By Miata Edoga
Being an entrepreneur has lots of advantages. It's exciting, energizing and full of unlimited potential. Sometimes, though, it's easy to feel like your finances are outside of your control. This may be particularly true in the early years of your business when your earnings may not be as reliable as they were at a standard 9 to 5 job. Plus, spending can vary as well, since building a successful business costs money.
This fluctuation means that it's imperative that we develop financial consistency. If you stay on top of the factors that are within your control, it will set you up nicely when it comes to building financial stability and staying off the financial roller coaster that many small business owners are on.
Here are 5 simple steps to becoming financially consistent:
1. Schedule Regular Money Days
It's really important to make "Money Days" a regular part of your routine. They're a necessary step in achieving success for any small business owner. A "money day" is exactly what it sounds like: a day that you set aside to focus on finances. You must be sure to make time to do tasks like filing, entering receipts into a computer program, and balancing bank statements. You don't have to take the entire day unless your situation requires it (this is usually only the case if you haven't had one for a long time!) A couple of hours every other week, and then a meeting with an accountant over the phone every couple of months should do the trick. When you take the time to stay on top of financial matters, your accounts stay under control and you can easily track your financial progress and identify potential problems early on. Money Days also give you the ability to focus on your finances at a designated time, freeing up the rest of your time to think about your main task—growing your business!
2. Forecast Your Spending
Forecasting is the process of allocating where your money will be spent. Abundance Bound provides tools specifically designed to help small business owners, network marketers and solo entrepreneurs track what they are currently spending. When you look at your spending, you can determine which categories cannot be changed (rent, for example) and which ones can (groceries, entertainment, etc). This allows you to make informed decisions about what amount you will CHOOSE to spend in each category. Being proactive like this is far more empowering (and effective) than guessing about which categories you can eliminate or reduce. This is the biggest difference between this process and traditional budgeting. Budgeting encourages cutting out "extras" entirely, which is hard to stick to because we're human! An action that makes you feel deprived is sure to be short-lived. Small changes can make a big difference, though. Next time you're at Starbucks, consider ordering a Tall instead of a Venti, for example. Making these kinds of small sacrifices in several areas can make a huge difference to your overall spending.
3. Keep Business and Personal Finances Separate
It is absolutely imperative that you have separate bank accounts for your business and your personal life. Earmark one credit card for personal expenses and use a different one for business expenses. It's unheard of for the CEO of Kinko's to pay company expenses out of his personal checking account, yet many small business owners make this a regular practice. Separate accounts allow you to see what your business is spending and earning at a glance. An added benefit is that it also legitimizes any tax deductions you take.
4. Pay Yourself First
This is an adage that you've surely heard before. That's because it's the cornerstone of long-term financial stability, not to mention wealth. Determine what percentage of your earnings you will set aside every month as your "salary" and deposit that amount into a high-interest savings account. Do not allow yourself to access that money until you are ready to invest it. Don't use this account as savings for a "rainy day" or for a celebratory splurge. Strictly use this money to buy assets (defined, in this case, as something that either makes you money, or appreciates in value (so a new car would not be an asset under this definition!). If you make this a consistent habit, then you will build up a nice amount of money that you can use for investments.
5. Regular Financial Learning
Stay on the right track! Keep making the time to take classes on business marketing, using the Internet, and creating products… but don't expect your finances to magically take care of themselves. This is more than just unrealistic, it is also dangerous. It's easy to make serious mistakes while we try to find our financial way. The primary reason that most small businesses fail is because they can't sustain themselves financially. Make an effort to avoid this fate by putting energy into financial education now. That way, you will have the skills to develop financial stability, which will keep your business around for the long term. Carve out some time for financial seminars. Learn ways of managing your money as an entrepreneur and investing so it can grow faster. Become skilled at effective strategies for handling business expenses, reducing taxes, and creating multiple sources of passive income. This is an effort that will most definitely pay off in the long run.
So that's it in a nutshell. If you consistently act on these five tips, your financial picture will improve significantly over the coming months and years. Incorporating each step into your daily and weekly life requires a small amount of time, but will reap dividends forever.
Miata Edoga is the President of Abundance Bound, creating success for small business owners. Their mission is to provide the financial knowledge and skills entrepreneurs need to build profitable businesses. FREE audio download with simple tips and strategies at http://www.AbundanceBoundSystem.com
Source:www.isnare.com |
