Don’t Let Your Personal Debts Drag Your Business Into Ruin
So many of us have some form of debt, but we don’t want to talk about it. Debt, despite being an inevitable and necessary consequence of capitalism is unfairly stigmatized in a way that leads us to attitudes and practices that can exacerbate the problem. Debt is widespread yet unfairly stigmatized against. We tend to see personal debt as a personal failure, even though most of us encounter personal debt not because we lead particularly lavish or extravagant lifestyles, but because we’ve encountered a personal cash flow crisis and have needed to turn to credit cards or loans to see us through a time of financial hardship, pay off an unexpected expense or just keep the lights on at home.
We have a tendency to sweep our debts under the rug, to keep them out of sight and out of mind. While understandable, this is hardly a mindset becoming of an entrepreneur, and merely adds to the stress and psychological hold that our debt has over us. Moreover, mismanagement of your debt can have severe consequences for your business. If you keep having to take more and more money from your business to pay off your personal debts, this can lead to a dangerous instability. It’s time to get your debts under control before they severely impede your business. Here’s how…
Pull your head out of the sand
Do you even know how much you owe? Do you know how much interest you’ve paid? Do you know what the different interest rates are for your individual creditors? Too many of us set our debt repayments to the minimal amount and hope that they’ll go away eventually. Unfortunately this can often exacerbate the problem.
As debts pile up it can damage your credit rating which can in turn inhibit your ability to borrow for your business should you face a cash flow problem. This could mean that you miss out on an opportunity that could lead to real growth. At best your business may stagnate or at worst it could be the beginning of the end. Debt consolidation loans for bad credit can be a lifeline in these circumstances. These aid your credit rating as all your existing debts are replaced by a single new debt.
Apply your entrepreneurial mindset to your personal finances and you can start to see real benefits quickly. Set targets to help yourself manage your debts, with clear quarterly and annual repayment targets, factoring the repayments into your monthly household budget. This will help you to track your repayment and help you to see the light at the end of the tunnel.
Reduce your personal overheads
If you’re the CEO of your own business, you likely pay yourself a salary to cover your personal expenses. All entrepreneurs walk a fine line in doing this, and finding the balance to achieve harmony between your personal and business finances is challenging but doable. You can avoid the temptation to pay yourself a little extra to cover your debts (and thereby siphoning much needed cash out of your business) by cutting down your personal expenses. Moving to a cheaper area, cycling instead of driving or even just rigorous meal planning to avoid the expense of restaurants and takeout can make a world of difference.