3 Common Financial Mistakes an Entrepreneur Can Make
As an entrepreneur, you will or have experienced a set of unique life changes. Many do share the road to success and accomplishment. However, few have experienced spearheading their own venture and have to combat the responsibilities and the new set of rules that follow. We understand starting your own business is fraught with constant challenges. One of these difficulties will be paying yourself as the owner.
1. Sending Money to one Account:
One of the biggest mistakes a business owner can make is not having a separate business and personal checking account. If you don’t have separate accounts, stop reading right now and go open one.
You are not paying yourself, but rather flooding money in without any structure. When your personal and business finances are mixed there is no way to develop a clear understanding of your financial state. This also makes developing and staying within a budget difficult and makes it’s easier to overspend and harder to reach your personal or business goals.
2. Paying Yourself as Money Comes in:
I know it is tempting to pay yourself as money comes in but drawing out money that way is very dangerous for your business. Sure, you get some extra spending money, but you are also leaving your company in a difficult situation when it comes to paying bills.
Drawing out money whenever it may come in is deceptively dangerous to your personal finances because you wind up feeling like your funds are limitless. Which of course they are not. You don’t have unlimited funds. You and your business have bills to pay, credit card payment, and goals you are aiming for.
3. Paying Yourself When Needed:
So maybe instead of paying yourself as money comes in, you are just paying yourself when you need to pay your housing bill. The problem here is that you are not handling your personal needs as a business owner effectively. I understand the argument that you might possibly be wanting to keep the majority of your funds in your business but you also need to be sure you are benefiting from your business. If you are not benefiting, then your business is going to suffer.
Even if you don’t want to or can’t afford to pay yourself huge sums of money every month, you still need to draw out something reasonable. At least enough to cover your personal expenses and savings goals.
Don’t be trapped in the idea “ I will get paid when my business is more successful.” What will happen is your business will become successful without knowing how to pay you. And when the time does come your business will struggle with this new monthly expense.
What to Do:
- Develop a regular pay schedule for yourself
- Set an amount based on carefully calculated financial needs
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