5 Practical Steps To Take Control Of Your Personal Finances

In my last post, I explained why restaurant owners often struggle with personal finances despite being exceptional business operators; now let’s dive into the practical steps you can take to change that.

Step 1: Manage Your Expectations

Set realistic timelines: It’s very unlikely you’re going to transform your financial life in 6 months. This is likely a 1-5 year project and plan accordingly.

This is a hard reality to accept, but don’t let it stop you from reaching your financial goals.

Step 2: Build Your Cash Buffer

Build float in your business bank account(s): accumulate enough cash in your business bank account so that you can make payroll and pay suppliers without transferring cash or juggling payments.
Create a personal emergency fund: Before investing in anything else – stocks, real estate, another location – build 6-12 months worth of personal expenses in a separate high-yield savings account. Temporarily cut back on personal spending if you need to.

Forget the advice of every advisor who ever told you not to carry too much cash because it was inefficient; they have no idea what running a retail food service business is like. Just stuff cash away and continue to operate your businesses well.

Step 3: Clarify Your Goals & Vision:

Now that you’ve got breathing room, take a step back and reflect:

What do you and your family genuinely want?
For your business: Are you ready to expand, sell, keep everything the same, or transition it to your children?
For your personal finances: is this the time to begin building wealth outside your business? And if so, how?

Gaining clarity about your goals makes subsequent decisions simpler. It’s also incredibly motivating.

Step 4: Address Tactical Issues:

Normalize your salary: Stop random distributions. Pay yourself a consistent monthly salary, even if some months are tighter, to smooth out seasonal fluctuations and cash flow issues.
Separate personal and business expenses: There’s obviously short-term benefit in mixing expenses; but over the long term you lose visibility to financial performance and become less and less certain about what’s going on.
Understand your personal spending habits: track personal expenses for 3-months to see where your money goes and then have some heart-to-heart conversations with your spouse and family about expectations and limits. Make firm agreements to one another but allow for flexibility where it’s necessary.

Think of solving these three issues as building the key habits you need to make sure you don’t go back to where you started. If you get these down, you’ll make dramatic progress over the coming years.

Step 5: Build And Execute Your Financial Plan:

Step 5 is the most challenging. But by the time you get here you’ll have a different mentality. You’ll have breathing room and be ready to tackle financial planning, and most importantly, be able to make better financial decisions for you and your family.

Build a simple framework to document your net worth and estimate your cash flows over the next 5-10 years: Document your financial situation – business equity, real estate, investments, other personal assets, and annualized personal cash flow. Build a simple financial model that shows your current path over 5-10 years. Note: I understand building a long-term cash flow model might seem confusing. I’ll do a future blog post on how to build a simple multi-year cash flow model.
Before making any major business decisions, analyze how they might impact your current financial situation and future cash flows: Before expanding, partnering, or making major investments, analyze how these decisions impact your personal wealth. What’s the best case? Worst case? Can you handle the worst case without jeopardizing what you’ve already built?
Begin to do tax planning: With the information you’ve collected, work with your accountant or financial planner on forward-looking income tax planning (this is not the same thing as tax preparation). Note: this is not interesting! It’s boring! But guess what, tax planning often provides business owners with the opportunity to reduce your tax burden by several thousand dollars over future years.
Begin to think critically about how you want to build wealth outside your restaurants: Using the financial model you’ve built, develop an investment strategy that leverages your skills and interests. Maybe that’s real estate (you understand properties and operations). Maybe it’s keeping more cash for business opportunities. Or a traditional investment portfolio.
Implement a routine for staying on track: Schedule quarterly financial check-ins with yourself. Review your plan, adjust for changes, and make sure you’re still on track for your goals. Treat it like any other important business meeting.

The Bottom Line

Financial uncertainty. It’s stressful, creates family tension, and keeps you from enjoying peace of mind. But the same operational discipline that made you successful in restaurants will work for your personal finances. Set realistic expectations and start by accumulating cash. From there, you’ll give yourself the breathing room to make plans on the basis of what really matters to you and your family.