How to prioritize personal savings as a Business Owner
Welcome to part 1 of 2 in this short series on managing the cash flow of your business. In this first post, we will discuss taking a look at your larger financial picture that includes not only your business cash flow, but also your personal cash flow. In the second post, we will dive deeper into the details of managing business cash flow.
A large segment of our clients are business owners, and with that comes a very unique set of planning needs. A question we get often is “Where should my money go?” Our answer is the following priority of saving outline. While it may vary depending on the type of business and family goals, a general guideline is as follows;
- 1 month of your family expenses in savings
- 1 month of business expenses in business savings
- Pay off high interest credit cards if you have any
- Get to a total of 6 months of family expenses in savings
- Get to a total of 6 months of business expenses in savings
- Add irregular purchases or investments that you expect in the next 12 months to personal/business savings
- Maximize retirement vehicles – 401(k), profit sharing, IRA’s, etc.
- Split excess cash flow between
- Adding to non-retirement, long-term savings for the business and/or family.
- Paying off low-interest debt
Disclaimer: Alex Voorhees and Reston Wealth Management do not provide legal, accounting or tax advice. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. No strategy assures success or protects against loss.