Not too long ago there was a notecard floating around Twitter with some basic financial planning principles. I thought it was a great idea, but soon after reading it for a second time, I realized not all of the principles on that particular notecard applied to entrepreneurs.
Entrepreneurs typically have different risk tolerances and financial needs than the majority of the public–not better or worse, just different. So I decided to make my own financial notecard for entrepreneurs.
- A Budget. Budgets are a necessity for everyone and will show up on every guide to financial planning list. For an entrepreneur having a grasp of not only your personal budget but also your business budget is a must. In order to know what you need to take from your business, you need to know how much is required each month to live. Be sure to identify WANTS vs. NEEDS.
- Save More Than You Think You’ll Need. You’ll always need more than you think you’ll need to get started or for growth. Cash is king at times, so build yourself a cushion to make sure you aren’t stressed.
- Protection. Make sure you have your family protected. Don’t skimp on life insurance OR disability insurance. Neither are fun things to think about and both require adding an additional expense to your budget, but making sure your family is provided for during a time of need is a priority. Don’t skip disability insurance.
- Debt. Not all debt is bad. Use it sparingly and make it your ally, not an enemy.
- Reinvestment In Your Company. Be anxious to get back to saving again. Be anxious to start investing again. But don’t forget to reinvest back in your business. Reinvesting back in your business might be the best saving/investing strategy you will have–just be sure to have a plan for reinvestment and balance things out with traditional investments along the way.
- Take Care Of Your Team. It’s easier and cheaper to retain employees than to have to train new employees. Create an environment good employees never want to leave.
- Cut Losses Quickly. Whether it is an investment in a team member or new opportunity, if it’s not working end it quickly. Rarely does more time bring anything more than additional headaches and expenses–avoid the sunk cost fallacy.
- Hire Professionals. Hire a CPA. Hire a financial advisor (preferably a CFP® professional). Hire an insurance agent (preferably an independent agent). Do so ASAP.
If you want a copy of the notecard, let me know…I’ll happily send it to you.
This blog is purely informational and designed to get you to think; in no ways should this information be mistaken for financial advice. Please consult your financial advisor to discuss how this could impact your personal situation.