Your home business is making money. You are an entrepreneur in the purest form. You are expanding your business, sales are coming in, and cash flow is not just a fantasy. But before you dance off into the sunset make sure you get your financial house in order.
Between your team, marketing, training, and family the last thing you want to do is financial planning. This is where most businesses fail. Business owners concentrate on making their business a success and forget about their financial house. Your personal finances will ruin your business. There is a long list of athletes, entertainers, and business professionals who can attest to that fact.
Here are 7.5 steps to get your financial house in order:
1. Education is Key – Get educated, my friend. Leaders are readers and it’s time to put all those financial books you have read to use. Schedule weekly dates with yourself and spend a couple of hours on your personal finances. Consider contacting a financial planner who works with small business owners, and has a track record of creating wealth. Know what your goals are and get a plan. Plug into websites like learnvest.com to help with your education.
2. Create a Budget – You probably have a budget for your business. Get one for yourself. Get your family involved also. Everyone needs to know where the money is going so you can get an accurate picture of your expenses. You can use online programs like mint.com, personal financial software, or a spreadsheet. Just get it done. Update your budget every week. After 30 days you can see what you are spending your money on and cut unwanted expenses.
3. Automate for Success – Technology makes it easier to pay your bills, save money, invest, and make transfers. Automatic payments will help you avoid late payment fees. Alerts will update you on due dates, and low balances, and protects you against fraud. Automation can help you start a savings plan and pay down your debts. Create your budget and automate your finances.
Credit and Debt the Double-Edged Sword
4. Building Your Credit – Cash is king and great credit is the next best thing. Your credit report is your financial report card. It’s an assessment of your financial character. Check your credit report quarterly or every six months. Remove incorrect items. You want lower rates on your car loans, mortgage, and when you borrow money.
5. Kill Your Debts – Make a plan to become debt free. Refer back to your budget and see how much extra money you can put towards debt. Your personal debts, bills, and bad spending habits can ruin your business. Your debts can destroy your business and your business can pay off all your debts. Educate yourself and find the best debt-elimination strategies.
Income and Cashflow are Kings
6. Create a Cash Cushion and Emergency Fund – Put at least $1000 away now. People often get into financial crises due to the little emergencies of $100, $200, and $500. They don’t have this and go into debt with their credit cards or short-term loans. Create a cushion now and strive for six to nine months of living expenses. When business gets tighter your cash cushion will get you through the lean times.
7. Investment Plan – Get with your financial planner and diversify your investments. Diversify means different investment vehicles like real estate, stocks, precious metals, and other businesses. Your home business will provide the cash to invest. Put that cash into income-producing assets.
7.5. Live to Give – Don’t forget to give. Whether it’s for religious purposes or not. Giving is a wealthy habit. Giving means you have more than enough and you are sharing it. Plus it’s a great tax write-off. Giving is reciprocal and like attracts like. Live to give and make your community a better place.
Action Steps
Now you have 7.5 steps to get your financial house in order. Contact a financial planner, start saving, pay off debt, and make a budget. Get a plan and stick to it. You will thank me later.
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