On my Business owners and Entrepreneurs podcast – Transition Guy, I interviewed money expert and top financial planner Shinobu Hindert who is the author of Investing is your superpower. We talked about how to get started with financial planning.

The cost of living crisis is hitting everyone hard. There isn’t a single business that has not been touched by it in some way. The highest inflation for 40 years and rising prices are causing some businesses to shut their doors. As business owners we need to think carefully about how we spend our money and where we spend it to ensure the long term health of our organisations. Having a plan is key.

The Basics of Financial Planning

There are different types of business owners. You have the people that save and work incredibly hard because they come from nothing. There are also younger business owners who may have made their way in the tech worlds and have quickly made money. They have a different view on spending. It doesn’t matter which camp you fall into, you need a financial plan.

Understand the balance between saving and spending. Write down your goals. Write down what you want to accomplish. Those goals don’t have to be tied to money. Work out the steps you need to get there. Planning for the future is a good habit to have.

Common Mistakes People Make

Don’t go it alone. Reach out to professionals. Get advice from experts when you are planning your finances. When you go to a foreign country you research and read up on the area you are going to. Even better, you talk to people who have been there and they can tell you the best places to go and why. It is the same with your financial planning.

Don’t listen to people who are not experienced in financial planning. For example family members or friends. They often have strong opinions and their advice could be misleading. Make sure you do your due diligence before following any advice from non professionals. We are emotional human beings, not robots.

Even though there’s a strategy in place, it’s sometimes very difficult for us to separate our emotions from what we are hearing in the news. In terms of markets rising and falling, don’t make knee jerk reactions and think before you action anything. Don’t make big changes based on how you are feeling. Stick to a solid plan.

There Are Fewer Barriers to Investing Now

Technology has changed financial planning and investing. There used to be major barriers for people wanting to get into investment. You were often charged fees and there were numerous conversations and hoops to jump through before you even got to deciding where to invest your money.

Often there was a substantial minimum amount needed to start the investment which discounted a lot of people. Investing has become democratised thanks to technology. It is now accessible to everyone.

Be Truthful in Your Planning

Be honest with how much money you are making, how much you are spending and what your debt looks like. Organise your debt by interest rate payments and by the payoff dates. Understand your financial picture. Work out what expenses you have. What things are absolutely necessary to your life and what things can you live without.

What things do you want to spend your money on? These things will be different for everyone. Then work out how much money you can comfortably afford to save. Once you have six months of money invested, think about how to grow it. Strike a balance between short term financial goals, like saving for a holiday and long-term goals like retirement. Do it with intention and not sacrifice.

How to Plan For Unexpected Expenses

It is important to have an emergency fund. Over the last decade we have seen multiple crises so having a backup plan is key. The general rules for this are: If you are a two income household, and you work at different places or different industries, then you should have three months worth of your monthly spending in savings. If you both work at the same company or you work in the same industry, then you should have six months of savings.

If you’re self-employed and you own your own business and you’re looking at business reserves you should have at least 12 to 18 months. If you are a single income household, then it is also good to have six months of savings. Also consider how high an earner you are because this can sometimes have an impact on how quickly you would find another job if you were let go.

Staying on Track With Your Financial Plan

How often should you reassess and adjust your strategies to ensure you are progressing towards goals? In the beginning you should reassess more frequently until you fully understand and have confidence in your plan. From then on review your plan quarterly unless there is a significant change in your circumstances. Make sure that you are still moving in the direction you want to be.

If you are a business owner and want help to come up with a financial plan for you and your business, get in touch

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Remember, failing to learn, is learning to fail.