When you first started your own business, you were probably looking forward to increased Freedom, choice and opportunity. Has that been your experience so far? Probably not. All too often, Business Owners fall into the trap of not separating personal and business expenses. They put their company before themselves—at the expense of their own financial future.
The Reality of Entrepreneurship
As a business owner, you likely have 50% lower net worth than someone who stayed in a traditional job. You probably rarely pay yourself, and when you do give yourself a paycheck, it’s almost certainly not enough.
And if you think that’s okay because you’re sacrificing for your future, think again! There’s actually an 80% chance that, rather than selling your business for a profit when you retire, you’ll simply close your doors.
So what can you do to grow your business, protect yourself and support your future? As a business owner who wants Financial Freedom:
- You need to start separating personal and business expenses;
- You MUST pay yourself a consistent income; and
- An exit plan is essential to your ultimate success.
You’re Financially Vulnerable
Business Owners are financially vulnerable as they try to build their business, because entrepreneurship requires risk. Before you expose yourself to the level of risk needed for success, you must be personally Financially Fit. And you must have a system that keeps your business and personal finances separate. Without both those pieces in place, when you’re faced with that do-or-die choice, how will you feel confident enough to take the chance you need to?
Pay Yourself First
You need to make your financial safety a priority, and you must pay yourself a consistent income. Without a strong personal financial base, you can’t maintain the lifestyle that lets you put in the hours and effort needed for entrepreneurship. When your personal financial world is in order, you’ll see very quickly how your business benefits.
The Business Owner Trap
You had a business plan to start your business, and you need an exit plan to protect your future. In Cash Flow Cure, we answer these two questions first: what kind of business do you have, and what is the best way for you to transition out? Your answers to these questions can mean the difference between Financial Freedom and chronic money stress.
For every entrepreneur who has taken the world by storm, there are many more who have seen their dreams crumble. Don’t let this be your story. Keep in mind that you’re not your business, and you’ll reach Financial Freedom on your own terms.
image credit: Bigstock/JacobLund
Dr. Tony is the co-founder of MindShift.money and the best-selling author of three books on personal and business finances. Having achieved Financial Freedom at 27, Dr. Tony believes that through Financially Fit Bootcamp and Cash Flow Cure everyone can get there. He has made it his life’s mission to help others live a life where their money works for them—not the other way around.