Balancing personal and business financial planning as an entrepreneur
Being a business owner can open up some exciting opportunities. You can work for yourself and make money following your passion. In fact, a report from Equifax Canada shows more and more Canadians are opting to start their own business, with new business originations now higher than pre-pandemic levels.i But being an entrepreneur also comes with its challenges, particularly when it comes to your finances. As a business owner, your financial landscape is dual-layered, including both your personal and business finances. This added complexity requires careful attention, planning and understanding. This is where a financial plan comes in.
Why is having a financial plan important?
A financial plan is designed to clarify, simplify and streamline your financial life. Think of it as a map – it captures where you are currently and outlines possible routes to your future aspirations. Having a financial plan is important whether you’re a business owner or not. However, it’s crucial for entrepreneurs as it can help keep both personal and business finances organized – something 42% of business owners are worried about, according to Wealth Professional.ii A financial plan also:
- Allows you to think about and prioritize your financial goals for your business – and your life
- Helps you plan and take actionable steps to make your financial dreams a reality
- Relieves stress you might feel about money, so you can command your capital
With personal and corporate finances often intertwined, taking a holistic approach to planning is not just beneficial – it's essential.
The anatomy of your business and personal financial plan
Although you’ll have different needs and goals for the business and personal sides of your financial plan, it can help to think of them as two sides of the same coin.
On the business side, there are two key building blocks to your financial planning: expansion and safeguarding. On the personal side, there are two similar building blocks: accumulation and protection. This table provides a closer look at each:
BUSINESS
EXPANSION | SAFEGUARDING |
|---|---|
Cash stewardship: Steering the flow of capital and debt. | Investment choices: Re-investing in your business, or something else. |
Tax strategies: Strategic tax planning and maximizing benefits. | Insurance and risk management: Pre-emptively guarding against uncertainties. |
Talent dynamics: Attracting and keeping team members to keep your business running. | Legacy and succession planning: Preparing for eventual transitions, whether that means exiting or shutting down the business, or passing it on. |
PERSONAL
ACCUMLATION | PROTECTION |
|---|---|
Resource allocation: Budgeting for saving while spending where it makes sense. | Health coverage: Having a plan for medical costs, whether that means health insurance and benefits, or setting money aside. |
Tax considerations: Strategic tax planning and maximizing benefits. | Insurance and risk management: Pre-emptively guarding against uncertainties. |
Economic investments: Growing your wealth through various investments. | Estate planning: Establishing where your money will go when you die, to determine your legacy. |
The financial planning journey
While there are a lot of factors to consider when planning for what your business and personal finances will look like, a financial advisor can help. They’re here to support you through each stage of your financial planning journey, including:
- Getting a sense of where you are, and where you want to go. Now’s the time to compile your paperwork and financial data to get a snapshot of your current state. Beyond that, think about where you want to go in the future – what are your personal and financial goals, for both you and your business?
- Mapping and recommending routes to help you meet your goals. Advisors have experience, expertise and knowledge of different strategies, products and solutions to help you get where you want to go.
- Putting your plan into action. An advisor can help you move from complex financial concepts to taking actionable steps that will get you closer to your goals each and every day.
Monitoring and reassessing your route. “Recalculating!” Think of an advisor as your co-pilot on your journey. They consistently assess how the journey is going and can help you adjust as needed, to make sure you reach your goals.
Next steps: Start your journey today
Starting your financial planning journey marks a big step towards realizing your personal and professional financial goals. Reach out to us today and together, we can craft a financial plan that aligns with your vision and aspirations – both for your life, and for your business.