Financial Planning Tips For Women Entrepreneurs

So, after years of indecision, you've finally decided to take the plunge and opt out from the proverbial rat race! Kudos to you for your courage, and wish you the best for the treacherous and exciting journey that lies in front of you. Make sure you follow these simple but important steps to ensure that you're well covered from a financial planning standpoint:

Establish an emergency fund beyond the traditionally recommended amount
Traditionally, it's recommended to have an emergency fund that's equal to at least 6 months of your non-discretionary spends. As an entrepreneur, this provisioning must be significantly higher than that. Target an emergency fund amounting to 12-24 months' worth of non-discretionary spends, before you embark upon your entrepreneurial escapades.

Reduce spending & slash your liabilities
A no brainer this might be, but a very important one nevertheless! When you were assured of a fixed salary, you could even have afforded to spend more than you had in your account, with the hope of paying it off when your next salary hit your account (as ill-advised as that approach is!). As an entrepreneur, this is nothing short of financial suicide. Chances are that you'll be financially stretched for the first couple of years of longer (depending upon the kind of business you're into). Take an impartial look at your monthly expenses and eliminate the ones you deem 'not very important'. It's going to hurt, but not more than running out of money and not having enough to pay the bills for your basic amenities.

Don't lose sight of your personal goals
Amidst the inevitable roller coaster ride that is entrepreneurship, it's deceptively easy to lose sight of the personal financial goals you set for yourself and your family. Your raw passion and desire to succeed may entice you to throw caution to the winds and liquidate your hard-saved goal oriented funds, but that's something you must not do. Stay the course and always separate personal from business.

Put away money when you have it
As an entrepreneur, you'll most likely have irregular cash flows. Saving fixed sums of money monthly (for instance, through a mutual fund SIP) might seem like a daunting task and not very feasible for you, especially at the early stages while you're still sinking time and money into your new venture. Take advantage of unexpected lump sums that might come your way (say, through a windfall business deal) by deploying 80% of the amount in quality investments towards your long term financial goals, and allocating 20% of it for discretionary spending.

Take out adequate Life Insurance a few months before starting out
Your decision to become an entrepreneur may affect your standing with life insurance companies, as your future income (and hence your ability to pay your premiums on time) might be perceived to be irregular. Take out a good term life insurance policy a few months before starting out, to cover your dependents (if any) adequately. Ensure that you service your premiums on time and do not let the policy lapse, as this might lead to the requirement for a fresh underwriting cycle.