Top 10 Financial Hacks: Starting your own business can be very exciting and financially rewarding, but it can also be extremely stressful. One of the most stressful parts about starting your own business is worrying about how you’re going to make all the money that you need to support yourself, and your employees.
Top 10 Financial Hacks For New Entrepreneurs
Because of this, many new entrepreneurs turn to high-interest credit cards to pay for bills like rent and utilities that they can’t afford out of their day-to-day cash flow yet.
1) Start Saving Money From Day One
It’s impossible to change your financial trajectory overnight, but there are a few things you can do to set yourself up for success. First, you should start saving as soon as possible. That may sound self-explanatory, but we mean that literally: Set up automatic savings transfers from your checking account into a high-yield saving account so that when paychecks clear, some portion of it lands in savings.
The sooner you get started, the more likely you’ll be able to save consistently and amass some cash by your next payday. After all, saving money is like anything else: At first, it’s difficult—the payoff just seems too far away—but after a while, it starts becoming second nature. You don’t even notice how much you’re socking away anymore. And before long, you’ve got an emergency fund or maybe even a nest egg.
2) Open a Dedicated Savings Account
Many people who start their own business don’t have enough money to live off of for an extended period of time. That makes opening a dedicated savings account even more important. Whatever you do, don’t use your new business checking account to store your emergency fund or to save for long-term investments like retirement and college tuition.
Aside from your personal savings, consider setting up another savings account that can help sustain you in case anything happens—because one day it will. As with any good emergency fund, it’s best if you only tap into these funds during a true emergency—and not just when you’re strapped for cash and want to go on vacation. You’ll want some play money in there too!
3) Buy What You Can Afford
In most cases, it’s not a good idea to buy everything you need for your business at once. In many situations, it’s far smarter to buy things as you need them or as cash flow allows. A well-considered plan can help keep you from overextending yourself financially when you first start out and significantly reduces the risk of failure due to an overwhelming debt load.
Remember: It’s better to have a small but functional office than a giant one filled with stuff you can’t afford. Once you’re up and running, though, don’t be afraid to upgrade—but only if you really need something new.
Many people go into entrepreneurship thinking they’ll do all their work from home so they don’t have to spend money on office space.
This is a great strategy in theory—but if your clients come over for meetings, that might not be ideal. Many startups get around that by working out of coffee shops until they find their footing (or realize how much time and money that’s costing them). Afterward, some choose to rent space by the hour (like WeWork) or by month (like Regus), which are generally more affordable options than leasing an entire office space.
4) Stop Buying Expensive Drinks
When you’re working from home, it can be difficult to avoid spending a little too much money on mindless purchases. After all, if it’s in front of you, it’s hard to stop yourself from buying more. So for entrepreneurs who may have a little trouble controlling their credit card spending, try making up your own mocktails at home instead of buying them at bars and restaurants. It will save you serious money over time and help reign in those out-of-control credit card charges.
To make sure that you don’t spend too much money on store-bought drinks, keep track of how many times you buy a drink per week and stick to that number. If you go over that number by even one drink, take away $5 from your weekly budget until it gets back down to zero. Once it does, start adding $5 back into your weekly budget again until next week when you hit zero again (or just add $10). This way, each week is better than last—even if only by a dollar or two—and eventually, those small numbers will start adding up.
5) Think About Big Purchases Carefully
Purchasing a big-ticket item, like a car or house, can have an immense impact on your finances and freedom. So think about these decisions with careful consideration. You don’t want to be stuck in a bad situation. At minimum, wait until you’ve been in business for one year before buying anything that could put you into debt. After that point, all your business revenue will be dedicated to paying off any purchases—and because of that fact alone, you should feel empowered to make big purchases if they help grow your company faster!
Don’t Buy Stuff Unless It’s Necessary: While most entrepreneurs tend to live frugally when starting out, many tend to splurge more as their businesses succeed. Don’t do it! Just because you’ve succeeded doesn’t mean it’s time to start spending wildly. Always remember: Your business is not your personal piggy bank.
The only things you should buy are necessary tools that’ll improve efficiency or boost productivity; otherwise, keep saving and spend only what’s necessary on materials (like office supplies) and services (like hosting). A good rule of thumb is to never spend more than $1 per day/per employee on overhead costs such as utilities and hosting.
6) Do Some DIY Maintenance at Home
When we start our own business, it’s easy to get sucked into work and work and work. But you need to carve out time for personal care. Go ahead—try a little DIY maintenance at home. You can take your shoes in for repairs. If they charge you more than $20, take them somewhere else and argue with them until they give you your money back.
And speaking of making that money go further, here are some ways you can shave off a few bucks from expenses buy toilet paper in bulk; use cloth napkins instead of paper ones; stop buying water bottles and just fill up reusable ones when you have access to free water; look for free Wi-Fi at local businesses when traveling; pay attention to any small perks offered by credit cards (airline miles, points, etc.).
So you can take advantage of those benefits; cut your cellphone bill by taking advantage of any free trial offers or switching carriers if necessary. Of course, there are many other tips like these—you just have to think about where you spend money every day and try to find new ways to save on those things.
7) Learn Money Management Skills
No matter how great your ideas are, they’re worth nothing without a plan to back them up. A solid understanding of money management will ensure that you have a sound plan in place and know where every dollar is going. Many entrepreneurial ventures fail because they don’t understand how much capital they actually need (or how much debt is too much).
Money management skills can also help you set aside cash for lean times, so that your business continues to run smoothly even when sales slow down. To begin, learn basic budgeting and accounting practices and make sure you keep detailed records for all of your expenses, including keeping receipts for major purchases. It may seem tedious at first, but proper bookkeeping will save time in the long run and help avoid unnecessary complications down the road.
8) Learn How to Save Money on Essentials
If you’re running a small business, chances are you don’t have much money to spend. When it comes to saving, we like to say spend less than you earn. But as entrepreneurs, it can be difficult to put your mind around what that means. Many times, people think they don’t have any control over how they spend their money.
But, while it might not seem that way at first blush, taking control of your spending habits, is essential for any budding entrepreneur looking to save money and cut costs in order to give themselves some wiggle room during hard times. Here are ten quick ways you can start cutting down on unnecessary expenses and begin saving today
9) Get Out of Debt and Stay Out Of Debt
The No. 1 way to ensure you can make your business idea a reality is to not be buried under a pile of debt. So, pay off your credit cards, student loans and other high-interest debts before embarking on your new entrepreneurial journey. You’ll sleep better knowing you aren’t racking up even more bills while launching your business. You’ll also have more money to put toward building out your new venture and you won’t miss what you don’t have!
10) Don’t Forget About Benefits Like Tax Credits
Many people ignore tax credits when they start a business because they don’t realize that not only do entrepreneurs get special breaks, but their family members often qualify as well. If you start your own business, you may be able to claim head of the household status and lower your taxes even more by including your spouse and children on your tax return.
According to Sarah Hall, Head of household filing status is generally granted if you maintained a home for yourself and one other person (or if you had two children living with you) during at least part of the year (see Are You a Household Head?). So take some time with an accountant to make sure these tax breaks are included in your financial plan.
Finance is a huge topic, and there are many ways to hack your way to success. These are some of my favorite strategies. What do you think? Which strategies worked for you? Comment below! I’d love to know what financial hacks have worked for you as an entrepreneur!
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