Owning a business is a great way to build your wealth. Use these five money tips to make the most of your opportunity.
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 $87 a month, you will be eligible for the kickstart of $1000, an annual tax credit of $521 and other KiwiSaver benefits.
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 because of changes in markets and technologies. Reduce your financial risk by holding some of your wealth outside your business. If the worst happens you will have financial assets from which to rebuild.
Separate business and personal money
One of the keys to successful business management is keeping a close eye on the cashflow 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.
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 business income changes.
Have an exit strategy
From the day you start your business, your plan should be to maximise 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.
Liz Koh is an authorised financial adviser. The advice given here is general and does not constitute specific advice to any person. A free disclosure statement can be obtained by calling 0800 273 847.