One of the most stressful aspects of being an entrepreneur is managing one’s finances. Even if you have a strong vision and a great business idea, success will be difficult to attain if your finances aren’t in order. If you want to avoid any future financial headaches, take a look at the finance tips below.
Emergency savings act like a financial safety net if you face unexpected expenses like medical emergencies or car repairs. Unfortunately, the majority of Americans do not have any emergency savings. Entrepreneurs should be especially prudent when it comes to saving for emergencies. Your personal finances affect your company’s finances. You should make sure that you are covered in case there is an emergency. Then your financial emergency won’t have any chance of hurting your business.
No Credit Card Debt
Do not use credit cards to fuel your business idea. While there are success stories of entrepreneurs who have used credit cards to get off the ground, this approach is never a good idea. There are just as many (if not more) entrepreneurs who used this method and failed. These stories rarely make the headlines. If you don’t have enough savings to start your business, then you should wait or partner with people who have the money. Don’t ruin your personal finances in your quest to succeed as an entrepreneur.
Write-offs Aren’t Free
Inexperienced entrepreneurs often make the mistake of thinking that writing off an expense is the same as not having to pay for that expense. Writing expenses off is helpful when it comes to dealing with taxes, but you shouldn’t spend frivolously and expect the tax benefits to appear later. You should consult with a CPA to get a better understanding of the relationship between your business’ expenses and the possible tax benefits. This conversation will also help you plan your budget.
TSL: Taxes, Savings & Life
TSL is a budgeting tool. It suggests you put aside 30% of your income for taxes, 20% for savings, and 50% for life expenses. These percentages are just guidelines and can be adjusted to fit your individual situation. For example, if you are willing to forgo certain lifestyle expenses you can add more money to your savings. TSL will help you manage your personal finances, and the money you save can be applied to your business.
Organize Your Finances
It’s important to keep your finances organized. For example, if you have multiple 401ks consider consolidating them into a single IRA. It’s also a good idea to use a system like Mint to have a better idea of your monthly expenses. Here are some more tips to help you get organized.