th images menu user export search eye clock list list2 arrow-left untitled twitter facebook googleplus instagram cross photos entrep-logo-svg

Are You Taking Care of Yourself Financially?

Don't let running your business keep you from managing personal finances
By Brian Hamilton |

Are You Taking Care of Yourself Financially?

JGI | Jamie Grill | Getty Images

 

I’m sure there are great entrepreneurs who are good at three or four things in their lives, but in my experience, entrepreneurs tend to be very focused, especially on their businesses. Unfortunately, this means that most entrepreneurs are terrible money managers for themselves. I think they get so tied up in running their businesses on a day-to-day basis that they don’t think about their future financial picture.

 

One constraint is simply their available time. They just don’t have enough time, especially if they have families. Financial planning and management tends to be a long-term consideration, and most entrepreneurs are just surviving, so they intelligently put their time where it should be -- keeping their businesses alive and profitable.

 

The other pitfall is that entrepreneurs tend to have a lot of their net worth tied up in their businesses. In some ways, this is not a bad thing since it is a tax-free way to build wealth. However, most businesses are not liquid, and they have huge hidden risks over the long run. The probability of a good lawn cutting service that has been in business for 20 years going out of business in the next year might be low. The probability of it going out of business over five, 10 or 20 years is much higher.

 

The longer that you are in business, the higher the chance of failure. As a result, keeping a majority of an owner’s net worth tied up in their businesses is not always sound practice. I’m sure there is substantial data around my claim, but I have personally seen this at least a dozen times from entrepreneurs I know.

 

There is a prescription for this. Every entrepreneur needs a good certified personal accountant (CPA) who is good at financial planning or even a financial planner with a good track record. I’m always reluctant to give advice to people like me who wouldn’t follow it, but it is probably a good idea to get some good professionals on your side. Pick advisors who are older, who are risk averse and who you may not even like since they are so different from you.

 

If you are like me and don’t especially enjoy going to doctors or other advisors, I recommend that you put away 10 to 15 percent of every dollar of disposable income that you ever earn. Put it somewhere that you don’t touch. I prefer safe investments like real estate and indexed mutual funds or even government vehicles that carry no risk. Since your risk in life is already way higher than it should be, and way higher relative to other normal people in the world, be sure that your investments are super boring and conservative. Stay away from investments in Franklin Mint coins and mint condition baseball cards and oil wells… and IPOs. Your life is chaotic enough, so you don’t need to add to the chaos.

ADVERTISEMENT - CONTINUE READING BELOW

Finally, depending upon your age (sort of, although I think what I’m about to say is age independent), stay away from debt completely, especially debt incurred on consumer items such as clothes, cars, furniture, jewelry and other stuff you probably don’t need. Consumer goods go down in value and should never be financed. I realize this is a strong statement, but it is one borne from a lot of personal experience. 

 

 

*****

 

 

Copyright © 2017 Entrepreneur Media, Inc. All rights reserved.

This article originally appeared on Entrepreneur.com. Minor edits have been done by the Entrepreneur.com.ph editors

Latest Articles

How Much Money Do You Have to Make to Be Satisfied and Happy?

It's only a fraction of the millions you dream about

byLydia Belanger | February 26, 2018 06:00:00

8 Strategies to Become More Influential at Work

Wherever you are in the corporate structure, influencing skills are vital for anyone to be...

byConnie Wedel | February 26, 2018 02:00:00

Ryan Reynolds Just Bought a Gin Company He Called 'the Best on the Planet'

The company said Reynolds will 'play an active leadership role in the business and creative...

byAlison Millington | February 26, 2018 00:00:00

Did the 1986 EDSA People Power Revolution Make the Rich Richer?

Property boom boosts fortunes of the extremely wealthy even as widespread poverty persisted

byPauline Macaraeg | February 25, 2018 09:00:00

Ask the Relationship Expert: I Can't Stop Acting Like the Boss With My Partner

Sometimes you have to take off your 'boss' hat

byMarla N. Mattenson | February 25, 2018 08:00:00

10 Weird Habits That Can Actually Be Good for You

From cursing to fidgeting to eating chocolate, these so-called 'bad habits' can actually benefit you

byRose Leadem | February 25, 2018 06:00:00

7 Real-Life Business Lessons You Can Learn From Billionaires

The only variable you really control is how hard you work

byDeep Patel | February 25, 2018 02:00:00

Here's Why This Company Encourages Employees to Decorate Other People's Cubicles

It bridges the gap between work and personal life, making employees feel more connected.

byLydia Belanger | February 25, 2018 00:00:00

Try This New App To Help You Invest for Your Children’s Education

Manulife’s GradMaker app makes it easier and more accessible to invest your hard-earned money

byLorenzo Kyle Subido | February 24, 2018 09:00:00

How to Deal With the Criticism, "You need to be more likeable..."

Three ways to negotiate sexism in today's workplace

byCandace Sjogren | February 24, 2018 08:00:00

What Every Startup Must Do to Get Investor Ready

Fortune favors the prepared founder

byRyan Himmel | February 24, 2018 06:00:00

Can't We All Just Get Along? 5 Steps to Building Better Relationships

To succeed, you need to increase your versatility when it comes to people who are different from you

byDoug and Polly White | February 24, 2018 02:00:00