By Dmitriy Fomichenko

Learn more about Dmitriy on NerdWallet’s Ask An Advisor

Entrepreneurs have to wear many hats. One of their key responsibilities is to understand and properly manage their business’s finances. But they must also be careful with how they handle their own money.

Here are smart financial steps every young entrepreneur should consider.

It’s common for entrepreneurs to use their personal assets as startup capital. But as your business grows, it’s crucial to separate your personal and business funds. Simply knowing which is which is not enough; you must be able to prove the same to the IRS. For instance, in the case of an IRS audit, a sole proprietor or independent contractor would be required to provide proof of his or her business expenses and income, usually by providing receipts and spending records.

From the beginning, sole proprietors and independent contractors should create separate checking accounts for personal and business funds. If your business is a corporation, you’re required by law to keep business and personal funds separate, and you can’t use business funds for personal expenses. If you’re having a hard time separating these funds, seek professional help.

One of the surest ways to go out of business is to have more money going out than coming in. Monitoring and categorizing your expenses can help you find ways to control overhead costs or other spending that doesn’t generate revenue or add to your business’s growth. It may also help you identify and claim tax deductions your business may be eligible for, increasing your tax savings. Maintaining good records of your expenses will also save you the hassle of going through a pile of receipts during tax-filing season.

If you’re an independent contractor, have an owner-only business or have only a handful of employees, using something as simple as a spreadsheet or an online calendar to note your regular or recurring expenses will work. Make sure to include the type of expense — rent, utilities, supplies, etc. — and the recipient of the funds. If your business is expanding, you may need to use accounting software.

It’s equally important to have a budget for your personal spending. You can use something as simple as Mint.com to track your monthly expenses. Because your income is likely to vary, even though your expenses may stay the same, it’s particularly important to pay close attention to cash flow.

Small businesses often experience profit fluctuations over the course of a year. That means entrepreneurship and irregular income go hand in hand. Without a buffer of savings, lean months could add to your mental stress. A lack of business capital could even force you to tap your personal savings, which could leave you with no cushion for emergencies. If you don’t already have a personal emergency fund in place, start working on one.

For entrepreneurs, the key to building an emergency fund is to save during your high-earning months. That will allow you to pass leaner months comfortably while ensuring that you can pay your bills on time.

If you have a spouse or partner who has a stable income, your emergency fund should be around six months’ worth of living expenses. However, if your entire family is relying on your business, you should save at least a year’s worth of expenses.

With a business to run, worrying about your own future may not be a top concern. This mindset may work well for your business, but how do you plan to take care of your family if you become sick or temporarily disabled?

Disability insurance can provide supplemental income to your family while you recover. The type of disabilities covered and amounts of coverage will vary depending on your policy. Adding a cost-of-living-adjustment option to your policy is more expensive but ensures that payouts stay current with inflation.

You’ll also want to protect your business in case you’re ill or unable to work. For this, consider business overhead expense insurance. These policies are designed to help cover recurring business expenses like rent or mortgage payments, employees’ salaries, utilities and taxes during your absence. This can help keep your business going while you’re unable to work.

Without an employer-sponsored retirement plan, it’s entirely your responsibility to fund your retirement. While that may sound distressing, you may actually have the opportunity to save even more than other workers do for your retired life. There are several qualified retirement plans for business owners that allow you to make sizable contributions toward retirement. In most cases, contribution limits to these plans are higher than traditional individual retirement accounts or employer plans. Some of the prevalent retirement options for entrepreneurs include a SEP IRA, SIMPLE IRA or a self-directed 401(k) plan. The key to building adequate retirement funds is to start as early as possible. Having time on your side is your biggest advantage when saving for retirement.

Small-business owners are often too busy to attend to these important financial matters. Hiring a financial advisor for your business and personal finances might help you avoid costly money mistakes. A financial advisor could help you identify business tax deductions, set up a strategy for your personal finances and even help you create an efficient financial structure for your business.

Dmitriy Fomichenko is president and founder of Sense Financial, a provider of self-directed retirement accounts.

This article also appears on Nasdaq.

The article 6 Crucial Money Tips for Young Entrepreneurs originally appeared on NerdWallet.