Personal Finance Mistakes Business Owners Make. Entrepreneur MBA Podcast 3.13
Summary: In today’s podcast episode Stephen Halasnik and his guest Eric Rosenberger discuss personal finance mistakes that business owners make. Whether you have owned your business for years, or maybe you are a small startup, these money mistakes can be applied to anyone. New business owners should be aware of their personal financial planning before they get too deep into the business. It is crucial that you know how to manage and avoid making the same common mistakes that other business owners make. Of course, all business needs are different, but these are some tips to take into account when it comes to personal finances and business ownership.
Financial Mistake: Not Having an Exit Strategy
Having an exit strategy is one of the most important aspects of owning a business. There are two main reasons why you should have an exit strategy. The first being from a strategic standpoint it is crucial to have a strategy in place to help secure and plan the future of the business. The second being from a wealth perspective, and in order to secure your personal wealth, you need to have a proper exit strategy. Many people get caught up in the quality of life that their business gives them in the present moment, that you forget what the long-term future will look like.
Oftentimes for small business owners, your money gets tied up in your business, and it can become easy to neglect future planning. Perhaps your personal finances and business finances have become meshed into one. Whether it accounts receivable, inventory, or equipment, everything you have is most likely invested in the business. If you struggle with personal expenses or personal finances, consider getting help from a CPA or look into bookkeeping. Bookkeeping is crucial for evaluating your profitability and cash flow, which will help you in setting up your exit plan.
With that being said, it can be easy to neglect planning options. However, it is crucial to be able to diversify your personal finances. It is a wise decision to set up a retirement plan because it has tax benefits. This is a great way to ensure you are putting away substantial money for yourself while reducing your tax liability. If you haven’t already, set up your IRA or 401k. Depending on your type of business, you want to deeply analyze how your cash flow is and what your payroll looks like so you are able to make the decisions best for you. Having a 401K as a business owner will also give you a competitive advantage in terms of securing your staff, and it will make them less likely to leave. Of course, there are caveats to every plan, and you want to consider a Roth 401K, which has tax-free withdrawals unlike traditional 401K’s. Every person and business is different, and you need to decide what will be best for you.
Financial Mistake: Not Preparing for Unexpected Expenses or Situations
When you are in a business and it is doing well, it can easily draw a blind eye to things ever going downhill. Things can go downhill unexpectedly for example during a time of a recession or pandemic, the fate of your business can be hindered. Whether unexpected situations occur, it ultimately will affect your personal life and your own business too. There can be short-term unexpected expenses or long-term, and it is best to prepare for both.
First, you want to prepare for a financial rainy day. Have a savings account that can cover any working capital expenses that come up or tax obligations at the end of the year. There are many different scenarios where you are going to wish you set up an emergency fund, and you want to do it before it’s too late. You can prepare for unexpected expenses in many ways. Perhaps you set up a business credit card or a line of credit or prepare a savings account. You don’t want to have to take out an unexpected business loan and then have expensive interest rates to pay back. Lines of credit will also help maintain a healthy credit score.
Next, you want to prepare for a personal unexpected situation. No business owner wants to prepare for when they are gone, but it is important to do so. Even more important than preparing for your wealth, you want to prepare for your family. It is smart to set up a life insurance plan. At the end of the day, one of the most important things you can do is a separate business from family. You want to make sure that even if your business fails, you are not going to leave your family in the cold.
For small business owners, it can be easy to get so invested in your own business. This can be a great thing in helping your business grow and expand, but you also need to make sure you have proper budgeting and planning strategies in your position. When things are going well, it’s easy to forget about the future, but the future is just as important as the now. Especially for new or first-year business owners, these long-term planning tips are going to help you years down the line even if you don’t use them now. As the amount of money you make increases, you want to make sure you are able to manage it correctly.
About the Guest Eric Rosenberger, CFP, CFS, Synthesis Wealth Planning
Eric is one of the Managing Partners and Wealth Planners at Synthesis Wealth Planning. Since 2003, he has provided proactive and holistic wealth planning to multi-generational businesses, entrepreneurs, C-suite executives, and retirees. He manages a coordinated team of experts to support clients in all facets of their personal and business planning.
Eric is a Certified Financial Planner™ and Certified Fund Specialist™. He graduated from Sacred Heart University with a bachelor’s degree in Finance. He teaches retirement workshops at local colleges and high schools that focus on protecting retirement savings from the impact of rising taxes. He has also been interviewed and quoted in numerous financial articles featured on US News and Yahoo Finance.
To contract Eric: [email protected] (732) 510-1620
About The Host Stephen Halasnik, Financing Solutions
Stephen Halasnik is the host of the popular, The Entrepreneur MBA Podcast. The Entrepreneur MBA podcast’s purpose is to help small businesses get over the $10 million per year in revenue mark. Mr. Halasnik is the Co-founder and Managing Partner of Financing Solutions. Financing Solutions is a leading provider of Lines of Credit to small businesses and nonprofits
Mr. Halasnik is a graduate of Rutgers University and has an Executive Masters from the MIT Birthing of Giants Entrepreneurship program. Mr. Halasnik has started and built 6 companies over 25+ years with 2 of those businesses making the Inc 500/5000 fastest-growing list. Mr. Halasnik is a best-selling Amazon author on business and regularly tweets about his ideas about growing a business. You can also find Mr. Halasnik on youtube talking about Entrepreneurship.
Mr. Halasnik loves small business. He lives in New Jersey with his best friend, his wife Gina. Mr. Halasnik’s number one purpose is raising his two boys, Michael and Maxwell, to be good men.
About Financing Solutions
Financing Solutions small business financing product is a great alternative to a traditional bank line of credit because it costs nothing to set up, nothing until used, and when used, is inexpensive. The credit line requires no collateral and no personal guarantees.
Small businesses use their line of credit to help with emergencies or opportunities when cash flow is temporarily down (i.e. Payroll funding)
Please feel free to fill out the no-obligation, 2-minute business line of credit application here. The time to set up a credit line is when you don’t need it so that it is ready to be used, just in case.
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