The quality of an entrepreneur is not only measured by the health of his company, but also by the health of his private finances. What if the key to success was to manage them like your company’s finances, that is, with foresight, rigor and backed by the expertise of professionals?
Separate your personal and professional finances
The top priority when managing your assets is that private expenses must not be met with company funds. Your private assets should not be used to cover operating costs or to secure any liabilities of the company. In addition, the private use of loans that your company has taken out is prohibited.
This does not mean that you cannot receive dividends if the operating result allows it, nor that you cannot secure a bank loan for your company with a personal guarantee. The goal is to get a clear view of your personal and professional finances before the question of any interactions arises. As a result, the first task is to clearly separate your personal accounts from your work accounts. Only then do you determine what proportion of your private assets you are willing to invest in your company projects.
Separating work and personal finances allows for sound management of your finances. This also proves your professionalism and increases the trust of your bank, for example when you apply for financing.
Managing your personal finances
No responsible Towing San Jose CA entrepreneur would think of neglecting his company’s finances. Why should this be any different with private finances? Manage them in the same way and use the same tools as you do for your professional finances.
The personal balance sheet showing your assets and liabilities. This balance sheet of your financial assets gives you an overview of your situation at a specific point in time.
It shows your regular income and your expected expenses. This allows you to estimate the development of your financial assets and make adjustments if necessary.
In accordance with your professional goals, you create reserves to expand your business activities, to renew your company’s equipment and for innovation purposes. Do the same with your private assets. A major purchase, your retirement, or the inheritance you’ll bequeath to your children are also goals that require careful planning. You should manage your private finances just as conscientiously as your professional finances.