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Separating Personal Finance and Business Finance

I decided to write this piece following Abraham’s recent post on ‘Children Education Vs Retirement: Which comes first?’, which received quite a varied responses both robustly supportive and questioning in nature.

One reader responded by saying ‘just like our parents trained us without our knowing if they had savings, not everyone is guaranteed staying in the world till retirement, I say give the kids the best and leave the rest to God.’

Whilst I agree to some extent with the thrust of this statement, it is not always as straight-forward as that. Planning plays a critical role in securing one’s financial future, whether saving for retirement or funding our children’s education and God is not against it. Abraham responded by saying; “It would just be as valid to turn your statement on its head and say: ‘let’s look after our retirement and leave the children to God! ‘’

However, what caught my attention the most was a subsequent submission that ‘by means of investing, some of us have our own firm which is different from savings. You see, money is used to make money, severally I have tried to save but it doesn’t work so expansion (of my business) is the means I apply.’

Here lies my proposition to business people and entrepreneurs and those who feel running a business however successful is a substitute for saving and investing for retirement. It is also for those who think it does not make ‘business sense’ to save when you can generate more profit by turning over money.

I feel you! Being a businessman myself, I for a very long time believed ‘saving’ and running a business are mutually exclusive. I often wondered why I should put my money in a savings that generates a 2% or 3% interest a year when I can turn the same around several times over by trading or investing in a business.

However, since I won over that struggle a couple of years ago, I realised that I now do business with a clearer mind and without jeopardising my future and/or family’s for that matter.

  • Why You should separate your personal or family finance from business

 A major mistake many a business people make is not separating business finance from personal. This has led to a lot of people, not only losing their businesses but also losing their family and friends as a result.

You should separate your personal or family finance from your business so that in the worst case, should the business fail or  God forbid, go bankrupt, your personal and family finances can remain relatively afloat. This comes with proper financial proper financial planning.

  • Business environment is unpredictable

Generally, as you get older (as some of us are already, lol), your financial needs change and you tend to need more liquidity than assets. You move from this seemingly ‘relaxed’ years to ‘anxious’ years, where you may not be able to run your business as you would love, your profit or earning power is probably peaking, healthcare and long term care needs also increase in priority etc. That is not the time to start saving for your retirement!

  • You can’t spend your business

Whilst we (Financial Freedom Academy) strongly advocate business ownership as an integral part of retirement planning, you need to remember, however that you can’t ‘spend’ your business in the future and nothing guarantees that if you choose to sell it then, you will get the value you anticipate.

A recent global survey shows that those who plan (even if they don’t actively implement the plan) end up with 3 times more wealth than non-planners, whereas those who implement their plans end up with 5 times more wealth. (Future of Retirement Survey)

So much for talking. Start your retirement planning now! If you need any help getting started, we are here to help and support you.

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