If you’re a small-to-medium-sized business owner, not only will you be responsible for the financial success of your company, but you will also have to make time to keep your personal finances in check. According to The New Daily, Australians are more indebted than ever, largely because of mortgages. Official data concludes that Australian households during the March quarter owed debt that equaled 190% of their annual disposable income. Clearly, our personal finances need just as much care and attention as those related to our businesses.
The good news is that much of the advice that can be applied to our businesses can also help us to achieve personal financial stability. It’s simply a question of cleanly and neatly transferring these skills from one area to another.
Third-party financial analysis
According to business development group GR-US.com: “there are only two ways of learning from your mistakes: you can learn from your own mistakes or you can learn from the mistakes of others”. This means that one of the best ways of achieving financial success, whether it’s personal or business related, is to analyse the actions and results of others.
While friends and family may be willing to impart personal financial advice for free, it’s important that you only follow in their footsteps if there’s solid evidence to suggest that their methods have actually paid off. Listening to those around us without fully investigating the success rate of their recommendations would be a poor financial move, both in the office and at home. However, if we have the chance to thoroughly analyse the results of a financial decision employed by a third party, we are liable to gain valuable insight that can save us from the perils of making costly mistakes. Indeed, trained business analysts can be vital when dipping into the benefits of third-party analysis for the first time.
Even when we think we’re onto a winning business venture, it would be foolish to assume that everything will simply work out perfectly. Small-to-medium business owners should place funds and invest time in a second side business, even when their primary business has been running well for years. If a second business gets too much to handle, setting aside investments of some kind is another effective option. You can never be sure that your business’financial situation isn’t going to change and so it makes good financial sense to have a Plan B in place at all times.
The same advice can be applied to personal finances. Having all your savings or cash in the same bank account or in the same investment fund is never a good idea. Banks do sometimes crash, even when they haven’t been known to crash before. By placing your finances in more than one place, you keep yourself, your assets and your home better protected.
When you own a business, your monthly income is rarely regular. This means that at certain times of the year you will need to adjust your expenditures to fall in line with your profits. However, there are certain expenditures you won’t be able to cut back on and that by law you must comply with. Staff wages are just one example.
Similarly, at home, while you may be able to cut back on your weekly shop or those little luxuries, like eating out with your family, you won’t be able to avoid paying health and education bills. This is why it’s important to top up your savings every month. Rainy day money is your safety net. It helps to keep you out of debt and therefore avoid the crippling pressures of credit interest.
Professional Tax Advice
Even if you’ve become a dab hand at filling in your annual tax return, you should still seek out the professional support and advice of a tax advisor for both personal and business reasons. There are many tax savings to take advantage of when you know what to look for, but it’s not always possible to keep on top of all the changes and all the tax savings that are applicable in each and every situation. This is what makes a tax advisor so useful.
On a final note, keep your personal and business finances completely separate. Not only will this improve your business’ credibility, but it will also help to reduce your personal liability, in the event that something worrying occurs, and make tax season a lot easier to deal with.