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How to Separate Your Personal and Business Finances- Without Overdrawing Your Account
Not having these separated, is actually one thing that is enabling you to be stuck in this situation. When you separate your personal and business finances, you have the clarity of where you are at financially which makes it a lot easier to align your decisions in a way that supports your business financially.
For example, if you have them separated and it feels scary to you, then seeing where you’re really at, will be the push you need to increase your prices. In addition to this, your finances will be more visible to restructure your business, to do something scary that you know will help move the bottom line forward, but that you weren’t taking action on because of fear of failure or fear of rejection.
When we have all of our money (personal and business), we are operating more from emotions which is causing us to feel like we can’t separate the two. Because the fears are real, when it comes to separating your personal and business finances, I see it all the time with both coaches and entrepreneurs.
At the start of my business, I too had commingling funds. It’s because I was making excuses as to why I couldn’t separate them. When I did, I operated from a completely different place. I was acting more like the CEO of my business than treating my business like a hobby.
So, waiting to separate your personal and business finances until you make more money, is a limiting belief that’s holding you back. In reality, when you separate them, it can actually be the catalyst that helps you to increase your income coming in. You can make different decisions and take different actions when you see your personal and business finances separated.
So, if you currently have commingling of your finances & you’ve been putting off separating them, I encourage you to do the scary thing and do it!
Now that you’re aware of just how important it is to separate your personal and business finances, you’re probably wondering about HOW to actually do this without overdrawing your accounts.
Before I give you the steps of how to actually separate your personal and business finances without getting anxiety about overdrawing your account, I’m first going to explain why it’s so important to make separating your finances a priority.
No matter where you are in your business, even if you have more expenses right now than income coming in, it is so important to have your business and personal finances separate right off the bat. I honestly can’t emphasize this enough. If more entrepreneurs heard this information before they launched their businesses, so many would be profitable so much sooner. They would be able to clearly see what’s going. When you can clearly see what’s going on, it is:
- easier to make decisions,
- change the structure of your business
- make changes that actually move the bottom line forward, thus, putting money in your pocket
#1 Open a Business Checking Account
#2 Open a Business Savings Account
#3 Link Your Business Checking Account to Your Payment Processor
The business checking account you will link to the payment processor you are using to accept payments in your business, ie. your Business PayPal account. I recommend not using a personal PayPal account for your business. Create a Business one and then link it to this account. It only takes a couple of minutes to open up a Business PayPal account. Unlink anywhere you have hooked up to your personal chequing account and hook it up to your new business checking account.
How You Actually Separate Them
Now, you’re probably thinking, “this all sounds great Mandyy, but how do I separate my personal and business funds right off the bat, if I don’t have enough money coming in yet?”
If you don’t have enough money in your business to pay for something that is a business expense (ex: paying a coach or for a program, etc), take and transfer the money from your personal account, into your business account and then pay for it out of there. Because now you have a record of you as an individual, funding your business with that amount of money and you have everything totally clear.
What you can do, is to fund your business account with a decent amount of money so you aren’t always transferring into it. For bookkeeping purposes, it is easier to keep track of what you’ve invested into your business as start up capital.
I cannot stress this enough to do this right away. It can make the world of a difference for the success of your business and your quality of life as an entrepreneur.
Other Content You May Find Helpful:
How to Keep Personal and Business Finances Separate When Using a Credit Card
See below for a few bullets on how to easily keep your personal and business finances separate if you’ve been using a personal credit card for business expenses!
- First off and depending where you are in your business, consider designating a personal credit card you already have solely for business. This is especially helpful if you don’t meet the requirements for business specific credit cards.
- Depending on our situation, you could always get a second personal credit card solely for business purchases only. This will make it easier when you are paying your credit card bill as payment will always come from your business checking account.
- Lastly- if you choose to apply for another credit card, whether personal or business, I highly recommend that you check your current credit score first. It’s always important to know what your current credit score is when applying for any new credit. If you want to do this, you can click the link in my bio to check yours for free.
A myth that people believe is that they can’t check their own credit score because it will have a negative impact on it. This is not true if YOU are checking it. You are allowed to check your own.
Now if anyone other than you is to check it, that is where they take note and if you have a certain amount of credit checks within a short period of time, your credit can take a negative hit because of it.
It’s really that simple!
Please share this blog with any of your biz besties to make the back end of managing their biz finances, easier for them!
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