How to Financially Prepare to Start Your Own Business
Starting a business is a life goal for many young entrepreneurs. Unfortunately, it’s not that simple. If you want to start a business and be your own boss, you have to prepare yourself for hard work and saving money to be successful as a first time entrepreneur. Here are some ideas for how to financially prepare to start your own business.
Startup costs can be very high, and every new investment comes with a risk, so every business owner needs to have their own contribution before getting a loan. However, saving money is a challenging task. Research shows that more than 57% of Americans have less than $1,000 in the bank, while 39% say they have nothing saved. Considering this, how can you save money if you want to start a business? Here, you will find some tips that will help you fund your new business.
Review Housing Costs
Some people are used to living above their means and have trouble cutting living expenses. You can do that in many different ways. For example, living in an apartment instead of a big house can bring you many benefits, primarily financial. Moreover, if you choose to move out and need to sell your house quickly, you should be able to find a willing buyer in just a few weeks and get a huge financial boost.
When it comes to other things, you should definitely pay attention to your housing costs, including rent, utilities, and other miscellaneous expenses. First, you might want to write such things down. Next, total it up. It will give you a general idea of what you need to earn each month.
Now that you know how much money you will have to spend on housing costs, you can calculate how much of that money you can save. The best option for people who want to start a business is to put aside around 40% of their monthly paycheck.
Housing is the most considerable expense you can have, and in bigger cities, it may eat up a big part of your income. As a rule of thumb, you may want to spend no more than 30% of your paycheck on housing, including utilities, mortgage interest, property taxes, and maintenance.
One of the best ways to save some money is to start cooking your own food at home. Many of us are used to ordering food and buying lunches at work, but overall, it can be very expensive.
According to data from Priceonomics, ordering food is five times more costly than cooking the same meals at home. If you’re using a meal kit service as a shortcut to a home-cooked meal, it’s a bit more affordable but still almost three times as expensive as cooking your own meals.
If you are a single adult, depending on your household budget, you should look to spend between $175 to $345 every month on food, and with a two-adult household, the numbers will double. It is estimated that, on average, Americans spend around 13% of their paycheck on food, which, at an average of $660 per person, can add up to $8,000 every year.
If you want to cut back on these costs, there are few things you can do, like planning ahead. Go to the store with a list of what you need to buy and put in the effort to stick to it. Impulse buying is one of the fastest ways to bust your grocery budget.
Rate Your Subscriptions
In times of pandemic, there are many things you can do to entertain yourself. For example, people turned to services on demand like Spotify, Netflix, and Game Pass. Individually, all these services are pretty cheap, but mixing them all together can become very expensive.
Taking this into account, you should calculate how much time you spend using such services and consider whether it wouldn’t be more reasonable to cancel them. The money you spend each week on unnecessary extras can really add up. Treat yourself only once in a while. You will be surprised by how much extra money you will save!
If you don’t want to cut off your services completely, you can review your plans. Most of them provide a few different options, including premium options that you pay a bit more for. Think carefully if you get full usage out of the most expensive fitness center membership or if you can change it to the cheaper option.
In order to have the highest chance of success, it is best to pay off those debts as fast as possible. Some banks offer accelerated payment programs. For example, you can pay your mortgage twice a month to reduce payments.
When saving for your small business, you should always consider what you may need in the future. For instance, canceling your credit card after paying it off may not be the best idea for you. A credit card will offer you additional money to fall back on should your business suffer.
Getting caught up in spending money is very easy, so many future business owners decide to use automated saving processes. Many banks offer savings accounts to which they will transfer 10% or more of your every paycheck. This way, your personal savings will get bigger every month without any additional help from you. Most banks offer it for free, so you don’t have to worry about more fees.
Focusing on strengthening your finances is the first step towards starting your own business. By doing it, you can learn how to be responsible and spend your money logically. Managing them may seem hard, but it will benefit you in the long run. Some people have natural talents that allow them to turn money into billion-dollar businesses effortlessly, but most of us have to work hard to do the same thing.
You can be surprised by how much money you can waste by not following your budget for everyday life. Practicing the tips listed above will help you save money and adjust your lifestyle. If you are serious about being your own boss, don’t wait! Take your life into your own hands!