For most individuals, personal-finance mistakes affect only themselves. For entrepreneurs, a personal-finance slip-up can have far-reaching consequences.
People who get into tight financial spots while running their businesses must make difficult choices about which bills to pay, which opportunities to let go, and which partners to leave.
Don’t let your focus on your company lead you to neglect your own affairs. Watch out for these common personal-finance mistakes, and take proactive measures to keep your life (and your startup’s growth) on track.
Carrying high-interest debt
Not all debt is bad debt, but some debts can become nightmares if you aren’t careful. Student loans tend to have reasonable rates, even though high balances can make them look intimidating. Payday loans and credit card balances carry much higher interest rates than comparable lines of credit. So be careful with the option you.
Letting your credit score slip
No matter how far off the grid you try to run, your credit score follows you. Business loans, personal loans, credit cards, and even insurance premiums all depend at least partially on your credit score. Fail to pay attention to yours, and you could quickly find yourself paying exorbitant interest rates — if you qualify for credit at all.
Not building an emergency fund
Entrepreneurship carries substantial risk, even for people on solid financial footing. Go in without a backup plan, and you could find yourself wondering how to pay rent tomorrow. An emergency fund insulates you from short-term problems and gives you wiggle room when you have to wait a while between income sources.
Failing to separate your accounts
You’ve probably heard stories about successful founders who poured their life savings into their companies and came out on top. Many entrepreneurs fund their companies from their own accounts, and that’s a perfectly healthy way to start a company. However, if you start depositing funds from your customers’ orders in the same account you use to pay your electricity bill, you invite massive financial (and legal) headaches into your life.
