Financial Wellness 101: Creating Financial Stability As an Entrepreneur in New Orleans

Financial Wellness means having the knowledge and skills to manage your business finances with confidence. Budgeting, saving, and cash flow management are three core skills that can help entrepreneurs in New Orleans to improve their financial position. Developing in these areas lays the foundation for long-term financial security in both your business and personal finances.

Looking at the numbers, 83% of Black small business owners who said they were “highly confident” in their financial wellness before opening their business reported that owning a business improved their overall financial security. Meanwhile, only 61% of those who were less confident with financial skills said the same.

Simply put, confidence in money management = greater financial security for your business. Keep reading, and we’ll show you:

Why Does Financial Wellness Matter to Entrepreneurs in New Orleans?

Financial wellness matters to entrepreneurs in New Orleans for the same reason it matters to small business owners everywhere — increased peace of mind… Here are six ways financial knowledge can help you get there:

• Cash flow management. Cash flow management means knowing (and tracking!) the net amount of money your business is making and spending. Given that cash flow issues are one of the top reasons small businesses fail, getting this area right doesn’t just lead to increased financial stability; it can also prevent you from closing your doors indefinitely.
• Protecting profits. A lack of financial knowledge can cost small business owners around $118,121 in lost profit. That could be the difference between investing back into and growing your business, or being among the 39% of Black-owned small businesses turning to business credit cards to cover emergency costs…
• Debt management. Around 70% of the aforementioned are unable to pay off their credit card balance within the next month, with most needing an average of 3 months. Unpaid credit card debt accrues interest at best and, at worst, can result in debt delinquency (missing a payment by the due date).
• Improved credit score. Data from WalletHub ranked Baton Rouge and New Orleans among the largest cities in America, “most delinquent on debt.” Over time, this will negatively impact your credit score. And that will impact your ability to secure funding to grow your business.
• Tax preparation. Financial skills, such as separating your business and personal finances and keeping up-to-date financial records, will help you with tax preparation. This matters specifically to entrepreneurs in New Orleans because Louisiana has the highest combined sales tax. Precise income tracking, especially at the point of sale, will help businesses to plan for tax payments. Aside from tax preparation, Louisiana’s sales tax structure can increase compliance costs. The more precise you can be with your records, the better.
• Planning for seasonal fluctuations. New Orleans runs on seasons. Peak season means Mardi Gras celebrations and increased tourism. Summer low season means oppressive heat and fewer visitors. Financial skills like budgeting and building an emergency fund will help your business stay up and running even during seasonal downturns.

Key Financial Concepts Explained

Budgeting, saving, and debt management are three key financial concepts that will impact you as an entrepreneur in New Orleans. Here’s a breakdown of what they mean:

6 Financial Tips for Entrepreneurs

Let’s look at six financial tips that can help you build financial stability as an entrepreneur in New Orleans.

1Separate Your Personal and Business Finances

Separating your personal and business finances will give you the clarity needed to operate effectively. For a start, you’ll be able to see exactly which of your expenses belong to your business, which means you can a) track them and b) reduce any unnecessary expenses, ultimately saving your business money. It also makes it easier for you to track your business’s profitability… and that, friends, is cashflow management 101.

The easiest way to separate your household and business finances is to open separate bank accounts for each. When looking for a business bank account, consider high-interest and low-fee options.

As an entrepreneur in New Orleans, you could also look at Louisiana credit unions. Credit unions usually have higher interest rates. Larger, national banks tend to have higher fees. When shopping around, check what technology the credit union covers. Does it support Zelle? Does it support Plaid? (No Plaid = no Venmo or Cash App.)

2Keep Accurate and Up-To-Date Financial Records

Keeping up-to-date, accurate financial records in your business gives you the clarity to identify which expenses you need to cut and how much your business is actually making. Downstream from that? Well, you have better forecasting across multiple areas of the business, which leads to better planning.

You can, for example, plan for your tax liabilities, making sure you know roughly what you owe, and that you’re not liable for any penalties come tax day. You can also forecast revenue, making it easier to set realistic savings goals — and hit them!

There are two financial areas of your business that you should record and track as a priority: your income and expenses. (Having a separate bank account for your business will make this a whole lot easier, by the way.)

The easiest way to stay on top of your financial records is to establish a routine of updating them at the end of each month. Use this time to log any sales made and file any corresponding invoices and sales receipts against each. You can also record any tax-deductible expenses and file the itemized receipts.

3Create a Business Budget

There are a multitude of benefits to creating a business budget, but one of the most important, specifically for building financial stability, is financial visibility. The second? Preparing for the unexpected financial challenges that are all but inevitable as a business owner…

If you’re in New Orleans, you will likely be battling financial highs and lows in line with seasonal peaks and troughs. You may even be dealing with property damage from extreme weather and natural disasters. Your business budget should account for both.

We’ve done a deep dive on how you can build a budget as a small business owner in New Orleans that you might want to check out! But the general strategy behind planning a business budget is as follows:

• Start by estimating your expected revenue
• List all fixed, variable, and one-time expenses
• Subtract expenses from revenue to determine projected profit
• Allocate your projected profit against different areas of your business following a budgeting framework like 50/30/20 (or 70/20/10 if your living expenses run higher)
• Review your budget regularly to adjust for changes in sales or costs

4Build a Household Emergency Fund

An emergency fund is money you set aside to cover an unexpected crisis. You can build one for your household and business. We recommend starting with a household emergency fund first. Entrepreneurs in Louisiana can build a household emergency fund by:

• Defining what an emergency means to you. It could cover roof damage from hurricane season, a burst pipe, or an unexpected injury that keeps you out of work for a period of time. Once you’ve defined an emergency, do not use this fund for anything else.
• Choosing the right savings account. Look for a high-interest, instant access personal savings account.
• Planning to pay off any existing debt. If you haven’t already, start by creating a “set-it-and-forget-it” monthly payment plan against what you already owe. Any debt repayments should come from your monthly budget, not from savings in your emergency fund.
• Auditing your finances. Look at your income against your expenses and work out how much money you have left over. Cut any unnecessary expenses where possible. To do this, ask yourself, “Do I really need this? Or do I just want this?”
• Starting with a smaller, more achievable savings goal. Even setting aside $25 a month will add up over the course of a year…
• Setting up monthly automated transfers. Once you’ve decided on your savings goal, set up an automated transfer. Schedule the auto-payment to happen as soon as you pay yourself, rather than at the end of the month.

5Save Money in Your Business

In this context, saving money in your business means a) finding ways to reduce unnecessary costs and b) reinvesting that money as well as profits into a business savings account.

Tips one through three are foundational to saving money in your business. To recap, you need to keep household and business finances separate, maintain accurate financial records (including tracking business expenses), and create a business budget. On top of that, small business owners in Louisiana can save money by:

• Reducing business outgoings. Cutting any unnecessary business subscriptions, renegotiating with suppliers every year, and collaborating with other small businesses in Louisiana can help you reduce outgoings.
• Planning for efficient tax payments. Planning year-round strategic actions with your tax payments can minimize liability, optimize cash flow, and save your business money.
• Researching Louisiana-based tax breaks, incentives, and allowances. For example, depending on what your business does and whether you are classed as a “culture bearer,” you might be able to access a grant from the New Orleans Tourism and Cultural Fund.
• Reinvesting back into a savings fund for your business. Start with a goal to save 10% of your business profits each month. If that’s unrealistic, set aside whatever you can afford, with the end goal of covering 3–6 months of your total business expenses.

6Prioritize Debt Management

As we covered in the “Why Does Financial Wellness Matter to Entrepreneurs in New Orleans?” section above, New Orleans is ranked 15th among the largest cities in America, “most delinquent on debt.” Missing a debt repayment by the due date can harm your credit score. That makes it harder to secure the outside investment often needed to grow your business.

Further, credit debt typically carries high interest rates that increase the total amount owed. Being trapped in this kind of debt cycle not only costs you financially but also negatively impacts your peace of mind. Knowing you have a clear and realistic plan of action to manage your debt can take some of this psychological weight off your shoulders.

You can either pay off high-interest debt first or tackle smaller balances for quick psychological wins. As with your household emergency fund, you can take a “set it and forget it” approach to debt repayment. That means choosing a monthly repayment amount you can realistically afford and setting it up as an automated transfer. You want this repayment to be processed at the start of the month, before any other expenses are debited from your account.

FAQs on Financial Wellness

Financial Wellness Made Easy with Flyte

Our flagship Entrepreneur Empowerment Program serves early-stage small business owners. Over 90% of the small business owners we work with are women of color. Our goal is to empower entrepreneurs across New Orleans to understand key financial concepts, such as budgeting, saving, and debt management. We also give entrepreneurs practical strategies they can use to apply their learning directly within their businesses.

Works Cited