Treat Your Personal Finances As You Would Your Business
November 4, 2020 - 2 minutes read
Posted by Xentum
At a recent webinar, I spoke about the importance of aligning personal and business finances. So often, business owners get 100% focused on growing their companies, to the detriment of their personal finances. And whilst you may enjoy running your company, surely the whole point of building a company is to create a comfortable, financially-free lifestyle for now and the future?
Try this simple exercise.
Draw two circles. One to represent how much time you spend each month thinking about and planning your business finances. And draw the other circle to represent the time you spend thinking about or planning your personal finances. Typically, this exercise results in circles that look like this:
The consequences of this are that you grow your business and you increase your personal wealth but you still experience anxiety or concern about money because you haven’t worked out the inter-relationship between your business and personal finances.
If you don’t have a personal financial plan then there’s a high chance that you don’t know the true cost of the lifestyle you really want now and in the future. You simply keep working for that ‘big number’ whatever that number may be.
Another thing that you’ll notice about these circles is that they don’t overlap. They need to.
Whilst you may have other sources of income, your business feeds your personal wealth, so your personal finances are highly dependent on your business plan. Indeed, your business plan should be driven by your personal financial plan – it should be aligned with the income and financial security you want to achieve for the lifestyle you want now and the future. Without this alignment, you can expect to be dissatisfied, constantly striving to earn more, but also unsure of when you’ve achieved what you need.
In an ideal world, your two circles should look like this:
You may not need to dedicate an equal amount of time to your personal finances as you do your business (unless you’re reaching a critical point, such as preparing your exit). But a clear personal financial plan should always be front of mind when reviewing and tracking your business plan. Then, and only then, will you be able to safely say that the effort and energy you’re putting into growing your business is worth it.
How can we help?
If you’re focused on growing your business but haven’t got a personal financial plan to inform your thinking, speak to us. We can help you clarify what you want to do with your money, now and in the future, and this will help you understand what you need from your business. In this way, your business plan can become aligned to your personal financial plan.