As a business owner, you might neglect your personal finances because you’re focused on those of your company.
Your business may be among your largest financial assets, but it is important to remember that your personal finances exist separately. Taking time to review your own financial plans can help you make more informed decisions and ensure your personal goals remain on track.
Here’s a list of important tasks you should consider completing this year if you haven’t already.
1. Review your personal goals
When you run a business, your personal and professional ambitions are often linked. You might reinvest profits, focus on expansion, or measure success by the value of your company.
Your personal financial goals deserve just as much attention.
Take some time to consider what you want your money to achieve outside of your business. This could include funding your children’s education, travelling the world more, or enjoying a comfortable retirement.
With your goals outlined, you can review whether your assets are helping you move towards these goals.
It is also worth considering whether your business is supporting your lifestyle in the way you want it to. For example, are you happy with your current work-life balance or does your business provide you with the financial security needed to enjoy other aspects of your life?
2. Assess your financial safety net
Many business owners rely heavily on their company for income, future wealth, and financial security. While this can be rewarding, it also creates risks if something unexpected happens.
Review the protection you have in place, such as life insurance, critical illness cover and income protection. Consider how your family or dependants would cope if you were unable to work. Appropriate financial protection could give you peace of mind and security.
It is also worth thinking about whether too much of your wealth is tied up in the business. If you’d be unable to cope with an unexpected bill, you might benefit from building up savings.
3. Check your investment portfolio’s performance
Review your existing investments and consider whether they’re still aligned with your goals, attitude to risk, and financial circumstances. Your situation may have changed since you first made your investment decisions, and your portfolio may need adjusting.
You should also consider whether your investments are sufficiently diversified. Relying heavily on your business means you already have exposure to one area, so holding a range of assets can help spread risk.
A regular review with your financial planner could help ensure your investment strategy supports your wider financial plan.
4. Check your pension value and forecast
If you view your business as your retirement plan, you might overlook your pension. However, it could provide an effective way to invest for the long term and potentially has tax benefits for both you and your business.
Start by considering how much is being added to your pension each month. This may be broken down into contributions you and your business make, along with tax relief. You can also see a forecast of how much your pension is projected to be worth when you retire.
A financial plan could help you assess how much is enough for retirement, and how different income streams, such as your pension or money from the sale of your business, could support you.
5. Review your exit strategy
Even if selling or stepping away from your business is a long way off, having an exit strategy is an important part of financial planning.
A clear exit plan can help maximise the value of your business, prepare you for future changes, and ensure you have the personal finances needed when the time comes. Over time, your exit strategy might change, so regular reviews are often useful.
Contact us
As your financial planner, we could help you manage your personal finances with a long-term outlook. Please get in touch to arrange a meeting.
Please note:
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
Note that life insurance and financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.
Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.