Don’t Let Your Personal Finances Suffer For The Sake Of The Business

Don’t Let Your Personal Finances Suffer For The Sake Of The Business

17th May 2023, 2:50 pm

A lot of business owners can get consumed by running the business and know their business financials inside out but let their own finances fall by the wayside and don’t have a personal financial plan that’s lined up with the business plan. It’s also very easy to make poor financial decisions in the evening, when all or most of your mental energy is used up during the working day.

Here are some top tips to get your personal finances in order…

– Build a personal financial plan.

It doesn’t have to be too long, in fact too much detail means you’ll get lost in it and you won’t action what you need to. Take some time on the weekend when your head is clear to list the top three things that are important to you and try and quantify that in financial terms. Only then can you work out an action plan to make sure the plan is working.

– Plan in when you’re going to look at your personal finances.

Get some regular dates in your diary to review your personal finances. It can be 30 minutes every quarter or every 6 months, whatever works for you, but the main thing is that it’s in your diary and ideally the diary will notify you – you don’t have to think in order to ensure it happens.

– Then automate as much as possible.

Between the review dates, you want to have to make as few personal financial decisions as possible so you can concentrate on the business and life/your family. If something big comes up then sure, you’ll have to drop onto it, but otherwise make sure to set up direct debits and standing orders and regular investment contributions or insurance payments, meaning you can set them and forget about them until the next review.

– Register a pension, even if you’re not going to make payments.

Firstly, do consider setting money aside into a pension from the business. It’s a long time until you’ll see that money again, but investing is mostly about making as large a regular contribution as possible and having a long time horizon- the investment markets will do the rest. And as a business owner, employer pension contributions are by far the most tax efficient way of taking money out.

However, we see it so many times where business owners opt out of the auto enrolment scheme and don’t set a pension up for themselves. Even if you don’t contribute, make sure you set up a UK registered pension. Companies can grow quickly and suddenly have large excess cash that owners don’t need for re-investment and want to contribute to their pensions. If you have held a registered pension, you can look back 3 tax years and make up for contributions that haven’t been made within the £60,000 annual allowance during those tax years. If you’ve not held a pension historically, you can only contribute in the current tax year and can’t look back.

– If you’re going to sell your business, don’t wait until nearer the time to prepare the business.

If your plan is based on exiting the company for a certain valuation, which you know using cash flow planning software will give you ‘enough’ to meet your desired lifestyle post-sale (with some room for error), make sure to seek out corporate finance professionals to ensure the business is ‘sale ready’. Valuations can be significantly below expectations if a number of key areas haven’t been taken care off.

– Get yourself a Will.

If you die without a Will, you’ll die ‘intestate’ and the beneficiary of the estate will be decided by a pre-arranged set of rules. You don’t have control at that point and the business shares may be inherited in a way that causes real issues for any surviving business owners (and employees). It’s a risk not worth taking.

– Consider placing insurance policies into trust.

Insurance policies not placed into trust will settle into a person’s estate on death, which means two main things, that the sum assured may bring about an inheritance tax liability, reducing the amount inherited by the beneficiary, and that the executors of the estate may have to wait until probate has been granted to get access to the money due. There are long delays in the probate process at the moment, so taking assets/policies out of the process is beneficial.

Next Article

Get ahead of burnout: learn how to prevent and recover from your busy life.

Burnout is a thing. It’s real, and it’s dangerous. It’s the feeling that no matter what you do, it won’t […]
Read Article