How to improve your financial wellbeing

Selina Flavius, financial coach, author, and founder of @blackgirlfinance, shares her guide to financial wellbeing for small businesses.

Finance tips for business owners

According to Simply Business research, financial worries are having the single biggest impact on the mental health of 41 per cent of small business owners. So, how do we maintain good business and personal finance practices to sustain our financial wellbeing when running a business?

You’ve done the hard work and powered through to bring your business idea to life. Sadly, as business owners, one area that often gets neglected in pursuit of business is our own personal finances.

Simply Business has partnered with Mental Health at Work, a programme curated by Mind, to support the UK’s self-employed with their mental health and wellbeing.

Together we surveyed more than 700 small business owners to understand their challenges. Now we want to start a conversation and end the stigma surrounding mental health at work through our Mind Your Business initiative.

Understand your tax responsibilities

It’s not uncommon when starting out in business to remain employed, whether full time or part-time, alongside running your exciting new venture.

If this is the case for you, it’s important to be aware of the tax implications. Make sure you consider whether you’ll be pushed into a higher income tax bracket, and that you’re able to set money aside each time you’re paid so you have cash to pay tax on any untaxed income sources.

Currently if you have untaxed income over £1,000, you may need to complete a Self Assessment and pay tax on this. It’s important to be prepared for this in advance and avoid getting landed with an unexpected tax bill.

Also, as a sole trader, setting aside tax in preparation for Self Assessment takes the pressure off.

Consider your business costs

As your business grows and expands, you’ll start accruing additional running costs in the form of office space, stock, payroll, IT, marketing, and business insurance. Keeping an eye on the cashflow into the business to ensure you can afford these new financial commitments is key.

Thinking about how much it costs to run your business will allow you to create and build up cash reserves based on these running costs. This means that during quieter periods you’ll be able to maintain your business until business picks back up again.

The above also applies to your personal finances if you’re taking a salary from the business, either paid monthly or as a dividend payment for directors.

Making sure you have HMRC payroll set up correctly in the case of paying your salary, or that you’re reporting any dividend payments made to yourself, means you can then put aside any taxes due. This doesn’t apply for taxes paid through payroll though.

Build a cash reserve

It’s also essential to build up your own cash reserve by creating a personal emergency fund.

As an individual separate from your business, it’s also vital that you do a financial stock take, create a budget to cover living expenses, and that you can maintain your personal financial commitments.

Within the budget, make sure you allocate money for things you enjoy – it can’t be all work and zero play 100 per cent of the time, your self-care is important.

Think about the future

Finally, take into account the long-term view of your financial future.

We all create businesses with the dream of infinite business success and million-pound exit strategies. But if we come back down to earth just a little, making sure we’re still setting money aside into a personal private pension (if not already set up as an employee pension scheme through payroll) isn’t a bad idea.

Pension accounts can be set up and administered extremely easily from a laptop or computer, giving you the peace of mind that you are financially secure whatever happens in the long term.

Running your business takes up a lot of focus and energy, but getting the financial balance right can help to keep this manageable and sustain you and your business over the long term.

Guides for small business owners and the self-employed

About Selina Flavius

Selina Flavius founded Black Girl Finance in 2019 to offer financial coaching and increase access to financial services for underserved groups. Selina’s written about issues including the gender and ethnicity pay gaps and the racial wealth gap in The Guardian and FT Adviser. Selina launched the Black Girl Finance podcast last year and has just released her book ‘Black Girl Finance – Let’s Talk Money’.

Visit Mental Health at Work’s dedicated Self-Employed Support Hub for toolkits, resources and powerful stories to help improve workplace wellbeing.

Looking for self-employed health insurance?

With Simply Business you can build a single self employed health insurance policy combining valuable covers and services. Whether you want to be covered for stress support, physiotherapy, or in-patient hospital treatment, we’ve got the right health cover to suit your needs.

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Top tips for managing financial wellbeing