Starting your own small business is an exciting time, but you need to plan to give it the best possible chance of success. Even those that eventually become successful often struggle to find their footing. To help yours succeed, have your finances in order so you can focus on growing your company. Many people dream of owning their own business specifically so they can control their future income and build wealth. While this is possible, it doesn’t happen overnight. To create a long-term, sustainable income, put in the work early. Be in a position where you don’t need to draw a salary right away, and invest any profits back into the company. Building a solid foundation puts your company in the best possible position to succeed.
Be Realistic About Expenses
Starting your own company is not cheap. It is tempting to manage everything on a shoestring, and if that works, great. You should not, however, count on it. Make smart financial choices when selecting a location and purchasing supplies and inventory, but draw up your budget with the expectation that you will have unexpected licenses and fees, as well as equipment and supplies you hadn’t taken into account.
Build an Emergency Fund
Everyone should have an emergency fund. The amount should cover your living expenses for at least three months, although six is better. If you are getting ready to start a business, you should pad this account to cover emergencies with your new project as well. Take a look at your expected costs. How much do you anticipate paying out each month? That should give you some idea of how much additional money you should set aside in this fund. Have enough savings to cover unexpected expenses, as well as funds to cover costs during the early days of your business.
Pay Off Credit Card Debt
Making any career change when you have existing debt can be stressful. Add in that you will be working for yourself and responsible for generating enough income to cover your expenses, and it can be even more challenging. If you have not been making smart decisions with your personal finances yet, now is the time to get organized. Strong credit has several benefits when you start your own business. When you pay off existing credit card debt, you lower your monthly expenses. You also free up those lines of credit, which may come in handy when facing an unexpected expense or emergency.
Finally, when your company is young, its creditworthiness will be tied directly to you. If you want to borrow money for capital improvements or other investments in your company, the bank will look at your credit score when making its decision. If the prospect of paying off credit card debt seems overwhelming before you start your business, look for ways to make it more manageable. Consider consolidating your debt at a lower interest rate. You can do this by taking out a personal loan or transferring your balances to a card with a lower interest rate.
Have a Plan for Student Loans
It is possible to launch your own business while paying off student loans. Consolidating or refinancing the loans through a private lender can lower your monthly expenses as well as the total cost of your loans. Use a student loan calculator to estimate what your monthly payment would be if you financed through a private lender.
Student Loan Planner also has a downloadable calculator that you can use whenever you want. Using this calculator you’ll find the cheapest way for paying your debt.
Lower Your Monthly Expenses
Ideally, you will have enough money in savings to cover costs if you struggle to bring in an income right away. One way to make that money go further is to lower your monthly expenses. Cutting out recurring costs, such as gym memberships and subscription services, and watching your budget when eating out and going to the grocery store, allows you to spend less without a drastic overhaul to your budget.
Consider a Side Hustle
You probably won’t be able to hang onto your full-time job when you start your business, but you may be able to take on a part-time position. A job that offers a schedule you can work around and doesn’t cause much stress allows you to cover any shortfalls to your budget without dipping into your savings.
Young Woman Calculating Bills -DepositPhotos