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If you run your own venture but you’re failing to keep your finances in shape, you’ll find this article helpful. We’ll walk you through seven steps to fix your money issues. But first, let’s explain what it means to be financially stable, so you’ll know what you should aim for.
What Financial Stability Means
A person is financially stable when they are able to meet their financial obligations without difficulty. It means that they’ve achieved a degree of balance between their personal income and expenditure which doesn’t cause them much discomfort. They can pay for whatever they need out of their own pocket, or settle debts they’ve incurred with relative ease.How to Become Financially Stable as a Business Owner
You can follow these steps to become financially stable:Keep Personal and Business Finances Separate
Without clearly delineating your personal and business transactions, you may lose a lot of your money running your enterprise. Ideally, you should have separate bank accounts for your business and personal funds. Treat your business as an entity other than yourself, and manage its income and expenses accordingly. You will find it easier to do this if you keep distinct accounting records for you and your business.Sign up for the Connect Nigeria daily newsletter
Pay Yourself First
Getting organized at your business could be crucial to mending your finances. This is especially true about reordering your financial priorities. It’s not uncommon for entrepreneurs to hold off on paying themselves until they’ve settled some non-essential bills or acquired new inventory. This may seem prudent, but it’ll often leave little for the business owner in the end. There’s no harm in rewarding yourself for your toil. If your income is fixed and comes to you at regular intervals, you’ll have more money at your disposal.Settle Your Debt
Debt that’s left to linger will eat into your income over time through recurring interest payments. Breaking free of debt is a tough ask sometimes, but it’s usually doable. Steps you can take to achieve this include limiting your expenses (by eliminating unnecessary spending) and renegotiating terms of repayment so that they’re more favourable to you. With no debt on your books, you’ll be able to save more.Build Up an Emergency Fund
An emergency fund is a ‘reservoir’ of liquid money that you can draw from when an unforeseen and urgent need arises. It’s basically an account in which you hold funds for ‘the rainy day’—a buffer against the dent that unexpected financial demands may cause in your regular savings. Financial experts recommend that your emergency fund be worth three to six times your monthly earnings. It could save you a lot of trouble when financial challenges hit.Diversify Your Investment Portfolio
It’s great to have a business that’s a reliable source of income. But if you’re going to build wealth that’ll make you truly financially stable, you’ll have to spread out your investment across multiple income-generating asset classes. In the past, this was something only the well-off could afford to do. But thanks to the many digital platforms that open up investment opportunities to regular people, it’s never been easier to diversify your holdings.Live Within Your Means
When you’re clear of debt and your business remunerates you decently, you may be tempted to ramp up your expenses to reflect the increase in your disposable income. That won’t be a smart move to make. A big part of being financially stable is being able to live below your means. This translates to spending as though you earn less than you actually do. Taking this approach to your finances will allow you to build up your savings and channel more funds to your preferred investment opportunities.Register to attend the CN Business Mixer
Speak to a Professional Financial Planner
Perhaps you’re in such a place that even your best efforts don’t get you any closer to better financial health. If that’s the case, you should consider speaking with a professional financial planner. They could give your finances a thorough look, and suggest smart courses of action you can take to fix things up.Final Words
Being a business owner is challenging enough; you should not have to bear the extra burden of suboptimal personal finances. If you’re dealing with that right now, we hope that you’ll take the steps we’ve shared here to improve your financial situation. Featured Image Source: Entrepreneurship In a BoxGot a suggestion? Contact us: editor@connectnigeria.com