4 Personal Finance Tips Every Entrepreneur Should Know

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Being an entrepreneur takes a lot more – both physically and mentally – than most people think. The majority of entrepreneurs work more than 40 hours a week, and most of them do not earn the same amount of money as if they were working in a joint job in a similar field.

Entrepreneurs are also responsible for all of their financial obligations outside of work, including insurance, savings, and retirement. While it can be easy to stay focused on your business, it is important to look ahead and plan accordingly.

In the end, retirement will come face to face with you, and if you’re not ready, you could be a rude awakening. There are also surprises that you may encounter while running your business that you need to be prepared for. Worst case scenario preparation is always the best approach.

The entrepreneurship path can be rewarding, as well as very stressful and challenging. Here are some personal financial tips that will help you navigate your entrepreneurial journey and prepare you for the future, as well as protect you along the way.

1. Create a personal monthly budget

It is important to be disciplined when it comes to your finances, especially when starting a business. The less nimble you can manage your business and personal life, the more money you can continue to recoup the business and boost its growth.

Many entrepreneurs focus on appearing successful rather than becoming successful. Avoid big houses, luxury cars, expensive dining, and other unnecessary expenses.

Set a budget with basic necessities plus a little entertainment (you have to go out and enjoy yourself sometimes!) When you have a specific plan and stick to it, you set yourself up and your business to succeed.

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2. Invest in quality assurance products

When you’re your own boss, this leaves all the outside responsibilities on you, and one of the most important is insurance. Don’t try to take shortcuts when it comes to protecting yourself and your business.

Get a solid health insurance policy that covers you and your family, and make sure you have life and disability insurance. It is always better to prepare for the worst possible situation than try to save a few dollars.

One thing a lot of entrepreneurs overlook is business insurance. It doesn’t matter if you have a global business with thousands of employees and sell millions of physical products per month, or you are a solo entrepreneur. Protect yourself with a business insurance policy that covers liability for everything you sell.

3. Allocate monthly funds to the emergency fund

Most business owners do not have a savings reserve that would allow them to operate for months without the revenue coming in. The Covid-19 situation has forced a lot of businesses to shut down permanently because they couldn’t keep the lights on.

Put the money into a trading savings account each month. Hopefully, you never have to touch this money, and it will continue to build over time. But, in the unfortunate case that you need to walk in the water for a few months while snorkeling, it will help you to stay above the water.

It’s a good idea to have at least 3 months of operating expenses saved to cover everything, assuming no revenue is coming in. If you can, 6 months of reserves are ideal.

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4. Avoid personal debts at all costs

To build and run a successful business, you need to get rid of as many stressful situations as possible. This allows you to focus more on the tasks at hand. One of the biggest causes of stress in real life involves debt.

Mountains of personal debt — from credit cards to care loans and real estate — can take your focus away from your work. Avoid debt at all costs, and if you definitely have to put some expense on a credit card, do everything you can to pay it off quickly.

Many entrepreneurs try to live beyond their means, and if they cut back on resources in the early stages and focus on building a successful business, money and financial freedom will come faster.

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