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Why You Should Keep Your Personal and Professional Finances Separate It may be tempting to go all-in on your company, but it's better to play it safe.

By Steph Wagner

This story appears in the July 2015 issue of Entrepreneur. Subscribe »

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Some entrepreneurs pour everything they have into their business: their home equity, life savings and untold amounts of blood, sweat and tears. From my perspective—as a middle-aged, recently divorced business owner raising three teenage boys by myself and facing 12 years of college tuition and my own eventual retirement—I can't take the same approach. I literally can't afford to assume that type of risk.

In many ways, it's a factor of age. "Our risk tolerance as it relates to business and personal assets changes as we get older, and we tend to become more conservative with both," says Michael Manning, president of San Diego-based Manning Wealth Management. While he encourages business owners to take professional risks, Manning suggests they hedge against the depletion of personal assets, "which by default creates a safety net that will reduce the impact and provide some stability in the event their business fails."

I've followed his advice by never relying on personal assets (or personal credit) to finance my business. To secure—and separate—my personal and professional finances, I opted to have two savings accounts that I built up before starting my company. I adhered to a frugal budget. I downsized my house, traded my car in for a less expensive but reliable one and declined any luxuries—all so I could build an emergency fund with six months' worth of household expenses and a separate growth fund for my business. I dedicated 30 percent of my income to these accounts, and it took 18 months before I felt ready to launch.

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