-- EMPLOYEE RESOURCES: ENTREPRENEURSHIP --

Save Money And Start Your Own Company

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Personal Financial Goals

Even with the lean startup approach, it’s still important to take the proper precautions prior to beginning a startup. And let me clarify, if you are starting a business as a side hobby and you’re still working a 9-5 job, some of this might not be applicable to you, but if you’re quitting your 9-5 to job for your new venture, please examine your personal finances first!

Let’s start with one simple concept that you need to understand: financial goals are a need, even if they haven’t always gone well for you in the past. A financial goal will create a roadmap that can be followed until you reach some sort of financial freedom that allows you to jump into your new venture.

Step #1

Set a financial goal perfectly tailored for you.You need to know yourself. This is important because you need to choose a realistic goal that fits the company and lifestyle you want to start. With that realistic goal in mind, look at your income and pick a time frame to match your goals. Remember, setting goals outside of your current income will not work!

Step #2

Pick a goal.If you are going to achieve a goal, make sure it’s something you really want. Think about the company you want to create and how much money you need to run that company full-time. You can create this goal using simple math.

Step #3

Do the math.Calculate a ballpark amount for the overall cost needed to pursue your startup. Divide that amount by 52 if you want a weekly goal or by 12 if you want a monthly goal. If that number doesn’t make sense, focus on a portion of it. This means you might not save the entire amount you want this year, but having 25% of it in the bank will be better than nothing.

Let’s do a quick example: Suppose you decide you want to spend six months on your startup without getting paid. Assume your expenses are on average $101 a day (average American exp.) and you need $10,000 to start your business. With these numbers in mind, you will need to save $28,382 before you start your company full time. Therefore, you need to save roughly $2,365 a month or $78 a day to accomplish your entrepreneurial goal in one year. But if that doesn’t seem realistic, you have every right to spread it out over an extended period of time. Let’s say you save the $10,000 over two years instead of one, a dramatic change will occur in the finance department: $1,182 a month or $39 a day is all that will be needed to accomplish your financial goal.

Step #4

Do a reality check.If any of this financial goal setting is going to work, you need to make sure the goals are realistic. Can you really afford saving $78 a day? Remember, for most Americans the answer is no. Therefore, if your goal is not realistic you have four choices: adjust your goal, adjust your timeframe, find a way to put more money toward your goal, or figure out a way to make your goal cost less. You have a ton of options… you may not put $10,000 into the business, you may decrease your expenses to less than $101 a day, you might accomplish your goal over a three year span, you might work a side gig while starting your company, etc. The possibilities are endless, but without the proper plan, you will miss out on the possibilities all together.

Your Motivation Will Run Low

We’ve now figured out how to start your new venture for dirt cheap and we’ve discussed how to put a financial plan in place to make it easier to prepare financially for your venture, unfortunately, that doesn’t make accomplishing the plan any simpler. Your motivation will run low. We’re human and motivation/will power isn’t always going to be on your side.

With limited will-power it’s important to come up with strategies that help you achieve your financial goals. Set up short- and long-term strategies to enhance your chances of following through with your plans.

Short term thinking is always a good place to start. Here are our favorite methods:

Strategy One: Find ways to save more money each day.

Finding ways to save money each day is the easiest way to start achieving your financial plan. Understanding your discretionary spending can help you see what you might be able to funnel into savings instead of your checking. This is important because short-term wins really add up, and they’re going to keep you motivated.

Strategy Two: Zero Spend day.

This is a fun strategy to implement for a day! Commit to freezing your spending for one day. It will help you see where and what you normally spend. Once you go through a couple of separate “zero spend days,” analyze what you learned and decide what things you could permanently cut from your daily spending.

Strategy Three: Cancel one thing.

Review your credit card and debit card statement from last month. Take a look at how many subscriptions or automatic charges you can find, and then pick one and get rid of it. For example, if you see charges for Hulu and Netflix, cancel one of them and put the savings in a separate account for your future business. Believe it or not, cutting just $10 or $20 a month adds up to a few hundred dollars a year, and that matters for your future.

Strategy Four: Make small swaps.

We aren’t going to tell you to swap out your coffee and make it at home because we want you to start a business to be happier and more fulfilled, therefore if coffee at Starbucks makes you happy, let it be. Instead, cut things that don’t matter to you. Explore cheaper grocery stores, gas stations, etc. Ask yourself, do you always need that brand name item when the same item one shelf over is cheaper? Consider turning the heat down a few degrees and having one less light on in the house. Even a bigger sacrifice might be skipping out on one less happy hour a week and only attending the ones you actually want to be at. Remember one thing, all these sacrifices are useful, if and only if, you are consciously taking the money you save and stashing the cash somewhere you can access it for your future startup.

Quick example: If you go out to eat 3 times a week for $30, eliminating 2 days will get you $80 closer to your goal every month. That’s an extra $920 a year!

How To Spend Your Short-Term Savings

Did the title grab your attention? Of course it did. Unfortunately, the “how” in “how to spend your short term savings” is you don’t. You don’t spend any of your savings at all. You can save all the money in the world, but non of it matters if you spend it right away on something else. Please do the following things with your saved cash:

  • Open a high-interest savings account. This will act as a separate account that will keep that money out of site, so you can keep saving without the temptation of spending. Plus, you can earn significant interest once your account grows. The current high-interest savings account with $1,000 can earn $20 a year and if you pushed that to $10,000 you could be earning as much as $200 a year.
  • Track your savings. Set up a spreadsheet or check out any of the awesome free tools out there. Tracking your savings is huge because the small savings can sting until you start seeing the results. The growth of your high-interest account will keep you motivated and excited as the number adds up rapidly.
  • Celebrate without spending. If you hit your milestone once a month or quarter allow yourself a small splurge. Choose a single celebration and get back to the savings.

Long-Term Spending

Once you’ve got your short term spending figured out, it’s time to pick it up. Sure $50 -$100 a month is nice but it won’t let you quit your job anytime soon. Consider a few of these potential long-term changes if you are eager to start your new company now.

  • Focus on the big three. A majority of our budget is housing, transportation and food. Look at your housing situation and reevaluate. Can you get a cheaper place? Can you get a roommate? Then analyze transportation. Can you start ride sharing more consistently? Are you spending too much money on careless drives that are adding up to a fortune in gas expenses? Lastly, look at your food. Track you food spending for an entire month and see if you can’t cut back by even $50 a month. Can you shop differently? Can you eliminate restaurants from you weekly plan?
  • Grow your income. This one is a little tougher because it requires more work. If you’re in for the challenge, consider taking a course that will make you more valuable to your current employer or look for a higher paying job elsewhere. Once you figure out how to make more money, set all increased revenue aside into savings and don’t fall into the temptations of inflating your lifestyle.
  • Start a side hustle. This sounds a little strange starting a side hustle in order to start your own business but sometimes it’s necessary. It isn’t always practical to grow your own income. Finding some more part-time work is sometimes a better option. Consider trying your hand at dog walking or something more advanced like ghostwriting. However you land extra cash, just make sure it gets saved and tucked away for your future venture.

 

Conclusion

Starting a business is an exciting venture. You get to channel your talents and ingenuity to create an organization you believe in. But it’s important to remember that the process isn’t simple. It requires time, dedication, and money. It’s important to be cognoscente that starting a business can create financial pressures. However, if you are organized and thorough, and you can consider implementing a handful of the plans above, you should be able to keep your startup and personal budget on track.