Personal Financial Planning

Running your own business can be very time and energy consuming... there isn't necessarily a lot left for planning your own personal finances. Many small business owners often find that they've been so busy planning and preparing for their business, that they've neglected their pension, saving and unemployment provisions.

Don't be afraid to talk to your accountant. Small business accountants are only too aware that to do an effective job for their clients they have to look at the whole picture, personal and private, because the two are usually bound up together.

Savings and investments

Often your personal finance is inextricably tied up with your business. However both for tax, accounting and record keeping purposes, and for your own peace of mind, it is important to be clear about what is yours and what is the business'.

It is also easy to overlook your own assets. Have you got your savings in the best interest accounts? Are you making full use of your tax-free savings allowances? If you own any property is it financed in the best way - have you got the best value mortgage? If you let it out are you getting the most from it? Is it worth considering a letting agency, who will take a fee but release you from the workload and perhaps maximise the returns?

Pensions

A 2007 survey by Scottish Widows found that only one third of self-employed people had pensions in place. Added to this that many self-employed people are older (more than half are over 50) and have larger debts - owing to business start up costs - and a worrying picture emerges.

Although there isn't a lot of fat on the bone in the early days of running your own business, as soon as there is you need to consider your pension options. To understand your options - and what the state may provide for your - visit the Pension Service at http://www.thepensionservice.gov.uk/home.asp . Also visit the Financial Services Authority website at http://www.moneymadeclear.fsa.gov.uk to get straightforward, no selling information on personal pensions.

Talk to your accountant. Taking out a pension is not the only way to fund your retirement. Investing in property or other assets, selling your business and putting money into ISAs or similar are all viable alternatives. Visit Pension Sorter for no-nonsense ideas: http://www.pensionsorter.co.uk/pensions_alternatives.html

Life, unemployment and sickness insurance

Again, many self-employed people fail to be properly insured. It is the usual balancing act between the cost of insurance and the perception of risk. There is very little excuse for not having life insurance, which can cost as little as £10 - 11 per month, especially when you consider the implications for your close family if you do die.

Insurances against unemployment and sickness are particularly important for the self-employed as they cannot get sickness benefit (though you may be entitled to Incapacity Benefits if you have made sufficient contributions). However they tend to be expensive, and the cost may well make them unviable. Talk to your insurance broker and your accountant.

Mortgages for the self employed

Although in the past it could be difficult for self-employed people to get a mortgage, things have become easier. Talk to your accountant and mortgage advisor. The more years' trading you have behind you, with proper accounts to prove them, the better you are likely to do. Self-certified (where you declare your own income) mortgages are now widespread, with many of the major banks and building societies offering them, but rates do tend to be slightly higher than regular mortgages. It may be more cost effective to take out the mortgage with your partner as the principle, if he or she is an employed earner.

Personal loans for the self employed

As with mortgages, it can be harder for a self-employed person to get a loan. Good accounts, and above all a good relationship with your bank, are helpful. Loans are available to those without accounts, but less stringent lending criteria usually means higher interest charges. Again, talk to your accountant.

Estate planning

Although planning for what will happen when you die, unexpectedly or otherwise, is hardly an appealing prospect, leaving it to your bereaved loved ones is an even worse one. Make a will and keep it updated. You'll need to think about who will act as executors, who will benefit from your assets, how the business might be maintained in the interim and how to pass on your estate with the minimum of duties - a serious concern as taxes and duties can end up swallowing much of what you leave behind. Your accountant can certainly help you to manage your estate planning and suggest ways to pass on your assets so that your beneficiaries receive the maximum possible.