Many CAs and even some IFA will tell you to keep your personal finance and business finance separate. We may do the philosophy of this in a different article..here are the “how to” steps for the same…
- As soon as you start a business open a new bank account – if there are not too many transactions and you are a sole prop you could even open a savings account. Choose appropriately.
- If you are going to spend a lot of money for the business, get a new credit card – maybe with small limits, but get a new credit card. All your business expenses – maybe your land line bill / mobile bill also goes here. Clearly no personal expenses should come here.
- Take a salary – whatever you need to run the household. Do not keep dipping into the “business account”. Yes it could hurt, but if there is money needed have the discipline of bringing it from your salary account / redemption of mutual fund…and show it as capital. This will force you to put some pressure on the business – and discipline on yourself to live within that amount.
- Do good record keeping especially if you spend in cash. If you are spending on your cards make sure that you keep summarizing your expenses so that you know where you are going. True for business and personal expenses.
- Set a budget for the business and for the personal life – and stick to them.
- Communicate to your family, friends etc. about your need (and ability) to keep the business and personal finance separate.
- Draw a line between your office space and home space. Maybe not necessary for keeping the money separate, but this will help you keep the space different in your mind. Make sure that you do not bring work home- sit late in the office. Even if you are operating from home, keep a different room, wear office clothes and work like you are in an office.
- Put your financial advisers team in place .
- Just do it !!
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