If you’ve recently opened a business or become an online entrepreneur, you’ll quickly learn that your paycheck isn’t always guaranteed. Working for yourself provides endless benefits, but it’s not without risk.
7 Personal Finance Tips for New Entrepreneurs
There is no safety net when you own your own business. If sales are down, things can get rough.
However, there are personal finance tips you can implement to keep things lean and manageable. Until your business really takes off, we recommend paying extra attention to how you’re spending your money.
We can help. Keep reading for a quick guide on financial management for new entrepreneurs.
1. Set Financial Goals
First, you need to give yourself something to strive toward. Set personal finance goals based on your means. These goals need to be practical, attainable, relevant, and time-bound.
For example, if you want to pay off your debt as quickly as possible, your goal could be to put an extra $150 (or however much you can spare) into your smallest debt every month until it’s paid off.
To ensure that money goes where it’s intended, we recommend setting up an automatic bill payment toward that debt. The extra $150 will be out of sight, out of mind.
You might also desire to establish a savings account or start putting money into a retirement fund. Once again, establish how much money you want to contribute every month and automate the process.
2. Track Your Cash Flow
One of the most important tips in finance management is keeping yourself aware of your cash flow. Nearly 63% of Americans live paycheck to paycheck. At the end of every month, their bank account drops down to or near zero dollars.
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However, more often than not, this is due to mismanaged finances. Dig into your checking account and credit card statements to see exactly how you’re spending your money.
Create a spreadsheet to document your expenses over the last three or four months to get a better understanding of your spending habits. We’re betting you’ll discover that you’re spending way more than you thought on groceries, dining out, getting coffee, shopping online, etc.
3. Minimize Your Personal Expenses
Now that you know more about your personal finances, it’s time to implement a little money management. Based on the spreadsheet you created, separate your expenses.
One category should be obligatory payments for things like bills, debts, groceries, gas, etc. The other category will consist of dining out, entertainment, memberships, subscriptions, online shopping, and other non-essentials.
Start looking for ways to cut back and save money each month. For example:
- Limit yourself to a single TV/movie streaming service
- Prepare all of your meals at home
- Brew coffee at home rather than spending $6 a cup at Starbucks
- Create a grocery list before going shipping to avoid unnecessary purchases
- Give yourself an allowance for pleasure shopping
The more control you have over your personal finances, the better prepared you’ll be for lean months. If your business starts to struggle, it won’t put your personal finances in jeopardy.
4. Don’t Over-Commit
One of the most important personal finance tips for entrepreneurs is learning how to start slowly. Don’t over-commit yourself to big overhead costs and hefty business loans.
Starting small will limit the monthly costs of running your business while giving you time to make mistakes, learn your industry, and increase your brand awareness. If you dive into your business and max out your budget, it will be incredibly difficult to keep your head above water, especially when starting out.
These business financing issues will bleed over into your personal life. We recommend working with an accountant or financial planning specialist to determine how much you should invest in your business startup. As your sales grow, you can expand your business.
5. Use Credit Cards to Your Advantage
Misusing a credit card is one of the most common money management mistakes people make. A credit card is a beneficial tool when used correctly. It can help you build credit and gain valuable rewards.
However, most people don’t know how to use a credit card to their advantage. They spend money recklessly, max out their card, and make minimum payments. Not only does this hurt your credit score, but it also costs you hundreds of dollars in interest.
Instead, use your credit card wisely. Find a credit card that offers a reward system where you can earn points for every dollar spent. Then, use the credit card for everything from buying gas and getting groceries to paying bills.
At the end of each month, transfer money from your checking account to pay the credit card down to zero. This way, you can avoid being charged interest on the card while simultaneously improving your credit score and learning points.
Check out this site for more information on how to get your first credit card.
6. Generate Multiple Streams of Income
One of the most common personal finance tips from successful entrepreneurs is to develop multiple streams of revenue. This is especially important if you’re starting a new business, online or otherwise.
As noted earlier, there are no safety nets when you own a business. If it doesn’t make enough money, you don’t get paid.
As such, you need to create a backup plan(s). For example, if you’re starting a business with your spouse, it might be a good idea for one of you to maintain a part-time job elsewhere.
Alternatively, find side gigs that don’t require as much commitment. When times are lean, you can bump up your hours driving for Uber, babysitting, walking dogs, etc.
You might also consider donating plasma several times a month. You can easily add several hundred dollars to your income by donating through places like Biolife.
7. Separate Your Finances
Finally, the key to clean finance management as an entrepreneur is keeping your personal accounts separate from your business accounts. In the beginning, it might seem easier just to keep everything combined, especially if you’re self-funded.
However, this can make it incredibly difficult come tax season. You will have business taxes and personal taxes. Trying to separate these two cash flows after a year of doing business will be both tedious and frustrating.
Looking for More Business or Personal Finance Tips?
Are you starting a new business? If so, remember the importance of financially planning. Though it might not be pleasant to think about your business struggling to get by, it’s something you must be prepared for.
Follow the personal finance tips listed above to ensure your financial security and minimize disaster. And if you’re looking for more business or money management advice, check out some of our other articles before you go. We created our blog to be a reliable source of information for entrepreneurs like you.
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