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Independent small business owners work very hard to create wealth and maintain their growth
status for years. The main aim in doing that is the creation of wealth in the generations to come. The basic rule of any entrepreneur is not to mix personal finances with business. The main goal in any business is to safeguard your finances. The biggest mistakes done by the business owners are spending most of their time running the business and not taking care of their finances.
While most entrepreneurs are very hardworking, it’s not easy to separate personal; and business finances, especially when the business is small. Here are top financial planning trends that small business owners can use to plan their finances and grow their business over the years.
1. Build an emergency fund
According to financial planners, it is good to have around three to six months worth of living in an emergency savings fund. It is even better to have a larger emergency fund, just in case your business takes a downturn or has a fluctuation in cash flow. The emergency fund assists you in taking bold steps in your business. It helps an entrepreneur focus more on the business knowing the family is protected in case of any financial emergency.
2. Manage your personal credit
Your main concern in small business is to make sure that your personal credit is secure. Even if you have financial constraints and the funds you have are only enough to make a minimum payment on your credit card, do it. It is better to clear your financial arrears than to miss a payment or pay late. To ensure that you’re financially secure, it’s advisable to take care of the minimum amount on your credit limit. If kept below 30% is better as it is going to enable you to have a better credit score. With that will be easier to secure personal loans.
3. Save for retirement
Most small business owners often invest their profits back to the business. Instead of investing all your profits back to the business, there is a great option of saving up your finances for retirement. Depending on your flow of income, you find out you can save more money for retirement. You’ll find out that when you are self-employed, you can save up more than an employed person. When you already depend on your business, you can save more money than the one you are investing back in the business.
4. Invest appropriately for your risk tolerance
When you are saving up for retirement, it is always good to do so in terms of assets. If you are young and you have more years to retire, saving up in stocks could be the best idea. Depending on your goals, you can invest more in your portfolio in stocks to capture the potential long term growth until your day of retirement. Investing in stocks is a risky move but offers long term solutions.
