5 Personal Finance Tactics You Can (And Should) Apply to Your Business

There’s no denying the importance of separating your personal and business finances.

Although the two are very different, there are some common personal finance rules that you should apply to your business accounts.

Let’s take a look at the personal finance tactics that can help set your small business up for financial success.

Budgeting is no-one’s favourite task but budgets are necessary to prevent overspending and correctly allocate resources. Even if you don’t maintain a strict personal budget, most people have an idea of how much they spend on rent, utilities, transport and social activities each month.

Business budgets can be more complex than personal ones, but this only makes them more important to have and maintain. A business budget will help you to create financial projections, accommodate unexpected expenses and identify areas for investment or improvement.

Budgets can also help you to prepare for multiple scenarios. What could you achieve if extra income came your way? Which steps would you take to mitigate the impact of losing a client or having to fork out for costly equipment repairs?

In personal finance, a good rule of thumb is to put away at least three to six months worth of expenses to cover your expenses without any additional income. However, this is equally applicable to business finances, too. You don’t just need a financial buffer for equipment repairs, output delays and cash flow problems. You should be prepared to continue operating if your income comes to a halt completely.

This money shouldn’t be tied up in stocks or an ISA that you can’t touch for a set period of time. Your emergency fund should be kept in an easy access savings fund so that you can access it quickly when necessary.

Most businesses use some form of debt to get started or to tide them over when money is tight. However, it’s important to only use debt when you really need to and don’t overspend. Not only does interest eat into your profits, the more debt you have, the more you’ll struggle to find new credit avenues when you really need funds. Don’t substitute a business credit card or line of credit for an emergency fund, either.

You wouldn’t ordinarily forego your salary, so don’t do it when you’re starting out. Many business owners sacrifice their salaries during the start-up phase but this is not a good idea, even if you have enough personal savings to cover the loss. If you don’t factor your own salary into your budget, you won’t get an accurate picture of how much capital you need to fund your business. This creates an unrealistic portrayal of how viable your business is and makes it difficult to start increasing your salary as you grow.

Yes, that fancy espresso machine would look good in your office and go down a treat with your staff, but do you really need it? Whilst your budget shouldn’t feel like a jailer and the odd treat is perfectly acceptable, it’s important to get into a wants vs needs mindset so that you can trim the fat when necessary and stay in control of your spending.

Separating business and personal finances is important but many of the same rules apply to both.

It’s important to create a budget to keep your spending in check and measure your progress, whilst an emergency fund will act as a buffer when difficult times strike. It’s also necessary to ensure that you are getting paid and not accumulating too much debt, as this can be a difficult web to untangle.

You may not be well-versed in business financial management, but you can use these personal finance rules to make sure that your organisation is on the right track.