If you are a business owner, especially if your business is new, you’ve got your hands full managing all aspects of your company. No matter what type of business you operate, there are demands on your time and energy that can make it difficult to keep everything on the rails. This is also true of your personal life and finances. Many people find that as they invest more of themselves in their business, aspects of their personal finances start to fall through the cracks. To keep this from happening, we’ve identified a few ways to keep your personal finances on track, even as you pay more attention to your business.
- Form an LLC. This will be a no-brainer to many, but if you run your business informally, this is vitally important advice. “LLC” stands for “Limited Liability Company”. There are many reasons for a business owner or business partners to establish an LLC. The main point, for our purposes, is to insulate an owner’s personal finances from the finances of his or her company. An LLC protects personal assets, no matter what happens in the business’s account books. As you might imagine, there are lots of ways for a business to get in financial trouble. Protect yourself by making your business an LLC.
- Budget Your Salary. If you give yourself a salary (As you should), it’s important to budget every penny of it. Until your business is mature, it is likely that it will not be a sure thing. You’ll have to do a lot of work to keep it up and running. Competition could undercut your prices or provide a better service for your customers. By budgeting your salary, you’ll be preparing for the worst, even as you hope for the best.
- Emergency Preparation. One of the best ways you can do exactly this is to allocate some of these monies to an emergency fund. Emergency funds are meant to cover your expenses (And those of your dependents) for a period of three to five months. Start now, and you could have a great emergency fund saved in a little over a year. Another way to prepare for the worst (While hoping for the best) is with life insurance. Term life insurance is the most economical option for most people who don’t actually expect to die anytime soon. This list of the top 10 term life insurance companies will give you a lot of great choices. In the end, just make sure that the monthly payments are affordable and that your coverage is more than sufficient for the people who depend on your income.
There are lots of ways to prepare your personal finances for a great future, no matter what happens with your business. Hopefully both will succeed. Fortunately, there is no reason why your personal finances have to suffer overly much if your business finances get into trouble. Budget your money, fight off debt or don’t take it on to begin with, and make sure you’ve set up an LLC or similar business structure, and you should be just fine.