As a business owner, you understand how important it is to manage your money carefully. Your personal financial health affects your business’s financial health, and it’s critical to learn how to avoid the pitfalls many younger and inexperienced business owners make. Strong money management skills are important, but they are especially critical in the early stages of a business.
One beneficial step is to be protective of your credit score. If it’s low, work to bring it up. Good credit can be important if you need to borrow money in the initial stages of your business. Your eligibility for a potential loan and your interest rate will depend on your score. If you must use personal funds to run your business or take a personal loan for that purpose, be certain you can pay it back.
As an entrepreneur just starting out, it’s essential to be realistic about your financial circumstances. Don’t live beyond your means. Instead, develop a budget that will allow you to pay for essentials and give yourself some breathing room. Living this way will enable you to save and have the room you need in your budget in case the unexpected happens in your personal life or with your business.
In your budget, create a line item that allows you to set aside money to establish an emergency fund. Having a cushion is essential in the beginning stages of a business when expenses can be high and profit can be low or inconsistent. As a business owner, you will also want to prepare for your taxes each year. By setting aside what you will most likely need, you won’t find yourself surprised or overwhelmed by what you owe the IRS each year.
The key to financial stability as an entrepreneur is preparation and a willingness to sacrifice. You may have to work very hard for little or no return for awhile, but you can lay the foundation for a strong financial future with a few simple steps now. Saving, careful spending and budgeting may be necessary, but these are prudent habits that will pay off now and in the future.
By Meagan Kerlin for Vertu Marketing LLC