When you start running your business, it’s hard to focus on your personal finances. You want to grow your business and start making money. However, even as you build your business, it’s important to stay on top of your personal finance situation.
You don’t want your personal finances to get to the point where they distract you from your business goals – and you don’t want your business situation to ruin your personal financial situation.
As you run your business and make it work, here are five ways to protect your personal finances as a business owner:
1. Look into a Separate Business Entity
One way to protect your personal finances from a disaster with your business is to set up a separate business entity. One of the reasons that situations like the Rich Dad Poor Dad bankruptcy didn’t impact Robert Kiyosaki’s personal wealth is because his businesses are set up separately from his personal finances, and he isn’t personally liable for the financial problems with his business. Donald Trump does something similar with his own businesses to prevent his multiple business bankruptcies from ruining his personal finances.
2. Build an Emergency Fund
Even as a business owner, you need to “pay yourself first.” This means setting money aside in an emergency fund. When you receive money from your business, put a portion aside. That way, when you have a lean month, or if something goes wrong, you can draw on your emergency fund to help you get through it without causing personal financial issues.
3. Get the Right Insurance Coverage
Part of effective asset protection, for your business as well as your personal finances, is getting the right insurance coverage. Insurance coverage for your health, home, and auto can help you protect against huge losses to your assets, and protect your finances in the event of a major event that would normally be too costly for you to handle. Likewise, the right business insurance can help you handle problems that could devastate your business finances, or drain your personal finances in a pinch.
4. Save for Retirement
Many times, when you’re self-employed, you forget to save for retirement. However, this is a huge deal as it relates to your personal finances. Your ability to handle retirement or reach financial freedom is impacted by your ability to set money aside. Don’t forget to shore up your future, even as you are building your business.
5. Keep Debt to a Minimum
Sometimes, debt can help you smooth your way. This is especially true with your business. There are times it makes sense to use business loans and other loans to access the capital you need to improve your cash flow or grow your business. Even though you might feel as though this debt is necessary, don’t forget to keep it to a minimum. You don’t want to find yourself hemmed in by debt obligations that you can’t handle. This can cause personal financial problems as well as business issues.
With the right planning, it’s possible to protect your personal finances while you start and grow your business.