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Pay yourself first: managing your personal finances as an entrepreneur

Separating your personal and business finances is essential to protect your personal cash flow, maintain your personal credit and invest outside of your own business.

By ATB Financial 27 July 2019 3 min read

We understand the commitment to your business, the blurry lines between "personal" and "project"—because being an entrepreneur is a 24/7 profession. 

So when it comes to money, the line between your personal finances and your business’ books might not really exist.

But there are ways you can draw that line and enjoy the personal and professional benefits of protecting personal cash flow, maintaining personal credit, saving and investing outside of your business and planning for how you (and your business) will navigate your eventual retirement. 

Separate your personal and business finances

Opening another chequing account, applying for a business credit card and disentangling your expenses may not be a top priority. But there are lots of reasons why separating your personal and business finances is important. 

  • You’re protected if anything happens to your business. This is probably the biggest reason to open that extra account, file business taxes separately and apply for business financing as a business.
  • It’s easier to keep track of your business’s profitability, accounts payable and receivable and tax deductibles. Thorough bookkeeping also makes it easier to see what areas of your business may need to be invested in and what areas may need to be pared back.
  • You have a psychological distinction between you and your business. As an entrepreneur, it’s easy to feel like your company’s financial health is a direct reflection of you and your worth as a human. Being able to look at separate accounts and bottom lines can provide some healthy perspective and separation.

Not sure where to start? Connect with your banker. They’ll be able to equip you with the information you need to choose the accounts and products that would work best for your life and business, plus provide insight on how to streamline your money management processes.

Protect your personal cash flow

As an entrepreneur, your personal cash flow is just as important as your company’s cash flow. Take steps to ensure that—no matter what’s happening with your business—you’re set up to take care of your basic needs. 

Consider paying yourself on a bi-weekly or monthly basis (just as you would any other employee of your business), automating your regular bill payments, taking out a low-interest personal line of credit, accumulating an emergency fund and making it a regular practice to review your personal finances. 

Growing your business

We’ve collected information from industry experts and resources.

Maintain your personal credit

Your company’s credit shouldn’t jeopardize your personal credit. Your personal credit—affected by things like a home mortgage, car lease and credit card history—needs to accommodate your and your family’s basic needs—your business’s credit is ultimately there to help you develop and sustain your business to meet market demands. While it makes sense to use credit judiciously to expand or bolster your business, it's wise to protect yourself from any unexpected changes that impact your business.

Save and invest outside your own business

Though some entrepreneurs invest their extra money back into the company, your best bet is to diversify. Just as you don’t want to tie your personal credit to a business’ credit, you don’t want to tie your investing potential to the profitability of any one business—including your own. 

Plan for retirement

As an entrepreneur, planning for retirement takes a two-pronged approach: saving for your personal retirement and creating a succession plan for your business. While it’s natural for business owners to assume that they’ll be able to retire on the proceeds from the future sale of their business, you don’t know what the market will be doing in ten, twenty, or thirty years. Small business owners can benefit from investing within a traditional RRSP and a tax-free savings account (TFSA). While you can save more in an RRSP, the money in your TFSA is easier to access in case of a pre-retirement emergency.​​​

Want personalized insight that will help power possibility for your business? Our entrepreneur strategists are standing by to help you conquer your most challenging finance and business related questions.

Do you have questions around starting a business?

We’ll take you step-by-step through everything you need to know when starting a business in Alberta.

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