Some entrepreneurs pour everything they have into their business: their home equity, life savings and untold amounts of blood, sweat and tears. From my perspective—as a middle-aged, recently divorced business owner raising three teenage boys by myself and facing 12 years of college tuition and my own eventual retirement—I can’t take the same approach. I literally can’t afford to assume that type of risk.

In many ways, it’s a factor of age. “Our risk tolerance as it relates to business and personal assets changes as we get older, and we tend to become more conservative with both,” says Michael Manning, president of San Diego-based Manning Wealth Management. While he encourages business owners to take professional risks, Manning suggests they hedge against the depletion of personal assets, “which by default creates a safety net that will reduce the impact and provide some stability in the event their business fails.”

I’ve followed his advice by never relying on personal assets (or personal credit) to finance my business. To secure—and separate—my personal and professional finances, I opted to have two savings accounts that I built up before starting my company. I adhered to a frugal budget. I downsized my house, traded my car in for a less expensive but reliable one and declined any luxuries—all so I could build an emergency fund with six months’ worth of household expenses and a separate growth fund for my business. I dedicated 30 percent of my income to these accounts, and it took 18 months before I felt ready to launch.

Living below your means is essential when starting a business, but some entrepreneurs take this advice too far. They use their lean personal spending as rationale for burgeoning company expenses. They bet big—investing all but living expenses in their venture (i.e., they stop saving for retirement).

But saving for retirement is critical; it forces you to diversify. When 100 percent of your wealth is tied up in your business, you’re double-exposed. If it fails, you lose your current income and the future income your equity could have generated in retirement. Consider this sobering stat: You’ll need approximately $1 million in investment assets for every $40,000 of pretax retirement income desired. To protect yourself, Manning advises investing no less than 6 percent of your gross income in a dedicated retirement account. I invest 10 percent every month as a nonnegotiable expense.

Smart financial decisions are not enough, though. You must also take steps to ensure that your personal assets are protected. This includes insurance, as well as legal considerations regarding your business structure and estate-plan items you don’t want to figure out on your own. Work with an expert. Above all, understand that protecting your personal finances requires you to temper your entrepreneurial optimism and play it safe.