Owning a business is a great way to build your wealth. Use these five money tips to make the most of your opportunity.
Tip # 1 Join KiwiSaver
Being self employed doesn’t preclude you from joining KiwiSaver. If you are not a PAYE employee of your business, your contributions will be made directly to your chosen KiwiSaver provider. By contributing around $87 per month, you will be eligible for the kickstart of $1,000, an annual tax credit of $521 and other KiwiSaver benefits.
Tip # 2 Have a financial safety net
A high percentage of new businesses fail within the first two years and at the other end of the spectrum, older businesses can fail due to changes in markets and technologies. Reduce your financial risk by holding some of your wealth outside your business. In the worst case scenario, you will have financial assets to rebuild from.
Tip # 3 Separate business and personal money
One of the keys to successful business management is keeping a close eye on the cash flow and the performance of the business. Small business owners often make the mistake of mingling their business income and expenses with personal income and expenses, making it difficult to monitor performance.
Tip # 4 Pay yourself a regular amount
To successfully manage your personal finances it helps to have certainty about what your income is. Paying yourself a fixed amount on a regular basis from your business will make this easier. Adjust the amount up or down after a period of time if your average business income changes.
Tip # 5 Have an exit strategy
From the day you start your business, your plan should be to maximize the price it can be sold for. You will need a clear plan of how you are going to add value to the sale price and how or to whom it might be sold.