With so many differences between one startup to the next, there are few rules that apply to every single entrepreneur across the board. Just one piece of advice is universal. As a startup professional, you should never mix your personal and professional finances.
What Could Go Wrong When You Blur the Lines?
To some startup professionals, this advice can seem impossible to follow. After all, most entrepreneurs pour their life’s savings into their business idea, and whatever you earn with your brand pays the bills back at home.
When you think of it that way, it’s all too easy to blur the line between personal and professional finances — whether you’re first getting started or an old pro. However, this bad financial habit can come with a lot of consequences for both your brand and your personal financial health.
When you start flashing your business credit card to make personal finances, you can make it harder to keep accurate bookkeeping. This, in turn, can cause headaches at tax time — or worse, tax penalties.
You also have to think about what this can do to your personal financial situation. Putting professional purchases on your consumer credit card can tie up your available credit, leaving you without a safety net if you need help in an emergency.
Tips for Keeping Your Personal Finances Personal
Keeping things separate is a lot easier when you take the time to build up personal financial stability. When your personal finances are in good standing, you won’t be tempted to use your business accounts to smooth things over at home.
One of the best ways to get your personal finances under control is with an emergency fund. Having an emergency fund gives you a cash cushion that you can rely on in financial emergencies.
If you don’t have enough cash in this cushion, don’t reach into your startup’s finances for help. Try your credit card, or apply for an online loan, if you don’t have room on your credit card. The online loan experts at MoneyKey make it possible to research these options before you apply, which can help you find a suitable loan online for your emergency.
While borrowing a loan online may not be ideal, it can help you keep your financial lives separate. If you do choose to borrow an online loan, make sure it’s something you can afford to repay within the time schedule. Paying off debt quickly makes it easier to focus on rebuilding your emergency fund.
Tips for Keeping Your Professional Finances Professional
Resisting the urge to use your personal finances for startup costs and investments is a lot easier when you equip yourself with the right financial tools.
In many ways, mirroring what you have in your personal toolkit can be helpful for your business. That means you should consider getting the following products and services, exclusively for your startup:
- Business credit card or line of credit
- Business savings account
- Startup insurance
- Merchant cash advance
- Business online loans
These products and services can help you handle many of the hardships that come with owning a business — from disturbances in cashflow due to supply chain issues to an unexpected flood making your office an unsafe place to work.
But more importantly, having these safety nets in place makes it easier to keep your hands off your personal finances in an emergency. Remember this single rule as your startup grows.