Tips for Personal financial planning for SMEs

Tips for Personal financial planning for SMEs

by onerinas

Small-business owners and entrepreneurs are highly motivated people. They are driven to make their companies successful. They are always on the go, and they try to seize every opportunity.

They have to play numerous roles within the company to keep everything afloat. He or she often has well-defined goals and big dreams for the business, but is inundated with an endless list of tasks and has limited time to accomplish them all. Planning for personal finance and ensuring that personal life and family  financially safe are not his priority although it should be the number  one priority  to make himself successful.

We suggest the following 10 suggestions which will make an entrepreneurs life happier along also success of his venture.

  1. Written Plan : Start with a written investment plan that takes into account your investment into  business and will ensure to keep your personal finance steady through rough times(if business suffers). Have an investment policy and execute it in a disciplined way, then spend most of your time and efforts on your business.
  2. Liquidity: Build a cash cushion for your family and your business. Set aside at least three to six months of cash flow (some planners recommend a year or more) in a liquid account, such as a debt mutual fund.
  3. Paying yourself: Owners may wish to pay themselves very little in the way of salary – in part for reasons above, and also to minimize personal payroll and income taxes. However it is a good practice is to take salary and keep away from dipping into business funds to meet personal expenses.
  4. Diversification of assets: As you save and invest some money for your future, ensure that it is properly diversified and compatible with the amount of risk you are willing to bear. Avoid investing only  in real estate. You should diversify at least some of their investment money into the assets which are not correlated to your business.
  5. Risk Management: Protecting one’s family is sometimes overlooked by business owners. Life insurance (with noting of the same under Married Women’s’ Act), health insurance and asset insurance along with funding their savings plan may be a great help.
  6. Groom Second line/Co founder: Also every small business owner never think about business without him. However unexpected events and  severe illness may derail  business and devastate the family.  It is better to groom a second line to stand in or choose a co-founder once the business stabilizes.
  7. De-risking the family from business risks: It is very common to find among the entrepreneurs that entire or most of their assets are locked in the business including pledging of house property for loans. Some of family members may also be employed in the business. It implies that fortune of family entirely tied up to business. This need to be reviewed and strategically approached with help of advisors.
  8. Personal goals: As a business owner you should make the effort to specify what your personal goals are in the same way you put together multi-year business plans. Starting a conversation with family members or advisors is a great start. Also, determining what is “reasonably possible” given your financial circumstances is a critical step.
  9. Planning for retirement: Spend some time to think about retirement. determine how much money it will take to fund your “retirement”.  It is unlikely and avoidable to think that business will remain stable in the long run.
  10. Estate planning: A business owner should meet with a estate planning specialist to discuss and ensure that goals and wishes in this area are properly reflected in the estate planning documents (including plans for the business assets). Younger owners don’t always feel this is necessary – but they and their families may be taking a risk. An owner should at a minimum have an updated will that contains instructions on how assets should be distributed, which may or may not include business assets.

With a lot of hard work, you can move on to bigger and better challenges within your business. But don’t forget to get on track – and stay on track – toward achieving your own personal financial goals.