As a small business executive, getting caught up with the day-to-day tasks of running your company is easy. But as a small business owner, you have responsibilities beyond ensuring that your employees do their jobs and meet client expectations.
You also need to ensure that your finances are in order so that they do not impact your ability to manage the company. Fortunately, executives can take several simple steps to help keep their finances on track while juggling their professional responsibilities.
The number of small businesses is increasing gradually. Currently, there are around 33.2 million small businesses in the US. Also, many new startups launch everyday. However, only a few survive for over a decade, as most small businesses close due to financial issues. This is especially true if the sole financial support of the company is the founder.
The financial landscape for small business executives can be challenging, but it doesn't have to be. The key is knowing what you're doing and planning. So, you can consider the competition for success to be as strong.
The first step in managing your finances as an executive is understanding the basics of personal finance management. This includes budgeting, saving money, investing, and paying down debt. These are all skills that every small business executive should learn if he or she wants to succeed in today's economy.
Once you've mastered these skills, there are two main areas where most small business executives need help:
All of these are possible with the proper financial knowledge and support.
As a small business executive, you can't afford to be in the dark when it comes to your finances. You have enough on your plate already. However, to get ahead in life and business, you must understand how money works and how best to use it for your benefit.
But if you don't know about this, consider hiring a financial planner or advisor. These professionals will work with clients like yourself who need more time or expertise in investing or managing their personal finances. They can help you with long-term financial planning and portfolio management.
In fact, the number of financial professionals is about to grow due to the increasing demand. According to the U.S. Bureau of Labor Statistics, personal finance advisor requirements will grow by 15% from 2021 to 2031. This gives you more flexibility to find the right individual for your needs to ensure a fruitful long-term relationship.
A long-term relationship is crucial if you want your finances to be on track consistently, and this is only possible with trust. According to Burton Enright Welch, confidence and trust are the keys to a long-term relationship with your financial advisor.
You must believe that he or she will always keep your and your family's welfare in mind. And to achieve this confidence, you must hire the right advisor for your requirements.
Here are some things that every small business executive should know about working with these professionals:
You must understand the importance of saving and investing in building a solid financial foundation.
First, you should prioritise your financial goals and determine how much money you can spend on them monthly. Once that's done, start saving for each goal by putting away small amounts at first so that it feels manageable. Then increase the amount over time as your income grows or more money becomes available in other areas of your budget.
To diversify your investments so they're not all tied up in one place, consider investing some into stocks or bonds instead of just keeping them all liquid in cash accounts. You can also use mutual funds or real estate or invest in other businesses.
According to Forbes, you can ideally divide asset allocation models into three groups:
Debt has always been the biggest problem in attaining financial independence. Many Americans are in debt. In fact, figures say that Americans have approximately $986 billion in debt on credit cards, which has crossed the pre-pandemic levels. As a small business executive, you can easily get trapped in debt because of the high financial requirements in your personal or business life.
When you're running your own business, it's easy to get caught up in the excitement of growth and expansion. You may feel like you need more money for marketing or equipment, but avoid being tempted by debt. While it can be tempting to borrow from friends and family or even use your 401K fund as collateral for a loan, these actions will only put your personal finances at risk.
Instead of taking on more debt than you can afford, focus on growing slowly while keeping track of all expenses so that they don't exceed income levels. This will allow you enough time to build up equity before taking out any loans and keep yourself out of trouble!
Maximising income and investments can be done in several ways. The first step is to increase your salary, which may mean asking for a raise or working more hours. If that doesn't work, you could always start a side hustle to bring in extra cash.
Another way to maximise income is by investing in a gold IRA or other types of IRA, 401k plan, or other retirement investment option. IRAs can be exceptional for long-term financial planning. They represent 34% of total retirement market assets in the US. However, it can be a riskier option if you put all your money into these accounts without understanding what they are or how they work.
Another critical aspect of managing personal finances is minimising the tax burden. Taxes are a significant expense for small business owners, and they can become an even more substantial burden when you're not organised and planning.
When it comes to taxes, there are two primary types, federal and state/local. Federal taxes apply to all income earned by your business, while state/local taxes only apply to certain types of income. You must file federal and state returns yearly unless you qualify for an exemption. And even then, some states require separate filing requirements or schedules in addition to their forms!
Your personal financial goals should be aligned with those of your business. This means setting goals like saving for retirement, buying a house or car, paying off debts, etc. It's important to consider what kind of lifestyle you want and how much money it will take to achieve these things. It's also important to set professional financial goals that align with those of your company or organisation.
In conclusion, financial management is a complex task that requires knowledge, resources, and tools. As a small business executive, you must ensure that your finances are focused on running your company successfully and efficiently. The tips in this article will help guide you through some of the most critical aspects of managing personal finances. Consider these tips and seek help from a financial advisor to manage your finances effortlessly.
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