On the path to being an entrepreneur, it is no-brainer that financial stability is key to building a successful business. I mean, you won’t end up building a solid business when you are always tensed as regards the money you need to foot your bills on a daily basis. In other words, the business and you need to be financially at ease for you to properly strategize on how to move your business forward. A huge step towards ensuring this stability is ensuring proper management of your personal finances.
The fact that an entrepreneur’s personal finances needs to be properly managed cannot be over-emphasized as proper management ensures that your personal life is first not a problem and you can hence properly focus on your business. Furthermore, the fact that the income of an entrepreneur is somewhat variable is another reason why deliberate effort should be made towards managing personal finances as no one wants be “on top of the world” today and then “hit rock bottom” the next day- you don’t want to unsettle your personal life as well as your business venture.
A key factor for efficient finance management is discipline. Any strategy that you put in place to ensure that this objective is achieved falls back on your ability as an individual and an entrepreneur to be disciplined enough to follow the plan. This discipline stems from your proper understanding of the fact that being an entrepreneur and building a business is a huge time commitment and requires a precise practicality about your money; you should understand how much you have and how much you are capable of spending. Having understood this, you then should hold yourself to your word.
With discipline, you then can proceed to making strategic efforts to achieve your aim. For a stable personal financial life, you need to have an “emergency fund” where you can turn to on “rainy days” when the income isn’t coming in as you expected. This ensures that you do not have to forfeit your basic needs every time you have an issue with your income. This “emergency fund” should be untouched unless such needs arise; this requires discipline.
You should also treat your personal finances as you would your business, hence business funds should be separated from personal funds. Doing this, might require considering yourself as an employee of the business and paying yourself a fixed amount which you can base your personal expenses and financial budgeting upon. Your personal expenses should be kept below your income so that you are not tempted to take from the business’ funds to satisfy your needs; remember expenses always rise to meet income.
Having taken care of the foreseeable factors that might alter your financial balance, it is also necessary to take care of unforeseen contingencies – it is necessary to ensure that your valuable assets are insured. You should ask yourself how your family would live without your income or what you would do for income if something happened to you. Do you have valid options? Do you feel you can shoulder the weight of certain happenings? If not, ensuring that you are insured is just the right thing to do.
An entrepreneur should always think about the effects of his decisions on his business. Each and every time you need to make a financial decision, you should be thoughtful about the consequences as well as how such decisions align with your strategy and goals. You should always maintain proper discretion as well as top level financial discipline to ensure that your goals are actualized.