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6 Personal Financial Planning Tips Every Entrepreneur Should Know

Whether you have had one business or several, seeing your ideas become a reality can be a unique and profitable thrill. People are drawn to entrepreneurship for a range of reasons: 

  • Making an impact in the world
  • Personal accomplishment
  • Helping others achieve their goals
  • They see it as a mandatory journey 
  • Enjoyment of the risk
  • Wanting to work for themselves (not a boss)
  • Not wanting to follow the 9-5 routine

Regardless of your industry, the type of business you run, or your motivating force, the path can be rewarding.

It can also be stressful and rife with challenges. Entrepreneurship is a lot more physically and mentally demanding than people think. Most entrepreneurs work more than 40 hours a week, and many do not have the healthcare or retirement benefits that would accompany a corporate job. 

Your Best Defense is a Good Offense

Business owners are responsible for financial obligations like insurance, savings, and retirement. It can be tempting to keep your head down, pour everything into the business, ignore personal financial planning, and hope it all works in your favor. However, retirement and unexpected circumstances are inevitable. There is no substitute for preparation.

You probably know the adage that says, “the best defense is a good offense.” As an entrepreneur, personal financial planning is your best offense. Having control of your finances will help you navigate past challenges and grow your business in exciting ways.

Here are six personal financial planning tips we think every entrepreneur should know.

Chapter 1

Financial Discipline Forms a Stable Foundation for Growth

“Financial discipline is the foundation of any growing business.” 

Understanding your financial goals and working toward them will help to ensure continued growth, even if you’re not the one pushing it forward daily.

The excitement that accompanies entrepreneurship can often overshadow your need to follow through with financial goals. Long-term financial goals are often ignored until they become necessary to move forward with your business plans. 

However, entrepreneurs who neglect to prepare financially expose themselves to unnecessary challenges, including difficulty obtaining loans and financial partners. Financial planning can be tedious, but it has many powerful benefits, including:

As a CEO, your personal finances are as important as the business’ finances. If you are overdrawn or facing an emergency without sufficient funds to cover it, you may need to draw personal funds from the company. The more efficiently you run your business and personal lives, the more productively you can move towards your goals.

At Brown | Miller, our disciplined process enables us to build a long-term, meaningful financial roadmap that adjusts as you navigate life experiences.

Chapter 2

Know Your Financial Numbers

The first step for any entrepreneur is writing a business plan; a personal financial budget should be included. Incorporating both budgets in your plan delivers a complete picture of the resources available and the business income required to thrive.

Knowledge is power, especially within financial planning. Your financial numbers include:

  • Income
    • How much money is coming in?
    • What is the net cash flow?
    • Which income streams are most profitable?
    • How much is available to reinvest?
  • Expenses 
    • How much is going out?
    • Where is it going?
  • Debt
  • Net-worth

In the growth stage of any enterprise, the more capital you have to reinvest, the more freedom you have to follow through on opportunities. Clarity on your personal and business numbers means you can reduce unnecessary spending and know what you have available to invest. 

It also means that all of your documents will be ready if you have an opportunity that requires outside investors or a loan. This allows you to capitalize on good fortune, hard work, and grand ideas.

Our services are highly customizable: we will dig into the details of your financial situation to ensure that we have a complete understanding of your financial objectives and risk profile.

Chapter 3

Don’t Neglect Your Contingency Fund for Emergencies

The ability to weather unexpected market conditions is essential for your business’s livelihood. While other companies are scrambling to survive, you can be positioned to respond to the moment. 

For example, when COVID hit, many businesses had to close their doors. However, those that were agile and had contingency funds had the time to adapt to the new marketplace and survive until federal funds were available and, finally, lockdowns lifted.

Contingency funds are not just for public health emergencies. You can use them for unexpected events such as the loss of a significant client. With at least three to six months of operating funds available and liquid, contingency funds provide a safety net to boost your business’ resilience when the unexpected happens.

Savings is often an afterthought for entrepreneurs focused on growing their businesses. Developing a savings plan can help you avoid financial stress caused by emergencies or surprises. Your financial planner can help set up strategies that encourage you to save consistently and automatically for ongoing, personal use.

An old expression supports this: “prepare and prevent, don’t repair and repent.”

Our mission at Brown | Miller is to profoundly enrich the lives of our clients through the power of compounding capital and a well-designed wealth management plan. This includes unforeseen events.

Chapter 4

Minimize Your Insurable Risk

Business insurances such as general liability, property insurance, and business interruption insurance can help protect your company’s insurable interests. Personal insurance products such as health, life, disability, homeowner’s, and personal property can protect your personal financial well-being.

Not everything is insurable, and not every insurance product is a wise financial decision. Prudent insurance planning provides the right coverage for your circumstances and stage of business growth. 

At Brown | Miller, we can refer you to commercial insurance professionals who can help you select the right products to protect your interests and assets without overspending. We can also help clarify the limitations and exclusions associated with each product. Reach out to our team to ask your questions.

Chapter 5

Focus on the Motivation Behind Your Long-Term Financial Goals

The entrepreneurial spirit encapsulates a boldness that most people admire but never embody. It’s the courage to trust in yourself, your ideas, and your ability to accomplish and lead. It’s a willingness to face challenges and forgo comforts enjoyed by less adventurous and more stability-seeking types. 

Many successful entrepreneurs joke they are unemployable; they respond to an inner fire that drives them to pave their path.

On their own, long-term financial goals are not enough to pull most people along the path of success. They are crucial but only take on natural vibrancy when we think about how their achievement relates to our life experience. 

Tell us what your goals mean to you and why you want to achieve them

The long-term financial goal that empowers you day after day will be the one that matches your heart’s desire and, more importantly, is in line with your authentic motivation. Goals that don’t fire you up will not do much good if there’s no energy driving them.

Your long-term financial goals are more than a destination. They dictate how you live your life for years to come and take a significant amount of time and effort to achieve. Make sure they mean something to you. When motivated by your vision, you can align your life with that future.

Being a Registered Investment Advisor (RIA) allows our team to provide laser-focused customer service and conflict-free investment strategies. 

“Brown | Miller was founded on the belief that there was a need to personalize the client relationship by serving as your financial guide, building and protecting your legacy.”

Chapter 6

Work with a Fee-Only Registered Investment Advisor (RIA) and CERTIFIED FINANCIAL PLANNER™ (CFP®) Firm Who Understands Entrepreneurship

Financial planners are professionals who help you design a plan that meets your financial needs. Entrepreneurs have unique requirements and face different challenges than high-net-worth individuals who work for an employer. They are often responsible for individual or group health care plans, retirement plans, insurance, and complex tax considerations.

The financial planning world offers various professional services. For example, a fee-only financial planner does not earn commissions on products and services. Their only source of income is through clients who choose to work with them. The advantage of this relationship: the advisor’s interests are tied to yours rather than the sale of products or services.

A CERTIFIED FINANCIAL PLANNER™ (CFP®) has met rigorous education, training, and ethical standards in financial planning. They have gone beyond the average preparation and are held to a higher ethical standard. 

The advantages of receiving personal financial planning for entrepreneurs through a fee-only CFP® are many. The most important: in-depth expertise can focus on your unique challenges and those of overarching entrepreneurship.

CFP® professionals experienced in working with entrepreneurs should be able to answer questions about tax planning, insurance issues, budgeting, debt management, retirement planning, partnerships, wealth management, business succession planning, and estate planning.

At Brown Miller Wealth Management, our team holds at least one certification, including CFP®, Certified Investment Management Analyst® (CIMA®) for wealth management professionals, and Chartered Retirement Planning Counselors (CRPC®) for more profound expertise in retirement planning.

Your Success is Bigger Than You

Successful entrepreneurs enjoy financial freedom and other benefits from what they’ve created. However, the impact of entrepreneurs reaches far beyond an individual’s success. Entrepreneurs introduce innovative technologies, products, and services and boost economic growth

They provide jobs and use business services. Entrepreneurs increase the competition in the marketplace, forcing everyone to evolve and improve.

As an entrepreneur, you understand the value of a good idea, a dedicated team, and steady cash flow. However, managing their finances doesn’t top the to-do list for many entrepreneurs. An accountant will help you track your money flow, but an experienced and knowledgeable financial advisor can help you navigate every aspect of financial planning, investment, and growth.

You are not the only one impacted by your success, and your business may be your largest asset. If you haven’t already enlisted the aid of a fee-only CFP® who understands how to help entrepreneurs, reach out to the team at Brown Miller Wealth Management today.

Disclaimer:

This article is intended for informational purposes only, and not to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs, and investment time horizon. This report is for general informational purposes only and is not intended to predict or guarantee the future performance of any individual security, market sector, or the markets generally.

The information provided in this article represents the opinions of Brown Miller Wealth Management (“BMWM”) and is expressed as of the date hereof and is subject to change. BMWM assumes no obligation to update or otherwise revise our opinions or this article. The observations and views expressed herein may be changed by BMWM at any time without notice. The information may be based on third-party information, which is deemed reliable, but its accuracy and completeness cannot be guaranteed.

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