4 Ways To Maximize Your Personal Finances As a Small Business Owner

A small business is a significant investment. It takes time and money to build your brand. And when it comes to managing your personal finances, there are a lot of decisions that need to be made. It can be tough to keep track of everything, from deciding on the right business credit card to which type of insurance you should buy and what’s the best way to save money. Hopefully, this article will give you some insight into optimizing your personal finances as a small business owner.

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Keep Business, and Personal Accounts Separate

It’s essential to keep your business and personal accounts separate. It can be challenging to determine which money is for what if you don’t. And the problem only gets worse if you’re not diligent about keeping them straight. Some people may be tempted to use their business credit cards for personal purchases or vice versa. This can result in several overspending, lost receipts, and more problems. It also makes it harder to track your finances. But it’s not just using the wrong credit card that could cause problems. You could also have difficulties reconciling your bank statements because you won’t know whether one expense belongs on the personal or the business account.


Take A Regular Wage

If you are the owner of an LLC or even a sole proprietor, it can be tempting to take all profits as income. However, it is often wise to take out a regular wage from your company. This will help you avoid paying taxes twice on the same money. It will also help if you ever need to replace equipment or hire an employee.


It’s important to understand that taking money out of your business as wages – even if it is just $100-200 per week – can affect your long-term tax liability, and it may complicate accounting for your business expenses. Speaking with a CPA helps understand how this strategy could work for you with the specific tax implications related to your particular situation.


Save For Retirement

As a small business owner, you might not have the luxury of taking time off to save for retirement. But don’t let that stop you from contributing to your future! There are many things that you can do to save for retirement. 


You can contribute up to $20,500 per year in pre-tax earnings into a 401(k) plan. If you are self-employed, you can set up a SEP IRA and make contributions of 20% of your net income or $55,000, whichever is less. Explore all of your options, including what is a self directed ira and how best to save for retirement outside of your IRA.


Have A Personal and Business Emergency Fund

If you want to be successful in your business, you have to take care of yourself first. Having a personal emergency fund is essential for all small business owners. An emergency fund can help with major emergencies that may arise, like a major car accident or serious illness. This is also true for your business. You should have an emergency fund that can cover at least six months of expenses, so you don’t have to worry about not keeping up with your bills if something happens.



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