Whether you are a new or long-time business owner, personal financial hardships can happen to anyone at any time. In a 2016 article on Forbes.com, it was reported that about half of Americans are not prepared to handle a financial emergency. Because the health of your personal and business finances are so closely related, an issue in one area can quickly cause problems in another. If you find yourself having personal finance issues, is there any way you can prevent those problems from affecting your business?
Thankfully, the answer is ‘yes.’ Discover three proactive strategies that can prevent personal financial issues from impacting your business.
Maintain separate personal and business finances
If you haven’t taken the steps to do so already, keep your personal and business finances separate. This includes separate bank accounts, credit cards, and so on. Why? Not only is this method of money management more efficient, it creates two separate financial “worlds” for you to work with. You’ll be less tempted to work with your available business funds to solve problems that should be handled by your personal accounts. Creating distinct accounts for both you and your business will put physical distance between each area of your life.
Create a sufficient cash safety net
If you are part of the half of Americans who do not believe that they could handle a financial emergency, now is the time to change that. Build up your personal savings so that you have a sufficient cash safety net to cover major expenses. In case of personal financial issues, you can use your added savings to handle whatever comes your way.
Know your personal and business credit scores
According to the experts at AAACredit Guide (AAAcreditguide.com), keeping track of your credit score is important. This goes for both your personal and business credit scores. Knowing where each of your credit scores stand can help you assess your ability to get a personal or business loan in case you need one. It can also help you learn where you can make improvements to boost your scores. In the event you experience challenging personal financial circumstances, you will have a good understanding of your current credit situation.
A few simple steps can help prevent you and your business from unnecessary financial hardship. As mentioned above, start by maintaining separate personal and business finances, create a cash safety net, and know your personal and business credit scores. Empowering yourself with tools and knowledge can be the difference between a financial inconvenience and a financial crisis.