal finances in control, you will feel more at ease and will be able to make better decisions for both your personal finances as well as your business. Understanding your business finances will be much smoother as well.
Now that you have an idea about how to manage your personal finances, let’s take a look at how these personal finances can impact your business. If you are just starting your business, you may be looking at utilizing your personal finances to get your business started. You could be using your personal savings, personal income, or your personal assets when you do this. Have a business plan in place so that you know how long it will take for your business to generate consistent income. You may need to continue to inject personal funds into your business at first if your business isn’t making enough money to be sustainable. Know where these funds will come from. Do you have a personal savings account you can fall back on, or will you continue to work at a job until you can afford to rely solely on your business income? You’ll also need to have enough income to cover your personal bills and living expenses during this time as well. Make sure that you have separate business and personal accounts. This will help you to not only keep your personal and business finances separate but it will also make it much easier to know exactly where you are sitting in each area. When you commingle your business and personal finances, you are not only looking at some potential legal issues, but when you keep them separate, you can truly see how your business is doing financially with an accurate picture of your financial statements. It also makes doing the bookkeeping for your business much easier since you are only accounting for the actual business transactions. Keep your finances separate even if you are a solopreneur and you are a sole proprietor filing a Schedule C on your personal tax return.
If you are looking at obtaining a loan for your business, lenders may review your personal credit score. If it is low, it may prevent you from securing financing. This is why it is essential to make sure you are paying your personal bills and debts on time. Watch the amount of credit you have outstanding in regards to the amount available to you. This is referred to as your credit utilization rate. Lenders will want to make sure that you can pay your current debt. If you struggle with your payments, lenders may not feel comfortable giving you even more loans. Vendors and suppliers may also look at your personal credit score and total personal debt prior to establishing credit with your business or how much credit to extend to your business. By monitoring your personal credit score and maintaining a high credit score, it could have a significant impact on your business. A lower credit score could also cost your business by having a higher interest rate for a business loan.
Once your business is established, and you are able to take money out of the business, you may need to pay yourself a reasonable salary depending on what your entity type is. If you don’t have this requirement, I would suggest you take a look at your personal finances to see how much money you need on a weekly or monthly basis to ensure you are able to cover your personal finances. If possible, try to have a consistent salary or payment to yourself so that your personal finances are more consistent as well. As with your personal finances, you’ll also want to make sure you have set aside at least 3 to 6 months of expenses set aside in your business. This will help your business run without any personal injections of money if your business runs into any cash flow issues.
By keeping a positive mindset in both your personal and business finances, you’ll be able to set achievable goals and do anything you put your mind to. When you are more informed or knowledgeable about your finances, you will make better financial decisions. If you need help with your personal or business finances, I’d love to help. Having someone help you get started and on the right path to taking control of your finances can help alleviate the stress and anxiety you may be feeling on your own. How you do one thing in your life is often how you do other things. If you are struggling with controlling your personal finances and that has you feeling like you’ll never be able to manage your business finances, you just need to take some time, make your finances a priority and get the help you need to gain control so that you can build your confidence going forward. If you are interested, you can sign up for one of my free consultation sessions, and we’ll take a look at where you currently are in your business and where you’d like to see yourself in the future. Sometimes you just need someone from outside your business to look inside and help you see where you could take steps to improve. I’m excited to announce that my 100th podcast episode is coming up next week. To celebrate, I am giving away a four-week business strategy and coaching package to one of my lucky podcast listeners. My one-on-one business strategy and coaching sessions really help clients get specific about what they need to work on to reach the next level in their business. In each session, we work together to make plans specific to your business and create a plan to follow through on your intentions. As a CPA, Business Strategist, and Coach, I help business owners just like you to push through and stop limiting yourself with the success you could be achieving in your business. Whether you need help with the next steps you need to make, you want to get more sales but are unsure how to do it, or you need to gain a deeper understanding of your business finances so that you can be more profitable, I can help. Clients come to me because they know that I am knowledgeable in both the financial aspect of business as well as how important it is to have a strategy and work through your mindset and whatever is holding you back from reaching the highest vision you have for yourself and your business. By helping you make the right decisions and holding you accountable so that you follow through with your plans, you get to see your results much faster. You could be seeing success like this in your business. If you’d like to be entered in the drawing for the four-week one-on-one coaching package I am giving away, you need to sign up for one of my free consultation sessions by September 3rd, 2022. I always offer these free consultation sessions, but when you sign up for one of my free consultation sessions from now through September 3rd, 2022, you could also be the winner of the four-week business strategy and coaching package I’m giving away. You can go to www.FinancialAdventure.com and click on the work with me button to schedule your session. During this consultation, we’ll spend up to one hour together going over where you currently are in your business, where you’d like to see yourself and your business in the future, and take action to get you started on the path to success. You’ll walk away with action steps so that you can start moving forward in your business right away. If you are already a one-on-one client of mine, that’s not a problem. Just let me know that you’d like to be entered into the drawing on our next call, and you’ll also have a chance to win. I’ve been helping business owners and bookkeepers achieve their goals for over 25 years, and it’s the best feeling when I see the joy it brings my clients when they follow through with their aspirations. I am looking forward to meeting you in a consultation session soon. I’ll post links to this and other valuable resources for business owners and bookkeepers where you are listening to this podcast and in the show notes.
And, you know I’m going to ask…what’s at least one thing you will take away from this episode that will help your business succeed and grow your bottom line? If you need some accountability, join our PRIVATE Facebook community and post your action item, we’d love to support you.
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