A Common Personal Finance Mistake New 'Treps Make

Starting a business affects your life many ways outside of work, particular the way you manage personal finances. One of the biggest mistakes new entrepreneurs is not keeping their personal and business finances separate.

"They move money back and and it is very important to their records separate," says Edward Wacks, a business financial advisor based Plantation, Fla. This commingling of finances, Wacks says, can have damaging implications for your business the road.

example, if you are paying business expenses personal funds or vice , it becomes challenging from an accounting standpoint to know your profits or revenues are for your business, says Wacks. That filing your business taxes a headache.

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, without a clear division your finances, your personal assets are less protected if your business is sued or you take a business loan and can't pay it .

"Many entrepreneurs are great salespeople, but they are as good with the inside" of a business, the metaphorical financial guts of a company, says Wacks.

Here are three tips protecting your personal finances as a business owner:

1. Keep separate bank accounts. this one step to separate business from personal will the biggest difference, especially tax time when you document your business' profits and losses. this might seem obvious, Wacks says this is a common mistake he has seen startups .

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2. Think like you have business partners, if you don't. To prevent yourself getting lax about keeping your finances separate, think as you have business partners, says Wacks. You wouldn't expect your business partners to pay for your groceries or the recent fill-up the gas station: that will have to come of your personal piggy bank.

3. Don't mix credit card purchases. it comes time to pull out the plastic, keep one credit card strictly business expenses and a separate one for personal purchases. Otherwise, trying to parse the business charges from personal on your monthly statement after the fact can confusing.

Related: 4 Mistakes to Avoid When Applying a Bank Loan

What is your best advice keeping business and personal finances separate? Leave your comment below or respond to other reader comments.


Adapted from: entrepreneur.com, June 21, 2012.