5 essential tips for getting your personal financial plan in place
Why personal financial planning is a crucial – and often overlooked – part of starting up
As start-up entrepreneurs, we are frequently reminded about the importance of a robust business plan. Without it, we can’t be confident of our business’ financial success, nor can we be confident of receiving investment.
But do we put the same effort into our personal financial plans? Generally, no. Yet it is equally important to the success of your start-up. If you as an individual are not sufficiently financially secure, your start-up has a much lower chance of success.
This week is national Financial Planning Week. As a start-up in the financial advice market, we at VouchedFor decided to speak to business owners and financial planners about what a start-up entrepreneur should include in their personal financial plan. Here’s what we found:
1. Give yourself time
Doug Monro, founder of Adzuna and former COO of Zoopla told us: “Running a start-up is stressful – it really is a rollercoaster – so the last thing you need to concentrate on is personal money worries. Making a financial plan and giving yourself a fixed window of say two years where you know you can afford to give your start-up a go is a good way to put this fear out of your mind, or at least to the back of it.”
2. Use tax breaks
Richard Heap, partner at Kingston Smith, told us: “One commonly missed aspect is, should the entrepreneur have left paid employment earlier in the tax year, they may be due a PAYE refund, which can be claimed back by writing to HMRC or alternatively waiting until the end of the tax year and completing a personal tax return.” Other examples of tax breaks include the Enterprise Investment Scheme, which can provide investors with a 30% tax relief.
3. Replace corporate benefits
For those leaving paid employment, consider whether you should be replacing benefits such as healthcare, life insurance and corporate pensions. Particularly for those with families, not having such cover can be one risk too many.
4. Don’t forget your mortgage
If you have a mortgage, you may in future need to remortgage – perhaps to move house, or fix your interest rates. If you do not have a steady salary this could be difficult to do. Again, plan ahead and understand your contingency options.
5. Remember the long term
In the heat of starting up a business, long-term concerns like contributing to a pension can take a back seat. That might be the right call for now, but make sure it’s an informed choice. Understand the long term impacts, and don’t get sucked into the common trap of over-investing into your business for too long. In summary, your personal financial plan is as important as your business plan. If you run out of money personally, your business will die. Equally, you must plan ahead if you want your business success to translate into personal wealth.
Adam Price is founder at VouchedFor.co.uk – a new start-up that lets you find, rate and review financial advisors. During the course of Financial Planning Week, VouchedFor will be running a series of guest blogs about financial planning for entrepreneurs.