Most small business executives know that it makes sense to create a personal investment portfolio apart from the investment in their own businesses. But that's not always an easy task. In reality, growing a business can require years of risk and hard work.
Typically, a business owner or executive may be putting most, or all, of their profits back into the business, leaving little or no time for planning personal finances. So, what can you, as an entrepreneur, do to help make sure your personal finances receive some much needed attention?
First, it's important to tighten management and accounting controls in your business. This action can surely help make your company more profitable and allow you more flexibility with your business capital. In addition, if you are like many entrepreneurs and executives, you most likely have a large part of your assets tied up in or loaned to your business. Thus, it is important to separate your personal finances from those of your business.
How you handle your personal investments will depend on your personal needs and goals. However, most entrepreneurs share two goals in portfolio management: liquidity and diversification. Having an adequate amount of liquidity can help provide greater flexibility and may more readily enable you to take advantage of new business opportunities. Diversification is just as important to help manage your investment risk. By varying your investments, you may be able to minimize the effects a decline in a single holding may have on your overall portfolio. Keep in mind that, although it can help reduce risk, diversification cannot eliminate the risk of investment loss.
Ultimately, one of your primary goals (besides running your business) should be to take as much control of your portfolio as possible. The following steps can help you develop a more comprehensive financial and investment strategy:
1. Keep your personal assets separate from your business portfolio
2. Save a set amount weekly or monthly.
3. Put your investments in a variety of accounts such as mutual funds, bonds, equities, and annuities.
4. Buy suitable insurance to protect you and your family (disability, life, nursing care, etc.)
5. Have adequate cash reserves.
6. Track your progress and adjust your goals accordingly.
Long-term business planning and budgeting are critical to the ultimate success of your company. At the same time, the creation of a long-term, personal financial plan and investment strategy is equally important for the financial success of you and your family.
Typically, a business owner or executive may be putting most, or all, of their profits back into the business, leaving little or no time for planning personal finances. So, what can you, as an entrepreneur, do to help make sure your personal finances receive some much needed attention?
First, it's important to tighten management and accounting controls in your business. This action can surely help make your company more profitable and allow you more flexibility with your business capital. In addition, if you are like many entrepreneurs and executives, you most likely have a large part of your assets tied up in or loaned to your business. Thus, it is important to separate your personal finances from those of your business.
How you handle your personal investments will depend on your personal needs and goals. However, most entrepreneurs share two goals in portfolio management: liquidity and diversification. Having an adequate amount of liquidity can help provide greater flexibility and may more readily enable you to take advantage of new business opportunities. Diversification is just as important to help manage your investment risk. By varying your investments, you may be able to minimize the effects a decline in a single holding may have on your overall portfolio. Keep in mind that, although it can help reduce risk, diversification cannot eliminate the risk of investment loss.
Ultimately, one of your primary goals (besides running your business) should be to take as much control of your portfolio as possible. The following steps can help you develop a more comprehensive financial and investment strategy:
1. Keep your personal assets separate from your business portfolio
2. Save a set amount weekly or monthly.
3. Put your investments in a variety of accounts such as mutual funds, bonds, equities, and annuities.
4. Buy suitable insurance to protect you and your family (disability, life, nursing care, etc.)
5. Have adequate cash reserves.
6. Track your progress and adjust your goals accordingly.
Long-term business planning and budgeting are critical to the ultimate success of your company. At the same time, the creation of a long-term, personal financial plan and investment strategy is equally important for the financial success of you and your family.
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