Managing Personal Finances As A New Entrepreneur: 5 Tips for Caribbean Women
Melisa Boutin runs the website yourmoneyworth.com , where she provides personal finance resources for Millennials. She is passionate about helping Millennials in the U.S. and the Caribbean make the most of their money, starting with tackling student loans. In December 2015, she paid off her private U.S. and international Caribbean student loans, and has since focused on assisting other borrowers understand and analyze their student loan account statements, navigate the repayment process and develop plans to effectively pay off student loan debt.
Today, Caribbean women access higher education, and professional opportunities in corporate and government sectors, at levels not known to previous generations. At the same time, Caribbean women continue the entrepreneurial spirit of their foremothers, while managing financial responsibilities for themselves and immediate and extended families. Balancing those personal financial obligations, along with a business, can be a real challenge for new women entrepreneurs. If you are one of these women, here are five tips you can use to manage your personal finances. 1. Understand Your Financial Obligations It is important to have a firm grasp of your personal finances, as you focus on growing your business from the ground up. You should know exactly how much and where your money needs to go, so that you can plan, track and rebalance, accordingly. Start by reviewing the past 2 or 3 months of bills and other spending, then categorizing those transactions into 4 groups:
Once you have done this exercise, you can determine how to plan your spending for those bills and other obligations, in each of these groups. Further, you can evaluate how you can minimize major must-have costs like housing and related expenses, transportation and other essentials, as well as, spending on your wants. Keeping a separate cushion of cash, even a small one, in an emergency fund, is also vital, as you embark on your entrepreneurial journey. And if you have personal debt, you will need to include those minimum payment obligations in your budget. 2. Manage Your Personal Finances Effectively To effectively manage your personal finances as a new entrepreneur, your business finances must be kept separate from your personal finances, even if you will be funding start up costs with your own cash. This means setting up different accounts that you will use for personal spending and then for business purchases and revenues, only. At a minimum, establish:
A personal checking.
A personal savings account.
A business checking account.
A business savings account.
This will simplify the task of tracking both your personal and business finances. You will be able to easily determine what funds are available to cover your personal expenses and how much you have contributed from your own money to your business. Most of all, you will avoid the headache of reconciling transactions between personal & business spending and be well prepared to seek funding in the future, with this separation in place. 3. Self-fund Your Business, The Right Way Many women entrepreneurs fund startup and operating costs with personal savings, in the first phases of their business. Although this can be a viable way to bring your business idea to reality, it is critical to balance making that type of investment, while maintaining your personal financial health. Make sure to minimize your operating expenses and generate income quickly from your business, while planning for growth. Explore low cost and free resources available to you to help you grow your business, and limit investing your personal funds into “would-like to have” products and services, that you don’t immediately need for your business. Also explore bartering for business services you need, by leverage your own skills and expertise. 4. Diversify Your Income, While Building Your Business While you are in the process of developing your product or service, or scaling your sales, it’s important to generate income that can cover your personal expenses. If your business cannot provide an income for you as yet, consider contracting as a freelancer or taking on a part-time job, to ensure to keep yourself afloat, financially. For example, contracting out skills that you have developed during your professional life or while building your own business, as a service. You can offer services like:
Social media marketing;
Social media scheduling;
Freelance writing; and
And the list goes on. These can be simple ways to bring in income, quickly. 5. Check-in on Your Money Regularly If you haven’t already, be sure to complete regular check-ins on your personal finances. Periodically assess your earning and spending, as well as, the investments you have made in your business, to-date. During your check-ins, identify:
Areas where you have overspent in your budget.
Upcoming seasonal or variable obligations.
Shortfalls in your income.
The health of your emergency fund.
Business investments or costs you would like to fund, in the near term.
This way you can take steps to adjust your spending and earning, accordingly. These regular check-ins are a must-have on your calendar, in order for you to manage your personal finances well. Building your business should not come at the detriment of your personal finances and there are real obligations you must take into account. Use these tips to set up a solid system to keep your personal finances on track, along the way.