How to Manage Your Money to Improve Your Mental Health

In aid of Mental Health Awareness Week 2023, we would like to share our advice on how business owners like you, can manage your money to improve your mental well-being. 

No doubt the cost-of-living crisis is having an impact on your business and the profits you are making. You may find that as consumers have less disposable income you are not making as many sales or, as the cost of producing your goods has risen your profit margins have reduced. This could lead to feelings of anxiety and panic; it could affect how much sleep you are getting and even leave you feeling lonely and depressed if you can’t afford to do the things you want to. 

To help you understand your habits and patterns around money, answer the questions below:

Knowing and accepting how you feel and deal with money could help improve your mindset and how you can plan for difficult times. 

To help you alleviate financial worries, here are some tips on how to organise your finances and manage your money:

1. Create a Realistic Budget

It can hard to create a budget as a business owner as you don’t know how much money you will make each month. However, you can work out how much money you will spend. Start by tracking your business expenses, including fixed costs like rent, utilities, travel, and insurance as well as variable costs such as marketing and supplies. This will help you gain a clear understanding of your cash flow and how much you need to make to cover your living costs. A good tip is to then budget for your lowest monthly income and set realistic goals, keeping in mind both short-term needs and long-term growth.

2. Separate Personal and Business Finances

Keep your personal and business accounts separate to maintain financial clarity and ensure accurate tracking of business expenses. Establishing separate bank accounts and credit cards will simplify accounting, facilitate tax preparation, and provide a clearer picture of your business's financial health. This separation also prevents personal financial issues from negatively impacting your business's viability and your mental well-being.

3. Build an Emergency Fund

Establishing an emergency fund, specifically for your business, is a frugal step to mitigate financial stress. Aim to save three to six months' worth of business expenses to cover unforeseen circumstances, such as the cost-of-living crisis that we are experiencing now. Having this safety net will provide peace of mind, reducing anxiety and allowing you to focus on strategic decision-making and growth.

4. Embrace Smart Cash Flow Management

Delayed payments from clients or high accounts receivable can strain your cash flow and lead to significant stress. Implement strategies to improve cash flow, such as offering discounts for early payments or setting clear payment terms with clients. Additionally, regular monitoring and follow-up on outstanding invoices can help you maintain a steady cash flow, ensuring stability and reducing financial anxiety.

5. Seek Professional Financial Advice

Consider enlisting the help of a qualified accountant or financial advisor to guide you through financial planning, investment decisions, and if necessary, debt advice. Their expertise will provide invaluable insights that you may not have been aware of and will enable you to make informed choices that align with your business goals.

Remember that your mental health is just as important as your business's bottom line, and a proactive approach to managing your money will contribute to long-term success and well-being.