How to Manage Personal and Business Finances
By Space Coast Daily // January 17, 2022
There are certain things in life that don’t mix well, no matter how hard you want them to. One such pair is your personal and business finances. Most people are unable to separate the two, leading to a loss in both of these. Did you know that financial illiteracy cost Americans $415 billion in 2020?
If you have a business of your own and you’re not able to keep your personal and workplace finances separate, here are some tips for you.
1. Establish separate checking accounts
First of all, establish two separate checking accounts. If you are diligent enough about drawing money from specific accounts at a specific time, you won’t face a problem when it’s time to pay your taxes. All you need to do then is to review the bank statements and see the details.
If you avoid cash as much as possible and do transactions via your business account, you can even manage taxes and financial reports right from your business bank account.
2. Keep separate receipt boxes
It comes as no surprise that businesses have to deal with a lot of paperwork and receipts. Even for your personal life, you’ll have to collect receipts, such as those from a restaurant or for parking. So keep two separate boxes or containers to store your receipts.
If you enjoyed a quiet meal with your family, the receipt goes to the personal expenses box but if you had a meal with a potential client regarding business issues, the receipt will be stored in the business expenses box.
Keeping two different boxes is a good idea because a tax auditor will most likely not care about your personal expenses but will be very interested in your professional expenses.
The receipt scanner app helps you keep your financial records organized. You can digitize and store all your receipts in one place, reducing clutter and the risk of losing paper receipts.
Digital receipts are accessible from anywhere with an internet connection. You can access your financial information on your smartphone, tablet, or computer, making it convenient for on-the-go or remote work scenarios.
3. Get a business credit card
You probably already have one, but if you don’t, having a business credit card is really worth it. This will keep your credit history separate from your personal credit card bills. A credit card is one of the most likely places where your finances get merged and you end up in confusion.
Having a separate business credit card also means that if something is slightly more expensive for your business than your budget, you won’t be tempted to use your personal card and vice versa.
If you need a credit card instantly, just contact https://www.greatsouthernbank.com.au/. You’ll easily get a card that suits your lifestyle and needs.
4. Set a budget
When it comes to running a business successfully, many owners tend to pump money from their personal accounts into their business accounts. This is a mistake that will cost a lot later. Keep a fixed budget for your business and stick to it as much as possible.
If you have a clear budget in mind, you won’t extract money from your own account into the business one whenever you feel the latter has run short of funds.
5. Explain to your close ones
Sometimes we tend to merge our professional and personal finances and put others as well as ourselves in a load of trouble. Explain to your family members about your current financial situation and the business’ status.
Similarly, explain to your business partners if things are a little tight back home. Remember that you’re not the only person involved in a business or in your family. It takes an entire team to work together, and your workplace or your house is not very different from this.
6. Separate your expenses
Identify which expenses are meant for your business and which ones aren’t. A trip with your spouse and children will most definitely be a family expense. Keep food, entertainment, and other similar finances strictly in your personal finances.
It might be tempting to write these off as a tax deduction, but some things will simply not qualify as business expenses no matter what you try to sign or write.
7. Keep track
If you use a personal item like your car or phone for your business as well as your personal life, maintain a logbook. It’s not always possible to have two separate cars or phones but what is possible is to maintain a clear record of the split.
Over to you…
These are seven ways in which you can avoid your personal finances merging with your professional ones. A little bit of smartness, awareness, and sincerity will be enough to help you become financially worry-free about merging these two funds.