As income dynamics of people who are their own bosses are a tad different from the salaried class, the subject also needs to be approached differently.(Photo:Shutterstock)
As income dynamics of people who are their own bosses are a tad different from the salaried class, the subject also needs to be approached differently.(Photo:Shutterstock)

Why self-employed individuals need to manage their finances more efficiently?

As income dynamics of people who are their own bosses are a tad different from the salaried class, the subject also needs to be approached differently.
By hindustantimes.com | Hindustan Times
UPDATED ON DEC 22, 2020 05:20 PM IST

The media and popular culture tropes rarely go beyond the razzmatazz of entrepreneurship but ask any entrepreneur about his/her experiences and the descriptions will surely have words that are synonymous with challenge. The world of start-ups is not just a microcosm of passion, hard-work, unrelenting dedication and the zeal to not give up. On some days running businesses can seem like waging a lost battle and the proverbial light at the end of the tunnel may seem invisible.

Given the circuitous path of entrepreneurship, money management for business owners and self- employed individuals can assume a new dimension. As income dynamics of people who are their own bosses are a tad different from the salaried class, the subject also needs to be approached differently.

However, for many entrepreneurs it is easy to give into wrong investment choices when their ventures are doing well.

Sidestepping what is popular

For many entrepreneurs and self-employed individuals, a lot of incorrect investment strategies are primarily driven by a lack of understanding of investment avenues. There is a tendency to jump on to bandwagons that may or may not be suited to their situations and goals. Arjun Chhabra, a practicing chartered accountant, whose clientele includes self-employed individuals and businesspersons says, “I have worked with so many people running successful ventures and a common trend is to follow the advice of friends and family members. If an entrepreneur has a friend, who is also an entrepreneur and decides to invest in a commercial property, chances are others too will be interested and may consider investing there solely because of the recommendation without thinking that maintaining the property may prove to be a loss magnet in some cases. It is extremely important to not give into cookie cutter solutions like these.”

Differentiating between your business and personal accounts

The perception that building a business is akin to raising a child can indeed be the secret ingredient in keeping entrepreneurs motivated but when it comes to money management it is imperative to not let your vision being clouded. Rachna Sharma (name changed), an entrepreneur based in Ranchi says, “In the early days of my entrepreneurship journey, I made the mistake of not segregating my personal finances from the business’s funds and the resulting mess took a while to clear. It is extremely important to always remember that your business is a separate entity because not only does it lend more credibility to your business but you will also be spared a lot of troubles if something bad were to happen tomorrow. You will also make better investment decisions once you demarcated the finances for the two – what you need for your personal finances aren’t going to be congruent with the financial decisions you need to make for your business.”

The beauty in simplicity

The path of entrepreneurship can be riddled with uncertainties and the constant need to be in the fight or flight mode can make it extremely daunting for entrepreneurs to actively monitor investments and review wealth management strategies from time to time. Parvathy Iyer, Chief Investment Officer at femwealth.com says, “It can be difficult to find the time and motivation to search all possible investment avenues, then understand them and finally pick the one most suited to them. Investment should be made in simple assets - assets that are transparent and easy to understand. They should be easy to buy, easy to sell. It should not require a lot of maintenance or checking up on. And calculating the value of the investment should just take a few calculator steps.”

Iyer advocates that given the convenience afforded to mutual fund investors, it can be an attractive option for entrepreneurs and self-employed individuals. She says, “A “fill it and forget it” passive approach on mutual funds is a good strategy. It is important to determine the distribution between equity and debt based on risk tolerance. The investment can be made in a couple of direct index equity funds, plus a couple of direct short term debt funds that manage large sums of money. This ticks all the above boxes and is a low expense, low maintenance portfolio. It is also a portfolio where mistakes can be avoided.”

Considering entrepreneurship in itself can be an extremely demanding role, making simplicity one’s mantra in the realm of money management can go a long way in helping entrepreneurs spare a lot of time and energy. “This kind of passive portfolio is especially well suited to entreprenuers short on time, attention span or inclination. All this can be done online which is easy and convenient,” Iyer asserts.

The next time you plan your investments, keep these points in mind:

 Do not give into cookie-cutter investment solutions: Always understand how a particular investment is going to help your case and then go for it. Buying commercial or residential real estate in different parts of the country might not always be the best way forward.

 Segregate personal finances from the business’s funds: It is extremely important to always remember that your business is a separate entity because not only does it lend more credibility to your business but you will also be spared a lot of troubles that come with overlapping of finances.

 Invest in simple assets: Investment should be made in assets that are transparent and easy to understand. They should be easy to buy, easy to sell. It should not require a lot of maintenance or checking up on. Mutual funds are a convenient choice for entrepreneurs and self-employed individuals.

This article is part of the HT Friday Finance series published in association with Aditya Birla Sun Life Mutual Fund

SHARE THIS ARTICLE ON
app
Close
India has allowed local airlines to fly limited schedules since May after two months of a strict nationwide lockdown, gradually opening up the domestic market.(PTI)
India has allowed local airlines to fly limited schedules since May after two months of a strict nationwide lockdown, gradually opening up the domestic market.(PTI)

India’s domestic aviation operations nearing pre-pandemic levels

Bloomberg
UPDATED ON JAN 23, 2021 10:54 PM IST
As many as 257,613 passengers flew locally as on Jan. 22, compared with 30,000 passengers that traveled by air when such flights were restarted on May 25, Puri said in a Twitter post on Saturday.
Close
Washington : FILE - In this Jan. 21, 2021, file photo, President Joe Biden reacts to a reporters question after signing executive orders in the State Dinning Room of the White House, in Washington. Vice President Kamala Harris, left, and Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, right, look on. AP/PTI(AP01_23_2021_000009B)(AP)
Washington : FILE - In this Jan. 21, 2021, file photo, President Joe Biden reacts to a reporters question after signing executive orders in the State Dinning Room of the White House, in Washington. Vice President Kamala Harris, left, and Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, right, look on. AP/PTI(AP01_23_2021_000009B)(AP)

Oil industry reels as Joe Biden targets fossil fuels in first days

Bloomberg
PUBLISHED ON JAN 23, 2021 06:25 PM IST
  • Officials are worried that technical permitting decisions are being placed in the hands of political appointees, rather than expert regulators in the field. And they’re concerned permits -- or simply changes to them -- will be delayed for existing drilling operations.
Close
Called the US Citizenship Act of 2021, the legislation modernises the immigration system, and also proposes to eliminate the per country cap for employment-based green cards, a move that would benefit thousands of Indian IT professionals.(AFP)
Called the US Citizenship Act of 2021, the legislation modernises the immigration system, and also proposes to eliminate the per country cap for employment-based green cards, a move that would benefit thousands of Indian IT professionals.(AFP)

IT giants Apple, Google welcome Joe Biden's new immigration reforms

PTI, Washington
PUBLISHED ON JAN 23, 2021 05:14 PM IST
On the day one of his presidency on Wednesday, Biden sent a comprehensive immigration bill to Congress which proposes major overhauls to the system.
Close
The ED found that Wadhawans laundered more than <span class='webrupee'>₹</span>2500 crore out of a total <span class='webrupee'>₹</span>6600 crore the company - HDIL - had taken from PMC Bank between 2007 and 2013.(Twitter/@dir_ed)
The ED found that Wadhawans laundered more than 2500 crore out of a total 6600 crore the company - HDIL - had taken from PMC Bank between 2007 and 2013.(Twitter/@dir_ed)

PMC Bank fraud: ED arrests Viva group MD, consultant

By Vijay Kumar Yadav | Edited by Abhinav Sahay, Mumbai
PUBLISHED ON JAN 23, 2021 03:31 PM IST
  • ED's money laundering probe in the PMC Bank case began after the Mumbai police registered a criminal case in September 2019 against HDIL, its promoters Rakesh Wadhawan and Sarang Wadhawan among others.
Close
A salesman shows gold necklaces to a customer at a jewellery showroom in Kolkata in this file photo. (Reuters Photo)
A salesman shows gold necklaces to a customer at a jewellery showroom in Kolkata in this file photo. (Reuters Photo)

Gold prices start the week at 48,332 per 10 gram, fall to 48,861

By hindustantimes.com | Written by Meenakshi Ray, New Delhi
PUBLISHED ON JAN 23, 2021 11:19 AM IST
Gold price was up in the national capital on Monday with a recovery in international prices and rupee depreciation, according to HDFC Securities.
Close
The record rise in prices has led to demands for a cut in excise duty to allow customers to buy fuel at lesser prices.(Satyabrata Tripathy/Hindustan Times)
The record rise in prices has led to demands for a cut in excise duty to allow customers to buy fuel at lesser prices.(Satyabrata Tripathy/Hindustan Times)

Fuel prices surge once more. Check what people will have to pay in major cities

By hindustantimes.com | Edited by Shankhyaneel Sarkar, Hindustan Times, New Delhi
PUBLISHED ON JAN 23, 2021 11:11 AM IST
Petrol prices in Delhi rose to 85.70 and diesel prices were up by 15 paise to rise to 75.88 per litre.
Close
While the RBI has sought to increase scrutiny on shadow banks, it has also assured them that the proposed changes will continue to allow those engaged in niche sectors and markets to have flexibility in terms of business operations.
While the RBI has sought to increase scrutiny on shadow banks, it has also assured them that the proposed changes will continue to allow those engaged in niche sectors and markets to have flexibility in terms of business operations.

RBI proposes stricter norms for non-banks

By Gopika Gopakumar, Livemint, Mumbai
PUBLISHED ON JAN 23, 2021 07:39 AM IST
The regulator proposed to classify the shadow banks into four categories, depending on their systemic importance and potential risk to the stability of financial system stability.
Close
The India volatility index, or the VIX, which indicates a rise in fear and anxiety among investors, rose 1% to end at 22.42 on Friday.(PTI)
The India volatility index, or the VIX, which indicates a rise in fear and anxiety among investors, rose 1% to end at 22.42 on Friday.(PTI)

Markets skid amid weak global cues

By Nasrin Sultana, Livemint, Mumbai
PUBLISHED ON JAN 23, 2021 07:37 AM IST
Stocks in the Asia-Pacific also traded lower, with Hong Kong’s Hang Seng falling 1.6%, China’s Shanghai Composite 0.4%, Japan’s Nikkei 0.44% and South Korea’s Kospi 0.64%.
Close
After the move was opposed by industry, finance minister Nirmala Sitharaman said on August 23, 2019 that violations of CSR norms under the Companies Act would be treated as a civil liability and not as a criminal offence.(HT file photo. Representative image)
After the move was opposed by industry, finance minister Nirmala Sitharaman said on August 23, 2019 that violations of CSR norms under the Companies Act would be treated as a civil liability and not as a criminal offence.(HT file photo. Representative image)

CSR offences by firms now a ‘civil wrong’, not a crime

By Rajeev Jayaswal
PUBLISHED ON JAN 23, 2021 05:25 AM IST
In line with a commitment made by the finance minister, the government formally notified that non-compliance with CSR provisions would be a “civil wrong,” not a crime, and shifted such violations to a penalty regime, two officials said, requesting anonymity.
Close
Intel shares fell 4.6% in early trading in New York.(Bloomberg)
Intel shares fell 4.6% in early trading in New York.(Bloomberg)

Intel tumbles after new CEO recommits to chip manufacturing

Bloomberg
PUBLISHED ON JAN 22, 2021 08:00 PM IST
  • Keeping chip production in-house may be bad for Intel because its manufacturing technology has fallen behind Taiwan Semiconductor Manufacturing Co., which makes chips for many of Intel’s rivals. If the US company can’t catch up, its products will become less competitive, lose sales and market share.
Close
The IPO has received bids for 64.58 crore shares against an offer size of 55.18 lakh shares.(AP Representative image)
The IPO has received bids for 64.58 crore shares against an offer size of 55.18 lakh shares.(AP Representative image)

Indigo Paints IPO garners robust response; subscribed 117 times on final day

PTI, New Delhi
PUBLISHED ON JAN 22, 2021 06:34 PM IST
The price band was fixed at 1,488-1,490 a share for the initial share-sale, which was open for public subscription during January 20-22.
Close
The Infosys co-founder also noted that the pandemic has brought changes in consumer behaviour
The Infosys co-founder also noted that the pandemic has brought changes in consumer behaviour

India will be role model on how to vaccinate billion people at scale: Nilekani

PTI, New Delhi
PUBLISHED ON JAN 22, 2021 06:02 PM IST
Speaking at Redseer's Ground Zero 4.0 event, Nilekani spoke on how to build for scale in India that presents a massive opportunity with a booming internet penetration and rising adoption of digital services.
Close
Amazon and Flipkart together control 81% of India’s online market share, while RIL’s online services are estimated at 1% market share in 2020.mint(MINT_PRINT)
Amazon and Flipkart together control 81% of India’s online market share, while RIL’s online services are estimated at 1% market share in 2020.mint(MINT_PRINT)

Govt has pledged strict foreign investment rules for e-commerce, says CAIT

Reuters, New Delhi
PUBLISHED ON JAN 22, 2021 05:34 PM IST
India's e-commerce retail market is seen growing to $200 billion a year by 2026, from $30 billion in 2019.
Close
The oil market will be able to accommodate Iran’s maximum oil output of around 3.9 million to 4 million barrels a day.(Reuters/ File photo)
The oil market will be able to accommodate Iran’s maximum oil output of around 3.9 million to 4 million barrels a day.(Reuters/ File photo)

Iran starts ramping up oil production to pre-sanctions levels

Bloomberg, Tehran
PUBLISHED ON JAN 22, 2021 04:47 PM IST
  • Iran has been subject to tough US sanctions since 2018, when the administration of then-President Donald Trump unilaterally withdrew from an international deal that restricted the Middle Eastern country’s nuclear activities. Its crude production was below 2 million barrels a day for most of 2020.
Close
In this time exposure taken from Westgate Cocoa Beach Pier in Cocoa Beach, Fla., a SpaceX Falcon 9 rocket lifts off from Pad 40 at Cape Canaveral Air Force Station, Fla., Tuesday, Nov. 24, 2020. The rocket is carrying the 16th batch of Starlink communications satellites. (Malcolm Denemark/Florida Today via AP)(AP)
In this time exposure taken from Westgate Cocoa Beach Pier in Cocoa Beach, Fla., a SpaceX Falcon 9 rocket lifts off from Pad 40 at Cape Canaveral Air Force Station, Fla., Tuesday, Nov. 24, 2020. The rocket is carrying the 16th batch of Starlink communications satellites. (Malcolm Denemark/Florida Today via AP)(AP)

Elon Musk targets telecom for next disruption with Starlink internet

Bloomberg
PUBLISHED ON JAN 22, 2021 04:40 PM IST
SpaceX has told investors that Starlink is angling for a piece of a $1 trillion market made up of in-flight internet, maritime services, and demand in China and India.
Close
SHARE
Story Saved
OPEN APP