Want to start a business? Work on your personal finances first

Starting a business in Canada can be a powerful way for newcomers to build opportunity, income and a sense of purpose. But before you take that leap, it’s critical to ask a different question: Do you have a strong personal financial foundation?

For many immigrants, the idea of launching a business is part of the dream of independence and success. After all, the entrepreneurial drive runs deep—in a recent TD survey, half of newcomers said they were interested in starting a business even though 62% said they lacked enough information about financial products that support business owners. 

That gap between ambition and readiness isn’t surprising. Building a business without first securing your personal financial footing can leave you vulnerable, however, not just to economic uncertainty, but to stress and burnout.

In this article, I explore why it’s important to establish personal financial stability before launching a business, and offer actionable advice for newcomers who want to build a resilient financial base first.

Why personal finances matter before starting a business

When you’re self‑employed or running a business, your income can fluctuate wildly, especially in the early years. Without a solid foundation—such as savings, manageable debt levels, and an established credit history—you may find yourself tapping expensive forms of credit or compromising your long‑term goals just to keep your business afloat.

And newcomers already face financial challenges: more than half (55%) report having difficulty managing their finances since arriving in Canada, with many struggling to understand the Canadian financial system.

This isn’t just about money; it’s about confidence. The same survey found many newcomers lack a clear understanding of how Canadian banking, investing, and personal financial planning work, which contributes to anxiety about taking big financial steps like starting a business. 

Without confidence in your own personal finances, it’s easy to delay business plans indefinitely or, worse, launch prematurely without the cushion you need to weather the early uncertainty of entrepreneurship.

A personal perspective

When my family and I moved to Canada, we were ambitious and optimistic. I had entrepreneurial experience from overseas, and I dreamed of building something meaningful here. But our first priority wasn’t launching a business, it was laying down a foundation: understanding the Canadian banking system, building credit, creating an emergency fund, and learning how taxes and retirement plans work here.

In those first years, I had to learn lessons the hard way. I was frustrated when my Canadian credit history didn’t reflect my financial past. Even with my background, I was initially approved for a low-limit credit card and had to slowly build trust with financial institutions. Over time, as my credit improved and I understood tax planning better, I gained the necessary confidence and structure to consider business ownership.

That foundation gave me stability. When I finally did start my business, I could focus on growth, not survival.

Seven ways newcomers can build their financial foundations 

Here’s a practical road map to help you build a financial base you can be confident in before you make the jump into entrepreneurship.

1. Create a personal emergency fund

Before your income becomes unpredictable, save for at least one year of basic living expenses. If possible, aim for two. There are mixed messages out there on what the ideal rainy-day fund should be; some say three to six months but, as a serial entrepreneur, I always recommend erring on the side of caution. This fund offers breathing room when things are uncertain, and it prevents you from turning to high‑interest debt.

2. Build and monitor your credit score

A strong credit history is often needed for both personal and business finance. In Canada, newcomers frequently find it hard to build credit, even when they understand its importance before arriving here. In fact, according to the survey I quoted earlier, 79% of newcomers who applied for credit said it was difficult to start building a credit history. 

Start small, use a secured credit card responsibly, pay off balances each month, and regularly check your credit reports. This will help when you eventually need business financing or better loan terms.

3. Understand the Canadian financial system

Newcomers report significant gaps in understanding how the Canadian banking and investing environment works, from basic budgeting to retirement saving. In one survey, 38% said they had little to no understanding of the Canadian banking system. 

Take time early on to learn about:

• Registered retirement savings plans (RRSPs)
• Tax‑free savings accounts (TFSAs)
• Registered education savings plans (RESPs)
• How Canadian taxes work
• Investing basics

This knowledge will make you a more confident decision‑maker, whether you’re choosing personal investments or planning business investments.

4. Separate personal and business finances early

When you do start a business, set up your business bank accounts immediately. Keeping your personal and business finances separate simplifies taxes, improves clarity for budgeting, and helps you make better financial decisions in both spheres.

5. Minimize high‑interest debt

If you have personal debt with high interest such as credit-card balances or payday loans, focus on paying those down before launching a business. Carrying personal debt can limit your ability to take risks and reduce your financial flexibility when you need it most.

6. Set financial goals and track your progress

Without clear goals, it’s easy to lose focus. Set personal financial milestones such as the emergency fund I talked about earlier, debt reduction, or a credit-score target, and track your progress monthly. This exercise builds discipline and gives you measurable confidence along the way. As management consultants say, “What gets measured gets managed.”

7. Tap into financial education and support programs

There are organizations and non-profits that specialize in helping entrepreneurs and self‑employed individuals build stronger financial foundations. Money Mentors, for example,  offers F.R.E.S.H. (Financial Reset Program for Entrepreneurs), a free program designed to help small business owners, contractors, and tradespeople take control of their money, manage cash flow, and eliminate debt with practical guidance and expert coaching. Programs like this, as well as free financial literacy classes on budgeting, credit, and planning, can be invaluable in building the confidence and money management skills you’ll need long before and during your entrepreneurial journey. 

How this foundation eases the transition to self‑employment

Launching a business can feel like stepping into the unknown, but having a solid personal financial base gives you options. You won’t have to choose between paying rent or investing in your business. You can pursue opportunities instead of just reacting to emergencies. You will also find it easier to get favourable financial products for your business when lenders see a stable personal profile.

A strong foundation also reduces stress. When you understand how your personal finances work, you’re less likely to feel overwhelmed by the financial side of entrepreneurship. Starting a business as a newcomer to Canada is exciting and empowering—but it shouldn’t come at the expense of your financial well-being. Too often, people rush into self‑employment before they are ready, simply because they feel like they should “just do it” or because they’re following someone else’s timeline.

But financial preparedness isn’t about delaying your dreams. It’s about giving them the best possible chance to succeed. Build that foundation first and you’re not just building a business. You’re building resilience, confidence and the kind of stability that makes both life and income more secure.

Read more money tips for newcomers to Canada:

• Balancing personal and financial goals as you build a new life in Canada
• The best free personal finance and investing courses in Canada
• How bad access to credit keeps newcomers from getting ahead
• The best no foreign transaction fee credit cards in Canada

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