Are you starting a new business and thinking of ways how you can manage your personal finances? While many people think that all you need is a great idea to start a new business and everything falls into place on its own. The reality is not that simple. In fact, money could be one of the reasons why you will have to shut down. So why not start managing your finances from day one so that no matter how your business idea turns out, you and your family do not have to face any crisis. Here are the 7 most effective personal finance tips for startup entrepreneurs.
#1 Create motivating goals
The first step of handling your finances once you start your business is setting goals for yourself. They should be clear, realistic, and motivating. For instance, you might list these as some of your personal finance goals: buying a house, saving for a car, saving for marriage, saving for children, saving for retirement, and paying bills.
Setting goals keeps reminding you where you are heading in your life. It tells you that there is something in the future that you can look up to. It reminds you why you must not give up and keep going. It is not only important to set financial goals for yourself but it is also important to define an action plan for how you are going to achieve those goals. So, once you make a list of your goals, do not forget to break them down and create a roadmap towards them.
#2 Keep a track of your spendings and savings
The second tip that I would give to startup entrepreneurs regarding personal finance is to keep a track of the cash flow. One must know where they are spending their money and how much money is going into their savings account. Here is a simple way to implement this tip:
- Study your bank account statements and credit card statements every month and analyze where you are spending money
- Create a spreadsheet to keep track of your financial transactions
- Analyze your spending habits and find areas where you can slow down
- Create a monthly budget for different things like groceries, beauty, clothing, bills, internet usage, and so on
- Keep track of your spendings, check your spending every week to see whether you can match your goals
#3 Generate new income sources
According to “Rich Habits: The Daily Habits of Successful People” by Tom Corley, 65 percent of all self-made millionaires have at least three sources of income, and 29 percent have five or more income sources. Can you guess why? The answer is simple, a smart entrepreneur would not depend only on one source of income or business. It is quite risky. Think to yourself, what would you do if you have only business and it fails?
I am not suggesting starting a new business right away when your first business is not even stable yet. But, you must understand that you cannot fully rely on your startup for your personal finance needs. So, while you are settling in, do some part-time work or do not quit your old job.
One of my friends has recently started an online clothing store. He also works as an academic writer and provides essay help to students. He also provides online tuition to high school and college students. Having different sources of income allows him to take risks in his startup and at the same time, he does not have to worry about his personal financial requirements.
#4 Seek the support of your family members
If you have a family to look after, you must share your financial situation with them. They must know how you are managing the finances and how their little contribution can be of great help. Here’s how you can involve your family in your personal finance management:
- Sit together with your family every month and discuss your financial requirements for the month
- Ask your kids to cut down their unnecessary expenses at least until your startup starts making a profit
- Set budgets for your family members so that everyone can manage their expenses
- Check on each other and see whether everyone can meet their financial goals
- Extend your support whenever needed
#5 Invest wisely in your startup
It generally goes like this. You decide to start a business. Soon you start investing in things like your office, stationery, expensive software and tools, hiring more people than required, and so on. But are these things really necessary? Not at all! If you want to manage your finances, you must invest wisely in your startup. Do not try to achieve everything at once. Understand that it will take some time for you to get that lavish office or hire a big team. Start small and take one step at a time towards success.
#6 Prepare yourself for unexpected situations
No matter how much we plan our lives, unexpected situations might arise at any time causing a shift in our plans. Instead of panicking at that time, why not prepare yourself for the unexpected?
Julia, who provides academic assignment help in Australia to high school and college students says, “I always keep an emergency fund for unexpected situations like if any of my family members get sick. I am also saving 5% of my monthly income into my retirement fund so that I do not have to worry about my future.”
You must also try something like this so that you can manage your finances even in a crisis without getting overwhelmed.
#7 Watch your habits
Are your habits costing you a lot? Some people have a knack for decorating your home or buying only branded items for your house. Some people prefer going to expensive restaurants every week. Some people shop impulsively and regret it later. If you also have a certain habit that is costing you a lot, it is time to change yourself. Here are a few things that you can do to eliminate your extra expenses:
- Eat at home more often, cook your meals
- Shop with a list, be mindful while shopping
- Create budgets for yourself and keep track of your spendings
- Do not shop impulsively
- Do not buy expensive items for a while until you reach your financial goals
- Do not subscribe to any paid memberships until absolutely necessary
- Try minimalism for a while, adjust to what you have
Key Takeaways
Running a startup and reaching your first milestone could be a challenge for an entrepreneur. Many are unable to experience the fame of success and have to shut down because of debt and money problems. Do not let this happen to you.
Create goals that motivate you to save money, keep a track of your spendings, watch your spending habits, invest wisely in your business and seek your family support from day one. Lastly, try to keep more than one source of income until your startup starts making profits. Keep things under control at a personal level and you will be able to apply the same tactics and management at the professional level too!
