Being a successful entrepreneur requires dedication, passion, and certain financial practices. We can’t emphasize enough how sound financial habits can positively affect your sense of well-being and how this can help you feel confident about achieving both your short and long-term goals.
That said, we’ve listed a few financial habits you can start with today:
Take time to plan
NerdWallet’s Lauren Schwann notes that working to a monthly budget after determining your financial goals is of paramount importance. Starting with your personal finances and working your way to your business finances, having a budget and planning it out thoroughly will enable you to determine how much you put away and save for a rainy day or business expansion. For instance, you could create a monthly budget that means that at least 50% of your earnings go to your monthly costs, a third to your wants, and 20% on savings.
Separate your business assets from the personal ones
Your business is an independent entity — so it should be treated like one. Not only is this good for your professional image, but it’s also good for tax reasons. You can form a limited liability company (LLC) or corporation, but budding entrepreneurs should go for the former. This is because forming an LLC lets owners avoid the double taxation that comes with your typical corporation, as they don’t have to submit two separate tax payments to the government. LLCs also grant the limited liability that corporations have with less-complicated procedures and maintenance requirements. By having an LLC or even a corporation, you’ll get to establish your business as official. It goes without saying that new customers or clients will be willing to work with you and trust your business if it’s recognized by the state.
Keep track of expenses and due dates
In line with keeping your business separate and having a plan, a successful entrepreneur knows how to track their business (and personal!) expenses accordingly. When you track your expenses you are reconciling what you actually spent money on with what you planned to spend money on. This way, you’ll also get to adjust where you need to. Try to automate bills and other expenses where you can — this lessens worry and also helps to ensure you’re paying necessary costs like rent on time.
Prepare for emergencies
Emergencies and slow months are inevitable (2020 is a great example of that) — and a good financial habit is setting aside money for a rainy day whenever you can. Compute for how much you need to keep running for at least 3 to 6 months, and try to save for that within a few months. Automating savings and setting aside a small amount from every sale or transaction is a good way to start.
Be smart about your finances
If you find it hard to keep track of where your business or personal money is going on a daily basis, download a budgeting tool on your phone. Apps like Personal Capital or Mint can be a great way to keep yourself on track, as they can help summarize your budget and motivate you with constant reminders. With the variety of apps out there, you’re bound to find a personal finance app that can fit with your lifestyle.
Being an entrepreneur is more than just being a good leader or being able to make sound management decisions. A successful entrepreneur is smart, thinks on their feet, and has their finger on the pulse. By developing good financial habits, you will be able to take your business to the next level despite obstacles and slowdowns in your way.