Personal finance tips for entrepreneurs and small business owners

Published: March 28, 2025 at 6:00 am

Most personal finance content implicitly assumes the reader is salaried and can access monthly fresh cash flow. We all know that the number of entrepreneurs and small business owners has significantly increased over the last few years. So have freelancers or jig economy participants. Here are essential personal finance tips for such folk.

1 Cash is king! Build a cash buffer for at least six months, preferably one year and use that for daily expenses. This way, you can better handle fluctuations in your profits. If, for some reason, you are unable to go to work or have to close your business temporarily, you can still manage your daily expenses. Note: This cash buffer is different from an emergency fund.

2 Delegate as much as possible! Initially, your ability to earn depends entirely on your ability to show up. If you can’t work for some reason, then your income is proportionately lower.  Plan ahead and find ways to keep your business up and running even if you have to take short breaks. If you don’t, the pressure to turn up daily will increase as you age and your health falters.

Hire assistants, employees, interns, or anything that gradually reduces your workload and physical presence. If you don’t do this, you will struggle to balance the needs of the business and your family.

3 Build a large emergency fund.  This is even more important for entrepreneurs and small business owners than the salaried.

4 Health insurance, life insurance and accident insurance are crucial. You will have to protect yourself against any event that can disrupt the fiscal stability of your family – hospitalizations, prolonged inability to work due to accidents and death of the breadwinners.

5 Build a cash-rich business and not a debt-heavy business.  When Microsoft was functioning in Bill Gates’s garage, he had one year’s worth of employee salary in the bank to ensure he could handle downturns.

Your health and peace depend on how successful you are at work. Focus on stable and gradual growth with enough cash instead of rapid growth via borrowing or external funding. This is an excellent read on the subject: Company of One: Why Staying Small is the Next Big Thing for Business – Paul Jarvis.

6 Invest right! When items 1, 3 and 4 are in place, focus on saving for your short-term goal and investing for your long-term goals. Work with a SEBI-registered fee-only advisor from our curated 10-plus-year-old list with 1000+ please readers as clients and get it right from day one.

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Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
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