As a brand-new entrepreneur, it’s all too easy to pour all your time and energy into your business. With all your focus on this exciting new venture, you can let your attention on your personal finances slip back home.
Even if you manage to pay bills on time and limit debt, your inattention could lead to costly mistakes. Let this guide serve as a reminder to carve out some time for the personal side of things today.
Build an Emergency Fund
Emergencies can happen to anybody, and when they do, they usually come with bills. Let’s say you break your wrist and need x-rays, realignment surgery, a cast, medication, and physio. While your healthcare might cover most of these medical needs, you may have to pay out of pocket for medication or physiotherapy.
An emergency fund is there to support you during a difficult time like this. You can dip into your savings to cover these out-of-pocket expenses, even if you didn’t think to include them in your budget for that month.
Start by saving roughly 20 percent of income. You’ll eventually want to save three to six months of living expenses in your fund. This way, you can rely on your fund when you hit a streak of bad luck and have to pay several unexpected expenses at once.
Once you budget for savings, visit your online bank account. You’ll want to automate your savings every month, so you don’t miss a single contribution.
Automating takes the chore of savings out of your hands; you won’t have to make the active decision to move money out of your account. This process doesn’t let you question whether you should save that money or splurge it on a new gadget. Instead, your bank will do it for you.
Know Your Safety Nets
Three months of expenses is a lofty goal for most people. It may take several years of dedicated saving to reach this point. Until then, your savings may not be enough. At the beginning stages of your emergency fund especially, your emergency fund may fall short of what you need.
Savvy entrepreneurs know that they need to set up safety nets to serve as backup to their savings. A line of credit is a common backup to savings because it’s convenient to use in an emergency. If you already have an account on standby, you can quickly draw against your limit to cover your unexpected expense. If you don’t already have an account, check out a website like Fora to learn more about what you need to apply for a line of credit.
Insurance works well with a line of credit to fortify your emergency fund. It picks up the slack in scenarios where both your savings and line of credit aren’t enough for an unexpected expense.
Establish Personal Financial Goals
Personal and professional goals can overlap when you’re an entrepreneur. After all, your business can feel very personal when you built it from the ground up. However, it’s important to gain some separation. Establishing personal financial goals can help you focus on what you want to do outside of your profession.
When do you want to be debt-free? When do you want to retire? Do you want to buy a new home or relocate? These questions can help you brainstorm what you want out of life.
Juggling your professional and personal finances can be challenging, but it’s possible. More importantly, it’s an important step to becoming a successful entrepreneur. Only when your personal finances are in order can your business take off.