When you are running a business by yourself, keeping business and personal finances separate can be a confusing and difficult task. It is something that is necessary, though. If you’re spending money set aside for business purposes on personal items, you’re going to run into major financial problems. Likewise, if you spend personal cash on business items, you’re losing money. Are you in this predicament? Finding it hard to keep your accounts separate? Here are some tips to keep your personal finances independent of one another.
Invest
Investing your personal money is a great option to keep it set aside from other accounts. By investing it, you are not only giving yourself an extra income, you are also doing something tangible which gives you a line between the two sources of cash. You could start day trading as it is easy to fit around your schedule. Day trading involves taking short-term options on stocks and making a profit. You don’t have to make a long-term investment and it gives you an income totally separate from your business. Before you start you should take a look at a list of stocks as a watch list gives an idea of the best penny stocks to trade.
Budget for Business and Personal Finances
The easiest way to start is to have your business budget and personal budget completely separate. Do not let them overlap. It might be tempting to use that little bit of extra cash from the business to take a vacation or buy yourself something nice, but don’t give in. Only by budgeting properly will you be able to spend within your personal means and stop yourself from spending money needed for your business.
Business Credit Card
If you’re going to keep business and personal finances separate, you will have to keep the way you spend your money separate, too. The best way to do this is to get yourself a business credit card. By doing this you will easily be able to keep your spending separate. This will involve some discipline. If you don’t have the money in your personal account, you don’t have the money. Don’t start using your business credit card because it is an easy habit to slip into.
Pay Yourself a Salary
Paying yourself a salary will help with your budgeting but it’s also the easiest way for you to make money from your business that you can use for personal reasons. You have probably spent time exploring pricing strategies for sales so spend an equal amount of time determining how much of that should go into your pocket. Make sure you pay yourself a salary you can afford but also don’t underpay yourself. Value what you do and take a salary accordingly.
Keep Track of Personal Items Used for Business Purposes
If you’re a solo entrepreneur, the lines between personal and business time and the use of items can become blurred. Obviously, if you are using your car to go to the gym you can’t charge that as a business expense. However, if you have legitimate business purposes when you are using your personal items, then charge it as a business expense. You can use a tax advisor to give you the best advice about when you should and shouldn’t be charging something to your business to ensure you are doing everything legally.
