The moment you become an entrepreneur and start running a business is also the moment you suddenly realize all the things you're not very good at. For most of us, we have a list of strengths and skills that have allowed us to succeed at our jobs and in our personal lives. But when you become an entrepreneur, as I did in 2014, you're suddenly responsible for so many big things that might not be in your wheelhouse.
One of those things, for me, was money. I never took an accounting class in college (my degree was in poetry, and math classes weren't required) and I never had to worry about reconciling a budget. I was barely very good at figuring out my own personal finances and made so many mistakes before getting my act together.
A couple of months into running my bridesmaid-for-hire business, a mentor of mine — who had sold two companies before and had been a full-time entrepreneur for almost 10 years — gave me a great piece of advice about managing money. She told me that no matter what was happening on the business side, it's important to focus on your personal cash.
Her reasoning was that as an entrepreneur, you become selfless and put your business first. This also means that you become too willing to tap into your savings account, 401(k), emergency fund, or even take on credit card debt to keep your business alive. Instead of doing that, she recommended doing the following three things instead.
1. Set a personal funding limit
Before you go broke putting all your cash into your business, this mentor made me promise that I'd set a monthly limit to how much of my own money I'd loan my company. This helped me set boundaries and be aware of how much I was committing to taking out of my savings account (I refused to touch my emergency fund or retirement fund) to give my business.
Having this limit made me feel more in control of my personal finances and forced me to get super creative with a very tight business budget. Knowing how much capital I was going to personally contribute also allowed me to explore other options around raising money or taking out a small business loan. Either way, it allowed me to have checks and balances in place to make sure I didn't drain my finances.
2. Work on growing your personal net worth
Most entrepreneurs are hoping for a major payday down the road. Which is why some people will give up every dollar they have and take on massive debt to make their business work. When I realized the financial risk that entails, I knew it wasn't something I wanted to take on in my late 20s. Instead, my mentor stressed the importance of growing my worth without relying on my business making me a tremendous amount of money.
She recommended making sure I was still contributing to my retirement fund and investment accounts on a regular basis and making smart moves with earning passive income from high-interest CDs and savings accounts.
3. Don't do this alone
Since accounting and bookkeeping were something I had never had to do before becoming an entrepreneur, my mentor told me that asking for help is essential. Once my business started generating money, it was important to seek advice and help from professionals to help me make sure I wasn't making any money mistakes in my business. I hired a bookkeeper to make sure everything checked out OK.
I also realized this was important to do on the personal side as well. Since being an entrepreneur can sometimes feel overwhelming and requires a lot of focus, whenever I felt my personal finances slipping, I knew I had to reach out to financial planners (or other professionals) to help me make sure I was staying on track.
The advice of making sure your personal finances are thriving when your business is rising was something I never would have thought to care about before my mentor spoke these words, but it's been a game changer and has allowed me to make smarter money moves.