Personal Finances
Insights & Tips Entrepreneurs Can Use to Help Manage Their Personal Financial Lives
Being an entrepreneur can mean a lot of different things to different people, the descriptors are almost endless. However, I believe there are some words all entrepreneurs can identify with:
- Creative
- Visionary
- Bold
- Determination
- Problem Solver
- Intrepid
- Risk Takers
- Passionate
Did you notice that none of them have anything to do with money? I have had countless conversations with entrepreneurs about their startups, and honestly, I can’t recall a single one that talked about money. It was always the “why” and “how”. Entrepreneurs tend not to create things that solve problems for money, money is simply the byproduct of building something of value that benefits humankind.
It has been my experience that founders of startup companies are so hyper-focused on building their companies that they tend to forget, put aside, or are not even aware of the personal financial strategies they could be using to better position themselves and their families for the future. Sometimes it is simply not knowing what they don’t know, and given all the stresses and time management issues that come with starting a company, who can blame them for not making this stuff a priority?
Although money is not the driving force for most entrepreneurs, it is certainly on their minds. Money is a tool. They use it to build & scale their businesses. They also use it to provide for their families, giving them a lifestyle they never had, and allowing them to experience life through a variety of opportunities. They also use it to give back in the form of charity and invest in other companies. They understand how hard it is to build a successful company and want to give back to those just joining the entrepreneur ranks.
Most entrepreneurs understand that money is simply an idea. They don’t want the money for the sake of having money, but for what the money does. They respect this idea and are not afraid to pursue their passions using money to make things happen! In other words, they have a mutually respectful relationship with money.
3 Personal Financial Tips for Entrepreneurs
I recently conducted a focus group with founders. One of the things I learned is that they all agree that personal financial planning is important, but when they are pulled in so many directions already, it is tough to add one more thing to the plate. However, they all said that they wished they would have started planning sooner.
Based on my experience working with entrepreneurs, here are three personal financial tips entrepreneurs can start using right away:
- Define your Hopes, Dreams, and Goals
What does this have to do with money you may ask? Well, everything! If you believe that money is an idea and tool, then you will agree that we need it to do the things we want to do in life. But if we don’t define those things then how can we plan for them financially?
All too often we get caught up in the day-to-day hustle & bustle of running a business, and for some also running a family at the same time. It is understandable to say “someday” I will get to plan for the things I want to do in the future given our hectic schedules. I can tell you from my experience working with a variety of people, that time flies and the next thing you know years have gone by and you still haven’t taken any time to map out the future you desire. You will never get that time back.
No two people will ever have the same hopes, dreams, and goals for the future, yet we all can benefit from thinking about them. It is taking a look at who you are and what want out of life. It is a very personal process. It is a lifelong process, thus what you want today will almost certainly change in the future.
I have found the best way to start is by just getting out and experiencing all that life has to offer. My outlet has been travel. By traveling I have expanded my boundaries and comfort levels. I have met new people & cultures, tried new foods, and had a variety of experiences all over the world. This has taught me more about who I am at my core and helped me identify more clearly what I want out of life.
You don’t need to travel to begin defining your hopes, dreams, and goals. It could be as simple as reading a book about something you know nothing about. Or going to a music concert of a band you have never heard of.
Simply doing is the point, it will help you learn more about yourself, which will help you figure out what you want out of life. Then keep a running list of things you want, want to do, etc., and check them off as you go!
- Know Your Cash Flow
Whether you are just starting your company or you are on the brink of a liquidity event, knowing your cash flow is crucial. It drives everything in your personal financial life. Why is it important? Once you see what income & expenses you have it is much easier to determine if a new purchase is feasible & responsible.
For those who are in the early stages of their company, you need to know your personal financial needs to map out how much money you will need to live and how long your current savings will last. If you are bringing on investors they will have no problem using some of their money to pay you a salary, but if you don’t know what you need, then how can you determine the right amount to pay yourself while still investing in your business?
If you are about to sell your company your cash flow is just as important. You are transitioning from earning a paycheck to receiving a lump sum. You may never earn a regular paycheck again. Having a strong grip on your cash flow will help you determine how to invest your windfall and what lifestyle you can expect to enjoy post-exit.
The list of why knowing your cash flow is almost endless. At least having a basic understanding is going to make you feel better. You will feel more in control. You will experience less stress knowing what your financial capabilities are.
►Email me for a simple & great tool to help you get started, it’s free!
- Educate Before You Implement
A commonality I have noticed among entrepreneurs is that they make it a point to educate themselves before implementing a strategy. They prefer to do some due diligence and gain a better understanding before deciding to move forward. This doesn’t mean they suffer from analysis paralysis, but that they get a firm understanding of what something is, why it works the way it does, and how it will benefit them. Once they feel comfortable with these answers they then decide to implement.
So how do you educate yourself about your personal financial situation in a way that gives you insight into your relationship with money and what strategies make the most sense for you given your hopes, dreams, and goals for the future?
First, figure out what you want, regardless of money. For example, do you want to do more traveling in retirement? Ok, you have the want now figure out the how. What must you do to save up for years of traveling? Where should you save this money? How should it be invested?
This is where doing some initial research online or with some books is a good place to start. Get comfortable with the basic financial concepts and strategies so you can start to formulate your plan. Now, this is where you may want to consider speaking with a financial professional. Yes, you heard me, you may want to talk to one of “those people”.
I get it, there are a lot of people in my industry that have made the idea of seeking out and working with a financial professional less than desirable. But, some great financial professionals out there truly want to help people achieve all of their goals. They can help educate you on a variety of financial topics as well as how to implement which strategies make the most sense for you.
So, part of your education process is to vet financial professionals before you ever reach out to them. Check out their website, does it tell you who they are, who they serve, and how they do it? Are their fees transparent? Also, check them out on independent government websites like FINRA BrockerCheck & SEC Investment Advisor Search.
If they pass muster on these fronts, then consider reaching out to them. Set up a meeting to interview them. Remember, if you don’t like and get along with them it won’t matter how smart or qualified they are, you have to connect with them on a human level to build trust. Without trust, nothing else matters.
How Does All This Help You?
If you have taken the time to identify your future wants and desires it brings clarity and energy to your life. You will have focus. You won’t feel overwhelmed or distracted by your finances, but empowered because you now have identified what you want, and more importantly how to get there. This is liberating and also allows you to put more of your time and energy into doing the things you need to do to get what you want.
Thank you for reading this post, I appreciate your time.
Cheers,
