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Personal vs. Business Financial Planning: What’s the Difference?

Financial planning is important for everyone. It doesn’t matter if you are a stay-at-home parent, an entrepreneur, or someone who spends their days behind a desk in the corporate world.

Personal financial planning may seem like one of those things that only matters for people with money to invest but this couldn’t be further from the truth. For some, personal finance can help them achieve their goals and aspirations while others might need it just to get by day-to-day.

Businesses, too, have many needs when it comes to financial management, including budgets, payroll and even purchasing new equipment on occasion. 

While there are some similarities between the two, there are also some very distinct differences.

In this blog post, we will explore both personal and business financial planning in more detail so that you can understand what each entails and when it might be necessary to seek professional help.

We hope this will help you decide which type of financial planning is right for you, or if your unique situation needs to include both options!

Exploring Personal vs Business Finances

Personal Financial Planning

When it comes to your personal finances, there are many different factors that need to be taken into account. 

There is no one size fits all way of doing things when it comes to this area. It’s a very individualized process as everyone has their own wants and needs – some more than others! 

For example:

Your Income

Personal finance is all about money. What you do with it and how much of it you have to spend has a huge bearing on what kind of goals can be achieved – personal or otherwise! 

When looking at your income, the first place to start is understanding where that paycheck comes from. If you’re self-employed, then this might be a little more difficult to figure out as it fluctuates month-to-month. 

However, if you have a regular job with set hours and a steady income, this is a great starting point for understanding your personal financial status.

Your Expenses

After looking at your income, the next step is to take a look at where that money goes. 

Whether you’re spending it on yourself or paying for the day-to-day expenses of your family, putting together a monthly budget can help to highlight where most of that income is going at any given time. 

This will allow you to see what kind of discretionary income (if any) you have left over and how much could be saved if you wanted to.

Another important aspect of personal finance is your net worth. This means the value of everything you own (your assets) minus how much money you owe (your liabilities). You can calculate this with a simple equation:  Assets – Liabilities = Net Worth

For example, say Joe owns $25,000 in stocks and has a $15,000 mortgage. Joe’s net worth would be $10,000 ($25,000 – $15,000).

Your Goals

One of the most important aspects of personal finance is understanding your goals and aspirations. 

Whether you want to buy a house, travel more or just save for a rainy day fund, knowing what you want to achieve will help you get there. After all, personal finance is a marathon and not a sprint – it’s important that your goals are the things that matter most to you!

Viewing Personal Finance as an Investment

In addition to understanding where your money currently stands in terms of income – expenses and assets/liabilities, looking at personal finance as an investment can be a great way to think about it.

When you view your personal finances in this light, the goal is to grow your net worth over time. 

This can be done by increasing your income, decreasing your expenses or investing money into assets that will appreciate in the future. The key here is patience and consistency – it’s not going to happen overnight!

Getting Started with Personal Finance Planning

If this seems overwhelming and you aren’t sure where to start, there are a variety of different services that can help. 

Personal finance planning, traditionally only offered to high-net worth individuals and families, is now available to everyone — independent of their income or asset-accumulation levels.

The key is to find someone you can trust and who will take the time to understand your unique situation.

Business Financial Planning

When it comes to business finances, there are a few key differences that need to be taken into account.

The first is that businesses have expenses related to running the company – things like rent, employee salaries, office supplies, and other costs. In addition, businesses have expenses related to taxes and insurance that individuals do not need to worry about as much.

Also, keep in mind that business finances tend to be more complicated with things like depreciation schedules – which is the amount of money you record over time on an asset so it can be spread out for tax purposes.

Finally, businesses have a lot more flexibility when it comes to how and where they invest their money. This is because there are different types of business structures that entrepreneurs can choose from including LLCs, C Corps, or S Corps.

Each has its own benefits and drawbacks so careful consideration should go into which structure is best for a given business.

The Bottom Line on Personal vs. Business Financial Planning

Understanding the differences between personal and business finances is an important first step to getting started with financial planning.  

It’s also critical that you find someone who can help walk you through this process in a way that makes sense for your situation – whether it be a professional financial planner, CPA, or someone else who has experience in this area.  

If you need help getting started, click here to schedule an introductory meeting with us!

Ready to take control of your money? Check out our Personal and Small Business Planning page for more information on how we can help improve your finances – and your life!

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