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The Entrepreneur's Guide to Small Business and Personal Finance

Starting a company and growing it to the point when we can say its future is an incredibly hard task that requires an incredible amount of time, concentration, and effort. Due to this fact, the entrepreneurs' lives tend to become so focused on their companies that they lose the track of other important personal challenges.

The area that usually suffers the most is personal finances. This situation is made even more difficult by the fact that the issues we encounter in this area almost always impede our ability to efficiently run the company so we undermine something we worked so hard to build.

Let’s see how all these obstacles can be avoided with these incredibly simple and effective tips.

Diversify the investments

Sure, developing your business should, at this point, be your absolute priority. However, you should strongly avoid putting all of the proverbial eggs in a single basket since your personal finances will become almost exclusively reliant on the success of your SMB and you don’t want to create such a dependency. Therefore, do your best to diversify your portfolio, find some secure investments that will relieve some pressure off your company, and operate as independently from each other as possible.

Allocate some money to an emergency fund

This combined with the previous measure we proposed will inevitably bite into your company’s budget. But, in order to run your company efficiently and avoid making knee-jerk reactions you need to know that your personal finances will be protected even if your ventures fail. So, make a habit of using each month to put some money aside and setting up your personal emergency fund you will use if, by any chance, your business stops generating revenue. Ideally, you should be covered for at least six months.

Make repaying debts a priority

Debts are, generally speaking, a huge encumbrance that plays an integral part in our leaves but needs to be rid of as soon as possible. Having an additional liability in the form of your SMB makes this situation even more difficult. That is why repaying your debts should be one of your absolute priorities. If you are unable to do that with the current earnings, you should consider consolidation. If you, for instance, refinance a home loan, you might get much more favorable repayment terms than in the original agreement.

Keep your expenses below income

All the things we have covered above will be possible only if you are creating a financial surplus. The only way to make that possible without relying too heavily on the success of your investments is to simply keep your expenses below the income you produce. Even though this sounds difficult, a bit of clever budgeting (we suggest that you start with the tried and true 50/30/20 model) and relinquishing a couple of neat but non-critical amenities can go a long way in keeping your monthly expenses in check.

Set clear financial goals

To put it simply, having something to work toward will help you to move closer to the finish line at a faster pace. Therefore, instead of having a vague idea that you want to bring your finances in order and put some money aside, set yourself clear, meaningful, achievable, and time-constrained milestones and start coming up with the strategies, you will use to reach them. If you are having difficulties with these tasks feel free to seek help from a professional advisor. This investment will, most certainly, pay off.

Protect your most critical asset

We are, of course, talking about you. Exposing yourself to constant professional challenges and a Spartan lifestyle can take quite a toll on any person. Endless hardships, of course, seriously undermine your ability to run a company or manage personal finances. That is why you should set very clear limits about how hard you are ready to push your abilities and give yourself some much-needed time for leisure. Also, make sure you have access to top health services and insurance. Otherwise, you will burn out.

We hope these couple of tips gave you a general idea about the strategies you can use to make sure that running a business never moves the focus from your personal finances. Or even better, these suggestions may even inspire a couple of unique strategies of your own. The most important thing to remember is that running an SMB is your job, not your lifestyle or the axis of your finances. As long as you approach entrepreneurship with such a mindset, your personal assets should be just fine.


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