It's then easy to see how your personal finance needs can get lost in the melee of running your business. If you are thinking of starting your own business (or already have started one), there are some things you need to be especially mindful of when it comes to your personal finances.

Here are some of the personal-finance challenges entrepreneurs face as well as tips to overcome them:

1.       Irregular, volatile income. Most new businesses do not make money on a regular basis, and even when they do, the amounts are not consistent. You will have months where you make large sums, and other months when you make very little or even nothing at all. This makes planning for your expenses trickier than if you were on a monthly salary since you still have recurrent bills such as rent and utilities.

To enable you to manage your expenses on an irregular income, you should ensure you have enough savings to rely on in the leaner months. Your emergency savings fund ought to be a lot larger than that of your employed counterparts, and needs to be consistently replenished. Additionally, during the months that you earn large sums, it would be advisable to make lumpsum payments for your major expenses such as rent and your kids' school fees. Try as much as possible to stay ahead of your expenses. Use a budget to keep on top of your expenditure.

2.       Blurred lines between personal and business finances. You may find it difficult, especially in the beginning, to separate your personal finances from that of the business. More so in the case of a sole proprietorship. But for the growth of your business and your personal development, it is advisable to keep the two separate. Often entrepreneurs find that they are unaware of the profitability of their businesses because they treat the revenue from the business as their personal income. This intertwining of finances also makes tax management difficult.

Aim to keep your personal accounts separate from the business accounts. Pay yourself a salary if you can. If a regular salary is not yet feasible, you could opt to pay yourself a constant percentage of the company’s net returns to ensure you are not dipping into the company’s profit and/or capital.

3.       Debt management. Debt can be particularly problematic for entrepreneurs. For many new business owners, they may feel that they need to borrow to stay afloat; and because of the blurred lines between business and self, they often take on personal debt. While a business loan may help a business grow it is important to be sure all debts are well thought out and planned for.

Be careful with any debt you take on. Ensure you only borrow what you can afford to pay back, and only what is beneficial to the business. Avoid personal debt as much as you can, unless it is good debt (such as a mortgage) and your income has gotten stable enough to handle the regular repayments.

4.       Managing external risks. Entrepreneurship on its own is quite a risk. You, therefore, need to mitigate against further external risks such as loss of property, illness, death etc.

To minimize the risks you are exposed to, you should insure what matters to you. Some of the covers you need to obtain are health insurance (to take care of you and your family in the event of illness), Business insurance (to cover stock and premises and possible liability claims) and life insurance (to ensure your dependents are taken care of in the event of your demise). There are several other covers you should eventually obtain, but these are key.   Even if you will opt for lower insurance limits, it will provide you with enough protection to prevent one catastrophe from financially ruining you and your family.

5.       Investing. Business in itself is an investment. However, you still need to diversify. Spread your risk by investing in other products/ sectors as well.

Invest your earnings to accelerate your personal wealth. Ideally, you should invest in a manner that will ensure you will not have to rely on your business income forever for your sustenance.  The goal should be for you to be able to run your business because you want to not because you will not survive without it. Therefore, budget for investing regularly.

6.       Retirement planning. Being in business means you do not have an employer-provided pension scheme supporting your post-retirement plans. While we sometimes like to imagine that there is no retiring from business, ageing is a very real thing; you should not have to (nor are you likely to be able to) work as hard as you are now when you’re in your twilight years. So, even within your business, you need a retirement plan.

You should contribute towards an Individual Pension Plan to ensure you have a nest egg for your golden years. Since your income may be irregular, it would be advisable to deposit lump sums into this fund in the months when you make a larger income. Additionally, you should consider where you would like to live post-retirement and plan for this accordingly.

If you take the time to organize your finances and hold yourself accountable for the things you have committed to do, you will find your entrepreneurship journey that much more enjoyable and your business will have a fighting chance at thriving. Be patient with yourself, and try to begin with the right structures in place.

Now. Go forth and prosper!

If you to have a chat about entrepreneurship and your money, you may book a no-obligation, free 30-minute Zoom session HERE.