Launching a startup is not easy. Not only do you have to worry about managing the cash flow of your business, but you also need to keep an eye on your personal finances.
To make things easier, here are some tips that will help you manage your money more effectively, so you can focus on building your business.
1. First, change your mindset
Whether or not you plan on running your own business, it’s always a good idea to know how to manage your finances. There are several ways you can stick to your financial planning, such as setting up automatic deposits into your savings account or frequently re-budgeting to ensure you’re saving what you can.
While these tips are a great starting point, as an entrepreneur, you may need to go that step further. You will need to change your mindset and think like a business owner, so you make the right decisions for your financial future.
2. Keep your personal and business finances separate
As an entrepreneur, you’re often so invested in your business that things can become a little inter-connected. However, the last thing you want to happen is that you end up with nothing, even after several years of hard work.
You need to make sure you pay yourself enough to live comfortably, so you’re not left stressing about money and can place your focus on growing your business.
It’s not just about making sure you get paid. By keeping things separate, you help ensure that you’re not putting all of the burdens from your business’ financials on your personal accounts. That way, if things go south with your business, you remove personal liability.
There are several ways you can keep things separate, such as establishing a limited liability company, opening a business checking account and getting a business credit card.
3. Keep track of your credit score
Monitoring your credit and building it where possible is important, not just for you, but also for your business. This is one instance where you may not be able to keep things entirely separate.
That’s because when you own a small business, you may not have a business credit score for lenders, suppliers, and creditors to turn to. The best way for them to find out whether or not your business will be able to pay off its debts would be to take a look at your personal credit score.
You may need to start picking up some good habits if you want to build your credit score, such as making sure you always pay your bills on time, not opening too many new accounts at once, keeping accounts open as long as you can, and keeping your credit utilization low.
4. Manage your personal spending
As we just mentioned, as an entrepreneur it’s important to have a good credit score as it can have a direct impact on your business. You don’t want to let poor spending habits affect your business, so now is the time to take a good look at how and where you are spending your money.
A great way to do this is to keep track of all your personal expenses, no matter how small they may be. Whether you use a spreadsheet or a budgeting app such as PocketGuard or Wally, getting into this habit will give you a good insight into where your money goes each month.
You may find there are certain areas where you can cut down on your spending, allowing you to save more money and avoid getting into debt. You don’t want to get yourself into a position where you can’t pay your bills on time, not only because it will affect your credit rating, but also because you may find yourself tempted to dip into your business account if there’s money in there.
The other great thing about keeping track of your spending? It will also help you to track your business-related expenses. All those small amounts, such as transportation costs incurred when meeting a client or buying a book that will help you with your business, can really add up over time. Always keep a record of these expenditures, as well as the receipts, as you may be able to claim it back later.