Financial Planning for Your Family and Business

Janet Barclay

Janet Barclay

A former professional organizer, I now eliminate stress for my clients by hosting, monitoring, and maintaining their WordPress sites so they don’t have to worry about security, downtime or performance issues. When I’m away from my desk, I enjoy reading, photography, watching movies, and cooking.

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financial planning

When you’re self-employed, you face the dual challenge of keeping your business running while saving for your family’s future. For entrepreneurs, successful financial planning needs to cover both business and personal finances. Although I’m no expert, I’d like to share a few tips I’ve picked up during my 10+ years as a small business owner.

Integrate Your Bookkeeping

One basic challenge is keeping track of everything. While accounting best practices emphasize keeping business and personal books separate, in practice, this can get complicated. Some bookkeepers advocate creating an “other” category in your business QuickBooks file where you can itemize your personal income and expenses and compare them with your business books. Your accounting professional may recommend other solutions.

Set Financial Goals

Any good plan starts with clear goals. If you have children, your financial goals may cover anything from allowances to summer jobs to college tuition. For your business, they should include managing expenses, paying subcontractors or employees, preparing taxes, and short-term and retirement savings.

Engaged and married couples face issues such as prenuptial agreements, joint bank accounts and tax filings, shared insurance coverage, and parenting costs. Prospective home owners must address mortgage financing, real estate taxes and home insurance. As we get older, retirement budgeting and investment become increasingly pressing. Crises such as unemployment, injury and divorce can necessitate financial adjustments. Finally, estate planning can ensure you leave something to your loved ones.

Your business financial goals should serve your personal goals. How much profit per year does your business need to earn for you to achieve your personal goals? How does that translate into revenue? How do business expenses and taxes factor into the picture?

Creating Annual, Quarterly and Monthly Plans

With a sense of your long-term personal and business financial goals, the next step is to map out a detailed plan. The U.S. Small Business Administration recommends developing your business financial projections with a five-year outlook. You can apply this rule of thumb to simultaneously handle personal financial projections as a function of your business performance. For each year, your business projections should include forecasts of income statements, balance sheets, cash flow statements, and capital expenditure budgets. For the first year, break this down into monthly detail. Quarterly and annual projections are sufficient for longer term planning.

According to a CBS news story, many small business owners fail to set aside money for retirement, and some have been forced to dip into what savings they do have just to keep their companies afloat. Even if you love what you do, you probably hope to retire someday, so keeping an eye on the future is crucial.

Scott and I are fortunate to have an excellent financial advisor, John Wright of Freedom 55 Financial. Unlike financial planners we’ve dealt with in the past, John makes a point of meeting with us every year to review our investment portfolio and our situation. He also stays in touch with us on an ongoing basis to keep us informed of important market trends. If you’re looking for a financial advisor in the Hamilton/Burlington area, let me know, and I’ll be happy to introduce you. If you’re outside this area, ask your friends, family, or local colleagues for a recommendation.

Photo © Sergej Khackimullin / depositphotos

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