As a small business owner myself, I know the opportunities and the challenges that come from owning a business. I have the gray hair to prove it. It’s natural to focus most of your time and energy on running the company. It’s just as important to have a financial plan for yourself, as it is to focus on cash flow, revenue and company earnings. You will not be able to reap the rewards of a successful business if you do not take care of your personal finances. So here are some tips for small business owners.
3.5 Personal Finance Tips for Business Owners
1. Build an Emergency Fund
It is absolutely critical that you set aside funds that represent at least 3-6 months of your current expenses. This is personal finance 101. You may need this money in case you get sick or injured and cannot work for a prolonged period of time. In the current economy, some planners are suggesting that you sock away 9-12 months of your current expenses. You will rest well at night knowing that you have these funds if things don’t go as planned. In addition, it will keep that hot little hand off those credit cards.
2. Save for Retirement
One of the advantages of being employed by someone else is the ability to have retirement savings automatically withheld. A sort of forced savings. It makes it really easy. It’s just as important to save for retirement as a business owner. If you are a sole proprietor with no employees, you may want to consider a Simplified Employee Pension Plan (SEP). A SEP will allow you to defer 25% of income or $50,000, whichever is less. If you have employees, consider a 401(k) plan or SIMPLE.
3. Hire a Tax Professional
Hiring a tax professional was definitely one of the best things I did for myself and my practice. You are so focused on running things that there is no possible way to stay up to date on all the tax law changes for small businesses. Check with a tax advisor periodically throughout the year. That way you can stay on top of taxes as well as head off any problems before tax time.
3.5 Hire a Wealth Advisor
A good wealth advisor will be able to coordinate all of your business and personal financial issues. Think of it as a financial quarterback. Wealth Advisors that specialize in business owners can work with you to establish a retirement plan as well as help you plan for exiting the business some day. Don’t underestimate the power of good advice. If you need assistance with business financial planning, write me at firstname.lastname@example.org, or call me at (859) 225-2596.