Personal Finance Expert Chris Farrell Having trouble juggling your personal finances and your small-business income? Don't let your money control you. Chris Farrell offers these tips on how to keep your finances straight.

By Lori Francisco

Opinions expressed by Entrepreneur contributors are their own.

You left that high-profile corporate job for the opportunity tobe your own boss. Now you're wondering how you're going tofinance your business, plan for retirement, pay for yourchildren's education and buy that new car you desperately need.Keeping your business separate from your personal life is sometimesdifficult when you're a small-business owner. It'sparticularly tough when you're trying to keep your business andpersonal finances separate as well.

Right on the Money Personal finance guru Chris Farrellshows you how to keep your finances in order while running your ownbusiness in his book Right on the Money. He explains how to planfor retirement, deal with credit card debt and meet your financialgoals. Here's his introduction to Personal Finance 101. What are some basic tips small-businessowners should keep in mind when putting together their personalfinance plan?

Chris Farrell: Small-business owners get into troublewhen they mix their business and personal finances. Not only willthey run into tax problems, but it's also very difficult toknow whether you're profitable or not and what you'retaking out of the business. It's very easy for small businessesto slip into this mode, but it's probably one of the biggestmistakes a fledgling entrepreneur can make.

Everybody I've talked to [for my book] made the same points.One important one is that having a business plan is incrediblyimportant. It really helps you focus your thoughts. If you have abusiness plan, take it to a banker or another professional. If theyreject you, the question is, why did they did they reject you? Whatdid they say? Then take your business plan back, revise it andthink about it. One thing the business plan allows you is it notonly lets you hone in on your thinking but you also have a documentyou can take to various professionals. You're trying to listento what they're saying and figuring out what you can take awayfrom the table and how to improve your business plan.

Money isn't always the most important thing, but you shouldspend time researching what your costs are going to be. Spend timegoing to trade shows, talk to people in the business [you'replanning to go into] because most small-business people are willingto talk about their business. What are some personal finance mistakessmall-business owners often make? Is there a certain mistakethat's made often?

Farrell: One is not funding an individual retirementaccount. I know it's hard to find money to do it, but the adageis the same whether you're a small-business owner or anemployee. Even if you can only put a little bit aside into atax-deferred account, it's worth it. You really can't putyour retirement on hold.

The second thing I've found is that small-business ownersoften hesitate to open up a retirement plan for their employees.You're really hurting yourself because you need that plan foryour retirement. In this highly competitive market, labor is in abetter position because the economy is strong and labor shortage isthere-it helps you compete for better workers. We live in anera where people may not know how to run their retirement savingsplan but just about everyone knows they should have one. There area lot of very cheap turnkey products being created that targetsmall business. I just think that it's a good move to build [aretirement plan] into your plan upfront, whether you're a soleproprietor or you're starting a business where you're goingto have employees. If you're just starting out andlooking for financing for your business but you have problems withyour credit history, what are some things you can do to straightenthat out and find financing?

Farrell: Two things. First, wait, because with time, yourcredit history does improve. The other thing depends on what kindof a credit history problem it is. There's nothing wrong withhaving worked with a business that went under or a business thatfailed. In fact, a lot of times it improves your hiring prospectsbecause people figure you've been in the trenches and you knowwhat it's like.

It depends on why your credit history is bad. Is it because youtook a reasonable gamble and it failed, so you fell back on yourmortgage payments a bit and you took on a lot of credit card debtand chipped away at it and you got yourself in shape but there wasa tough period of time? I think most people can understandthat-they can deal with that. They want to see if you have anidea-a passion. Do you have a business plan? Do you have anexit strategy or a way to pay back the lender or the equity holder?It's not an insurmountable barrier, but if you do have atroubled credit history report, it's a warning sign. Ifit's the type of thing where you haven't been anentrepreneur, you'd have trouble getting a mortgage or gettinga good car loan. What you have to do before you go out and startsetting up that business is get that credit history cleaned up andshow good payment strategies. What is the most important piece ofadvice you'd give to a person regarding managing their personalfinances?

Farrell: Personal finance is not rocket science, andit's not hard to do. You want to keep your personal finances assimple as possible. If you're buying life insurance, buy termlife insurance to protect your family if you die. Save for yourretirement, don't take on credit card debt-build thisinto your habits and your personal finances will evolve. Ifyou're successful as a small-business person, you'reeventually going to face a lot of fairly complicated personalfinance issues dealing with state planning and how you want yourassets distributed when you die. Until you reach that point, thegoal is to keep it simple and flexible and keep your options open.In our society, you have to somehow save for your retirementbecause that's being expected of you more and more. That'sone of those things that's hard to make up if youdon't.

Wavy Line

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