My short answer: separately. I get this question a lot. Because your personal and business finances are different. But you should have a management system for each. And the systems do not have to be complicated. They need to be separate, but not complicated. Here are a few simple steps for managing the personal finances when you have a business.
Step 1: How much do you need? Know your numbers.
Personal: First tally up your “four walls” because these expenses get paid first, always. Food, utilities, housing, and transportation. This is the minimum number you need to eat, cook, sleep in a real bed, and get to work so you continue to make money. Know this number. Next, add together your minimum debt payments. You will have two numbers, the “four walls” number and the “total I need to pay everything” number.
Repeat for your business.
Business: Four walls of business, your Breakthrough Number. The Four Walls are rent/utilities and internet/ phone (access to buyers), Critical Operating Expenses, Minimum inventory and product spend, and payroll (and payroll expenses). These four walls will secure your business and allow you to keep the doors open and making money. Next, figure in any debt payments and other business areas (marketing, projects, team). You will have your Breakthrough Number (minimum amount) and total “All In” number.
Step 2: When do I need it? Know when things are due.
Personal: To make things smoother in your personal finances, schedule your paydays. Say NO to co-mingling! Do not pay your car insurance form your business account (unless you are a delivery service). Take the time to pay yourself on regular days and then you can begin to count on that regular income. I advise my clients to pay themselves every other week. This way, they can arrange their personal expenses the way they likely would if they were employed somewhere.
Business: On the business front you can do two things; Pay business bills as they come due, not early and know which bills can be halved. In business cash is king and protecting the cashflow is critical. Since you are now only paying yourself on regular paydays, the next thing is to preserve cash by paying expenses when they are due. Some of my clients pay bills weekly. Some twice a month. They key is to get into a rhythm and know when you need and how much you need available for expenses.
Step 3: Begin to plan your spending.
Personal: Once you have regular paychecks scheduled, you can create a personal spending plan (or budget) for what need to be paid and when. You can plan your personal spending for everything. My only rule for my clients is write it down. Your plan. It may change, but you will have the baseline to refer to.
Business: For your business if you don’t know what you are going to spend in a given month or know how much you need to plan for projects and growth, you will stunt your business. Again, my only rule is that your plan must be written. If you are new to this, it may take a moment to set up. How much did you pay for ads last month? How much are you going to pay this month? That’s really all you need to do to have a general spending plan that you can refer to when you work your business the next month.
Following these few steps will get you on a good path to managing both the personal and business finances every month. If you’d like more tips and strategies for taking and keeping control of your money stuff, join my Facebook Group, “Stacking the DECK for financial success.”