In this part of the world, for a very long time, people were very reluctant to talk about money and this led to a bad money culture for the majority of people. As times are changing and everyone is getting wiser and more open with issues surrounding finances, we must learn also.
As a fashion entrepreneur, being financially responsible is very important in building your business. You need to learn how to manage your finances in such a way that neither you nor your business suffers financially.
If you have been wondering about how to build your personal finance while building your business then this article is for you.
In this video, Bibi Adeniyi of Lady Biba fashion brand shares on how to build your personal finances as you build your fashion business, investment opportunities you can take advantage of as a fashion entrepreneur, and some apps to help in managing your finances.
How To Build Your Personal Finance As You Grow Your Business
Educate Yourself On Finances
The very first step to take in building your personal finance as you build your fashion brand is to educate yourself on finances. Read books, watch videos, read articles – just educate yourself on all things regarding money.
Educating yourself on finances is a duty you owe yourself and your business if you want to truly be successful in entrepreneurship.
As a business owner, it is understandable if you always want to put yourself last when it comes to money and financial gain, and if you put business first by paying yourself last and taking pay cuts when the business is struggling. But, while these things are noble, you have to be intentional about building your wealth.
In building your personal and corporate finances, you have to;
1. Separate your Personal Finance from your Business Funds
If you haven’t done this already, you need to leave everything else after reading this article and get it done. You should not be dipping your hands into your business account and you should not have an ATM card for your business account because it will tempt you.
Imagine you’re out for lunch at a restaurant with friends on a budget of N10,000 and you see your friends ordering for the starter, main meal, and dessert but you cannot afford all that on your budget. Looking at them, you might be tempted to indulge and reach for your business ATM card to pay for the meal with plans of repaying the business later. This is why you should not have an ATM card for your business at all.
It is very important to separate your business finance from your personal funds.
2. Pay Yourself a Salary
You might not be able to pay yourself what you are worth but you need to pay yourself something significant to cover your expenses and leave some to save. Even if your business is not making good profit in a particular month you can write it in your business ledger as ‘wages payable’, meaning that your business owes you money.
Do not be greedy in paying yourself. See what your business can afford and pay yourself that without comparing your pay to that of your contemporaries. Stick to what is affordable by your business and what can keep you.
Things To Consider For Your Personal Finance
1. General Savings
To be able to achieve the goals you have in life, say goals like buying a car, or building a house, you need to have a concrete plan to achieve these goals.
If you do not plan you are definitely going to fail. You have to lay the foundation for what you want in future.
Don’t wait to start earning better before you make plans because as you begin to earn more, your standard of living will change. If you do not have a concrete plan for your personal finance, as your standard of life changes, you will find that you still do not have money in the bank.
For your general account, the one you have an ATM card for, you need to aspire to have a minimum amount there at all times regardless of what happens. You need to set a spending limit and stop spending when you reach that limit.
As the money increases, you can then move it to investments, emergency funds, or whatever else. You can open a traditional bank account for your general savings since it is the account your salary goes into.
2. Emergency Funds
Anything can happen. For instance, this pandemic wasn’t planned and many people have lost their jobs because of it while many entrepreneurs could not earn an income during the total lockdown period. You need to plan for these types of things.
For building your emergency fund, it is better to have a high-interest savings account. High-interest meaning between 5%-10%. Banks like Alat and Piggyvest are recommended for your emergency funds. Piggyvest has options like auto-lock that allows you to lock money and make money on the amount you locked.
For emergency funds, though, you want to keep the account accessible and liquid. For this, Piggyvest Flex is better. The most important thing in building your emergency fund is to set money aside every month so you can keep building it. It is recommended that you have 3 – 6 months of your monthly salary saved up so it can work for you.
3. Health Insurance
You might wonder what health insurance has to do with getting your money right but a lot of people spend a lot of money when they fall ill and investing in a good health insurance plan can help reduce that amount in the long run. There are many options for health insurance plans like Reliance HMO, Sterling, and so on.
Do your research on the health insurance plan that will work best for you and go with it. Make sure you know what your health insurance plan covers so you do not waste money on one that hardly covers anything.
Investments are highly subjective. Advice on investment should not be gotten from just one person and should definitely be gotten from an expert. The more you learn about investment, the wiser you become on how to make good investments.
Some investment channels you might want to look at are shares and stocks. With mobile apps, like Bamboo, you can invest in shares from companies like Apple, Netflix, Spotify, Google, and Facebook. Other apps that will help you with investment plans are Rise, CowryWise, and PiggyVest.
You can also invest in treasury bills, government bonds, agriculture, and real estate. In investing, however, you have to know your risk appetite, Do not invest your emergency funds or money you need urgently because the higher the interest rate on your investment, the higher the risk involved. You have to make smart choices in investment.
You can lay out a plan for yourself when it comes to your investments. You can plan to use your stock portfolio to build your money to a certain amount which will be used to buy your first property or any other thing. It is important to diversify your portfolio because the more diverse it is the better it will be for you.
You do not want all your eggs in one basket when it comes to investments.
You need to continually read about investments and know about the market. Learn all you can about it so you get wiser. You can start investing with as low as $50 (N23,000).
The most important thing in managing your personal finances is to keep track of your money. For this, you can use an app like Wally, Excel, or Google sheets or you can download or buy templates to help you. An app might be easier though because it helps you organise and streamline everything.
In using an app, like Wally, you have to have the discipline of going there often to put in your receipts and expenses. On an app, you can see how much you have spent on different businesses and what you used your money for at one glance.
With an app also, you can put in different accounts like your investment account, your emergency funds account, your savings account, and so on so you can see all your assets and liabilities there. An app also helps you see, your net worth, in a way, at one glance because it shows you everything regarding your finances.
There are other aspects to consider for your personal finance which we did not go into like pension and life insurance.
Thoughts on the Video
I find that the opinions shared in this video are very helpful and will go a long way in helping you manage and grow your personal finances as your business grows. However, you must make your research and find out which platforms will work best for you as you go ahead in your financial journey.
Do not take our word for it, go out, do your research, and put into practice all that you have learnt about managing your finances and see how they help you.
Are there other financial practices you put into play in managing and growing your personal finances as you build your business that are not included in this article? Please share them with us in the comments section below. Don’t forget to hit the like button if you enjoyed this read or it has helped you in any way.