Mixing Business and Personal Finances is Like Eating Ice Cream with Lettuce
EATING A SALAD WITH ICE CREAM IS JUST WRONG!
I have to say… eating a salad with ice cream is pretty disturbing to me. So, I am perplexed when I get to witness this not so normal behavior. In my brain, these two things should never happen at the same time, but yet there are a brave few that do it… so this leads me into how mixing your business finances with your personal finances is just… WRONG!
MIXING BUSINESS AND PERSONAL FINANCES WILL LEAD TO SOME FINANCIAL DRAMA
Being a business owner is having a membership to an exclusive club! According to the US Small Business Administration, over 543,000 businesses are started each MONTH!
Unfortunately, just as many close their doors each month. They close due to poor financial management, and sometimes it can be as simple as separating your finances. This one move is something many business owners neglect to do and it has negative consequences for their business and personal finances. Here is what typically happens when you start mixing money without paying attention:
- You start draining your personal finances to support your business
- Your spouse or significant other gets really mad at you
- You are clueless as to how much your business is spending
- Your bookkeeper drools, because they know your books are a hot mess and they will charge you for it
- Your accountant will be upset with you, because you show up with puppy dog eyes looking clueless
- You raise a big red ‘audit me’ flag to the IRS
- You will be dusting off your resume looking for a job because you ran out of money
Not mixing your finances will save you time, money and lower your stress levels
Your business deserves the proper respect of being treated as a business and as the CEO/Owner, it is time to start behaving like it! Your business will treat you right only if you treat it properly from the beginning.
Here are just a few reasons why separating your personal and business finances are very important:
•Start laying the foundation of paying yourself a salary
•Properly track your business expenses
•Have an easier way of knowing if your business is profitable
•Keep accurate financial records
•Decrease your risk of an IRS audit… i.e. you won’t go to jail
You and your business are financial BFF’s, so trying to separate can be a bit tricky
Whenever I work with clients, we always get stuck with the separating of finances, and I get it! As a solopreneur, or business newbie, you are just happy to make some money and pay bills so separating is not the biggest priority, but if you start practicing great habits now, you won’t get into trouble later.
So, if you are confused on what is considered a business expense vs a personal one… here are some clues… clothes shopping, downloading music, paying for a full season of Downtown Abby are not business expenses. These are all personal! Your cell phone, home internet, car mileage are acceptable business expenses. So that you won’t end up in IRS jail, always check with your accountant first!
Practice! Practice! Practice!
It may sound silly, but you have to get into the habit of not “choosing which account to use.” Use the one that you are designed to use… business accounts for business ONLY!
If you have already separated your business from your personal finances, YAY! It never hurts to review and make sure you are keeping those lines separated, because we slip at times and use personal money for the business and think it is no big deal. Well… it is…
Your business needs to be able to thrive on its own without your personal finances supporting it to no end.
For a quickie guide to jump starting your money separation, just sign up below!
Small actions turn into huge gains for your business. Start separating your business and personal finances and you will see your business in a different light.
Founder | CEO | Speaker | Writer | Lightweight Adventurer
My mission in life is to see the world and sprinkle some magic on it to help inspire and change it! As the CEO & Founder of Budget School, my fun day job is spent helping solo and entrepreneurs get smart with their money so they can achieve their dreams. When I am not writing, speaking, or leading workshops, I love to travel and see different parts of the world!
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