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Are You Taking Care of Yourself Financially? Don't let running your business keep you from managing personal finances.

By Brian Hamilton Edited by Dan Bova

Opinions expressed by Entrepreneur contributors are their own.

JGI | Jamie Grill | Getty Images

I'm sure there are great entrepreneurs who are good at three or four things in their lives, but in my experience, entrepreneurs tend to be very focused, especially on their businesses. Unfortunately, this means that most entrepreneurs are terrible money managers for themselves. I think they get so tied up in running their businesses on a day-to-day basis that they don't think about their future financial picture.

Related: You Suck at Money, So Never Mingle Business and Personal Expenses

One constraint is simply their available time. They just don't have enough time, especially if they have families. Financial planning and management tends to be a long-term consideration, and most entrepreneurs are just surviving, so they intelligently put their time where it should be -- keeping their businesses alive and profitable.

The other pitfall is that entrepreneurs tend to have a lot of their net worth tied up in their businesses. In some ways, this is not a bad thing since it is a tax-free way to build wealth. However, most businesses are not liquid, and they have huge hidden risks over the long run. The probability of a good lawn cutting service that has been in business for 20 years going out of business in the next year might be low. The probability of it going out of business over five, 10 or 20 years is much higher. The longer that you are in business, the higher the chance of failure. As a result, keeping a majority of an owner's net worth tied up in their businesses is not always sound practice. I'm sure there is substantial data around my claim, but I have personally seen this at least a dozen times from entrepreneurs I know.

Related: The Best Blogs to Help Entrepreneurs Boost Their Personal and Business Finances

There is a prescription for this. Every entrepreneur needs a good certified personal accountant (CPA) who is good at financial planning or even a financial planner with a good track record. I'm always reluctant to give advice to people like me who wouldn't follow it, but it is probably a good idea to get some good professionals on your side. Pick advisors who are older, who are risk averse and who you may not even like since they are so different from you. If you are like me and don't especially enjoy going to doctors or other advisors, I recommend that you put away 10 to 15 percent of every dollar of disposable income that you ever earn. Put it somewhere that you don't touch. I prefer safe investments like real estate and indexed mutual funds or even government vehicles that carry no risk. Since your risk in life is already way higher than it should be, and way higher relative to other normal people in the world, be sure that your investments are super boring and conservative. Stay away from investments in Franklin Mint coins and mint condition baseball cards and oil wells… and IPOs. Your life is chaotic enough, so you don't need to add to the chaos.

Related: Don't Wreck Your Retirement: The Entrepreneur's Guide to Personal Finances

Finally, depending upon your age (sort of, although I think what I'm about to say is age independent), stay away from debt completely, especially debt incurred on consumer items such as clothes, cars, furniture, jewelry and other stuff you probably don't need. Consumer goods go down in value and should never be financed. I realize this is a strong statement, but it is one borne from a lot of personal experience.

Brian Hamilton

Chairman and co-founder of Sageworks

Brian Hamilton is the chairman and co-founder of Sageworks. He is the original architect of Sageworks’ artificial intelligence platform, FIND. He has dedicated his life to bringing greater clarity to financial statements and to increasing financial literacy among businesses. Hamilton regularly leads discussions on private company performance, the financial strength of companies preparing for an IPO and entrepreneurship in major business and financial news outlets such as CNBC and The Wall Street Journal. 

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