Having your money in order will help you reduce daily stress, and it will also serve as a basis for managing the capital of your company.
If you’re like most entrepreneurs, you’ll likely need to split your time between managing your team, getting sales, improving customer service, promoting your business, and creating new products or services. The last thing you want to add to this mix is taking care of your personal finances (what a horror!). However, if you don’t have your home finances in order, you’re just adding more chaos and stress to your life… you realize it or you don’t.
These 7 tips will allow you to make sure your personal finances are in order before continuing to expand your business. Put them into practice and ensure your economic (and also emotional) stability.
1. Edit yourself
Take the time to read about personal finances. Every week, schedule “money” appointments with yourself and spend a few hours managing your personal finances and reading books, magazines, sites or finance blogs. The more you know about your own finances, the more confident you will have in managing your money in the long run.
If you need more help, consider hiring a financial coach to help you create a financial plan to reach your goals.
2. Check your credit regularly
Your credit report is like a file of you and your credit history. It basically tells lenders how risky you are, and whether or not they should lend you money. When it comes to buying a car or home, it’s desirable that your credit report is in great shape, so you can qualify for good rates.
Create a habit of reviewing your history at least once a year to confirm that everything is in order. Do it on a special date (such as your birthday) to make it easy for you to remember and maintain monitoring. You can access your history on sites like the Credit Bureau.
3. Make a budget
While this sounds very basic, many entrepreneurs don’t have a fit budget to monitor their monthly income and expenses. You can use digital tools as apps to monitor your personal finances or just a document in Excel. No matter which option you choose, make sure it fits your lifestyle.
If you really want to fix your finances and take the lead financially, you need to spend time and energy updating your budget every week. This will help ensure that you don’t spend more than you earn and that you’re able to save for your financial goals.
4. Self-motize your finances
Technology makes it much easier to manage finance every day. Find that most of the process is automatic. You can use automatic online transfers or pay your bills online each month. This will help you not stress about paying your bills on time and generating extra interest or charges.
If you’re concerned about automating your account payments, you can set alarms on your calendar (on your computer or smartphone) that remind you of payments. The more you can automate your finances, the less worries you’ll have on a daily basis.
5. Pay debts
Make a plan to pay off all your debts as soon as possible. Start by making a list of all your debts (credit cards, car credit, educational credits, etc.). Includes current balance, minimum payment per month, and interest rate. Then review your budget to determine how much money you can add to your debt payments.
From there you can do research on strategies to reduce debt so that you confirm that you are paying them off as efficiently as possible. When you’re working on debt reduction, it’s important that you have a “mattress” to pay for any emergencies that arise along the way.
6. Build your own mattress
Having a mattress of money is an essential part of your finances. It allows you to use the money to pay for unplanned expenses or emergencies that may appear in your day-to-day life, rather than increasing your debt or investing in the long run.
As an entrepreneur, you may want to have a six- to 12-month mattress of your fixed expenses. It will allow you to pay personal bills and not worry if you need to reduce your income due to the flow of the business.
7. Invest outside your business
While it’s very important that you always invest in yourself and your business, you shouldn’t have “all the eggs in the same basket.” Diversification is extremely important as it will lower your investment risk in the long run. Work with a financial glider to create a portfolio of long-term investments that includes stocks, bonds, and Cetes that align with your own financial goals and risk tolerance.