Entrepreneurs are busy. Which sometimes means that our businesses take over our lives. Which in turn means that personal financial goals are frequently left until last (or not at all).

As an entrepreneur, ensuring that your personal finances are in good order can actually be the difference between your business surviving month to month or it taking off like a rocket.

If you know that you should be paying more attention to this aspect of your life, but don’t know where to start, here’s a simple four-step plan you can use to regain control of your personal finances.

Step One – Create a financial plan

A financial plan, when it comes down to it, is simply a list of short and long term goals. Making the list doesn’t have to be complicated and writing down goals helps to make them seem more real. Which in turn, holds us more accountable.

So, make a list, and check it twice. What is it (exactly) that you want to achieve?

Do you want to buy your first home, build a huge retirement nest egg, eliminate your debt, or save up for that trip to the Maldives that you’ve always wanted to take? Perhaps you just want some F*&# You! Money (as it is fondly known in our house).

Identify some six month, twelve month and then some two, five and ten year goals and write them down. Type them up on your computer, or write them down on a napkin, we won’t judge… but do it.

Step Two – Calculate your net worth

Before we can get where we want to go, we need start from where we are. I know… deep innit?

Which means we need to know where we are from a financial point of view. In this case, our starting point is our current net worth.

Net worth is calculated by working out the value of any assets and deducting the cost of any liabilities. If you have more assets than liabilities, then you have a positive net worth. If you have more liabilities than assets, then you have a negative net worth.

To calculate net worth, the first thing to do is to collect together all of your financial documents, bank statements, investment accounts, mortgage statements, credit card bills, loan documents, house and vehicle values, etc. Try to include everything: home furnishings, clothes, art, fine wine, cars, your student loan.

Everything INCLUDING the kitchen sink, in fact.

This list is going to help you protect yourself (and your family), so it’s really worth taking some time to do it as thoroughly as you possibly can. Put every detail you can find into the free Net Worth worksheet you can download at the top or the end of this article. Add up your assets and liabilities then subtract the liabilities from the assets. What did you get? Hopefully it was a positive, rather than a negative number. But fear not, even if you owe more than you own, help is at hand.

Step Three – Create a spending plan

Now that you know where you’re starting from and exactly where it is that you want to go, it’s time to figure out how to get there.

The next step is to create a spending plan to help navigate to your desired destination. Just so’s you know, common reactions to this is step are: screaming “Nope, I hate budgets!” at the computer screen, eating a pint of Häagen-Dazs, drinking a pint of Rose, or just hiding under your bed, sobbing quietly to yourself.

Or was that just me?

But this is a spending plan, not a budget, so there’s nothing to fear – honest. This step is as easy as figuring out your net worth – and as a bonus, you should already have found most of the information you need. This time – instead of writing down your assets, write down your income and instead of your liabilities, write down your expenses. Subtract your expenses from your income and you have your cash flow.

Just like your net worth, you’ll want this to be a positive number (meaning you spend less than you make).

If it’s not, then keep reading. As part of your spending plan there are three important things you can do: have an emergency fund, reduce your debt, and reduce your expenses. There’s a Spending Plan worksheet included in the free Financial Worksheets pack you can download (above or below), to help work it all out.

“I found the road to wealth when I decided that a part of all I earned was mine to keep. And so will you.” — George S. Clason

Reduce your debt

Debt can be a useful tool when used correctly, it can fund growth and even take your company to the next level. Used poorly, it can drag a business under. As we saw in our personal finances, debt lowers net worth as well as reducing cash flow.

If Cash is King then Cash Flow is Queen. Paying down debt and reducing your monthly payments makes your business’s runway longer, giving you the time that you need to succeed. If you want to make it easier to establish your emergency fund (see below), then it’s time to reduce debt and increase cash flow.

Reduce your expenses

As business owners, we often pay a lot more attention to our business finances than we do to our personal finances. But, just like a business, we have a personal burn rate as well. By lowering our expenses we can reduce our personal burn rate, which means we can build our emergency fund and/or reduce our debt quicker.

In the same way that reducing your debt helps, reducing your expenses also increases your cash flow. 

Emergency fund

Owning and building a business can sometimes be hard and is often full of risks. One of the greatest risks to any business is simply running out of money. Even the thought of it is very stressful and can keep you awake at night. Which means more wrinkles and less productivity the next day.


So, when times are hard, actually having some money in the bank can give you the time you need for your business to succeed. The typical amount of cash quoted for an Emergency Fund is three to six months of expenses. Now… while this figure is an OK ballpark estimate for employees (meaning someone else is going to pay you), it’s not really enough for entrepreneurs.

Realistically, it’s better to have 12 months of expenses saved in order to give your business the greatest chance to succeed.

Cue freak-out… There’s no way I can save 12 months of expenses, I need to eat!Yes, 12 months expenses is a lot of money, and you probably don’t have it all right now, but the sooner you start saving it, the better off you’ll be. Start with as much as you can, even if it’s only £25 a month. Honestly, I’ve been on both sides of this coin and the difference is amazing. So, commit to saving a little of what you earn each and every month. Once you get into it, your only issue will be that you’ll wish you’d started sooner.

Step Four – Protect yourself and your family

The last thing you want to do after you have worked so hard to build your business is to lose it all. You need to protect yourself and your loved ones. You’ll need several different legal documents to cover all eventualities, if you want to keep it all safe.

Desired documents would include: A Will, to make sure your wishes are carried out – not what the government decides is best for your estate. A durable power of attorney, so someone can manage your affairs when you are not available, for whatever reason. A living Will and a health-care power of attorney are also very important, and mean that someone you trust can make medical decisions when you arent able to make them for yourself. Finally, you might find you also need various types of insurance, Medical, Liability, Umbrella (a general insurance policy that covers anything not covered anywhere else), Long-term disability.

Working on these four simple steps will get your personal finances in order. And getting your personal finances in order will help grow your business. As a bonus, it will also give you the time you need to build a healthy and sustainable company.


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