By Rhonda Campbell
Congratulations. You’re the owner of a micro business. A typical day for you might send chills up millions of other people’s spines. After all, there’s a good chance that you handle every aspect of your business yourself, including the finances.
Personal Savings to Fund Micro Business
If you’re not careful you could end up tapping into your personal savings to fund your business, especially during slow sales cycles. Before you know it you’re retirement savings could be gone and your kids’ college fund might not have enough money in it to cover the costs of one year’s worth of college textbooks.
You can avoid emptying your personal savings if you give yourself boundaries and start managing your finances with the same razor sharp focus you use to manage other aspects of your business. For example, you can:
- Create a personal budget and stick to it
- Develop a line item budget to track your business expenses (you might be surprised at what you’re spending money on; some expenses you may be able to cut out)
- Compare rates on business loans before you take out a line of equity on your home (it won’t cost you anything to shop around)
- Pay back loans and credit cards (they’re really bank loans too . . . just with a lot of interest tacked on) as soon as possible
- Cut out unnecessary spending (e.g. $8 sandwiches from the local diner for lunch, coffee at $4 a cup)
- Avoid using credit cards to pay for monthly services (e.g. utilities)
- Work out of your home versus renting office space
- Consider consulting for other clients during slow business sales cycles
- Look at and balance your personal and business accounts at least once a month (no burying your head in the sand)
- Open an account to deposit money to cover your self-employment taxes into
- Take advantage of discounts, sales and coupons when shopping for business products and/or services
- Invest in yourself by opening and building a retirement savings
Paying attention to your personal finances while you operate a micro business is well worth the effort. After all, by creating (and sticking to) personal and business budgets you can see where your money is being spent. You can also tell if there are spikes in your personal spending (e.g. emotional buying) that you can cut out. Most of all you may be able to start building a savings, even as you manage a micro business.
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Sources:
http://www.sba.gov/sites/default/files/files/Finance%20FAQ%208-25-11%20FINAL%20for%20web.pdf (Small Business Administration: FAQs About Small Business Finance)
