Solopreneurs wear a lot of hats. They’re business owners, employees, accountants, strategists, the list goes on — and that doesn’t even touch on the fact that they also have personal lives.
If you’re someone who’s quietly working on your own business by yourself, you’re likely aware of how hard it can be to keep both your business and personal finances moving in a positive direction at the same time.
Here are a few tips to make sure that your professional labors are helping rather than hindering your personal financial health.
1. Think Long-Term
As a business owner, it’s tempting to stay focused on the day-to-day operations of your company. Are you getting enough work? Have you tended to all of your responsibilities? Are your clients happy?
This short-term mindset can spill over into your personal life, too. Did you pay the bills? Can you afford to eat out? Do you need to put gas in the car? Don’t let the current responsibilities keep you from thinking long-term, as well, though.
If you want your solopreneur efforts to pay off in the long run, make sure to invest in your future, too. This can start with something simple, like setting up an IRA or solo 401(k). From there, consider how you can create passive forms of income or diversify your professional activities to keep that cash flowing in over the long haul.
2. Build Buffers
Along with long-term thinking, it’s important to guard against any mid-term financial emergencies that could pop up. Again, this is bigger than day-to-day financial concerns, but not necessarily on the scale of a 40-year retirement plan.
Instead, consider significant potential financial expenses that could creep up in the next few years. This could be anything from a car repair to buying a house to starting a family.
The best way to prepare for these kinds of larger mid-term expenses is to build a short-term savings fund. This should consist of cash that can be used to offset unexpected bills. It’s also wise to start working on a rainy day fund to keep your personal finances afloat if your work dries up for a spell.
3. Keep Business and Personal Life Separate
Along with specific savings activities, it’s wise to adopt a healthy financial mindset. This can be tricky as a solopreneur.
Since you work for yourself, the lines between work and pleasure can become blurred. It’s easy to charge a business expense on a personal credit card. It’s tempting to cash a business check right into your personal bank account.
If you want your personal finances to benefit from your solopreneurial activities, it’s important to keep your personal and professional lives separate. This starts with creating a dedicated bank account for your business.
Open up a credit card, as well. Whenever you make a financial transaction, make sure to differentiate between business and personal financial activities.
4. Budget Below Your Income
One of the most important factors that lead to healthy finances is living below your income. Unfortunately, as a solopreneur, it may be difficult to know what that income will be. For many, the amount of money that they make can fluctuate quite a bit on a weekly and even a monthly basis.
The best way to navigate this ever-shifting aspect of your finances is to live well below your means. If you just started your business, do your best to forecast when you’ll have good and bad cash flow. Then consider what you’ve made so far and create a personal budget that can work within the bounds of your average income.
As time goes by, use your past income to further inform your future budgets. Throughout this process, always make sure you’re working hard to live well under what you plan on making.
5. Conduct Regular Risk/Safety Analyses
As a business owner, you need to maintain a certain ability to take risks. After all, you wouldn’t be where you are now if you hadn’t decided to launch out on your own, right?
With that said, rampant risk-taking can be a danger to your personal finances. If you invest $5,000 in a high-risk business venture and lose it, will you be able to pay your mortgage next month?
The problem is, it can be hard to walk the line between entrepreneurial risk and personal financial conservatism. This starts with separating your personal and business activities, as recommended above.
However, you can take things one step further by conducting risk/safety analyses on a regular basis. Ask yourself two questions. Are you still willing to take financial risks as a business owner? Do you consider all of the personal financial implications of each risk that you take? Use your answers to adjust your mindset and maintain a balanced perspective.
There are many factors that go into being a solopreneur. One of the easiest to overlook is the state of your personal finances. It’s easy to excuse poor finances as part of the “cost of doing business.”
But the truth is, if you’re going to invest in your own business, part of the benefit of that should be improving your personal finances. As part of that effort, use the above tips to boost your non-work-related monetary activities alongside your business so that you end up reaping the financial rewards along with all of the other benefits that come with working for yourself.
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