2 November 2022
Happy Wealth Wednesday!
So let’s dive straight in.
I want to ask you how you think every Entrepreneur should prepare their finances?
Entrepreneurship is a very demanding occupation. Approximately 19% of entrepreneurs work more than 60 hours per week. In addition, 82% work more than the average 40 hours standard per week. Thus leaving little time to manage your finances due to having other responsibilities. Every entrepreneur, however, should plan their finances meticulously.
Start Thinking Beyond The Venture:
Recognizing the volatility of income – Even if you start generating revenue immediately, your profitability will likely fluctuate irregularly. A varied income can make it difficult to predict and manage your finances. You’ll need to devote at least some of your time to make it go smoothly. Paying yourself a salary can help offset this. However, you will still be paid less than the market rate for your position.
Maintaining a stable home life – Personal financial planning and management can aid in developing a stable personal life. For example, eliminating stress related to overdue bills or debts. You’ll also be able to stick to a consistent budget. In addition, stable home life can boost confidence and productivity at work.
Getting ready for the worst – It is also critical to be realistic. New businesses have a high failure rate. Even if you have a great idea and a great team, there is a chance you will need more money. When you consider that you will almost certainly incur debts and take risks when starting a business, you may find yourself in an even more precarious position. Preparing your finances in advance can protect you from such an occurrence.
There are numerous personal finance categories to consider. However, before we discuss those, let’s take asses the most important long-term strategies.
Consider the long-term – Though many of your financial strategies will be focused on daily, weekly, or monthly actions, they should all be planned with the long term in mind. The more you plan, the better; you’ll thank yourself when it comes time to retire in a few decades.
Reduce outside risk – Starting and running a business as your primary source of income is dangerous. The last thing you need is additional risk in your life. Though some risks cannot be avoided, your responsibility is to reduce your risk profile as much as possible to keep your financial life balanced.
Strive for consistency – Stability is one of the essential characteristics of a successful personal finance plan, especially for entrepreneurs. Stability will assist you in compensating for the volatility of entrepreneurship and creating a lifestyle that allows you to perform at your peak.
Set goals and stick to them – Set specific, attainable goals and milestones for yourself. These will serve as a powerful motivator to keep you going and provide you with a framework for measuring the success of your efforts. In addition, sticking to your plans week after week will help you achieve your goals.
Budgeting is the first step in creating a solid personal finance plan. This is incredibly challenging, given your fluctuating income. However, it is another reason every entrepreneur should plan their finances.
There are several approaches to this, but one of the most popular is to take your monthly income, deduct your necessary and uncontrollable expenses, and then allocate the remainder to entertainment and discretionary spending or personal savings and investments.
A better path for entrepreneurs is to work on reducing personal expenses as much as possible. Set up housing costs, fuel, groceries, subscriptions, and entertainment categories, and look for ways to cut costs in each. Then, calculate how much money you need to make to cover those expenses while still having enough left over to save or invest; this should be your profit target, your monthly salary from the company, or your target earnings from a secondary source.
You can be confident that you’ll stay on track for your long-term financial goals if you take the time to organize your finances and make time regularly to hold yourself accountable to high-level plans. At the same time, you’ll be able to manage your company and make it profitable. In addition, you’ll be better prepared if something goes wrong. You’ll also have more stability in your personal life.
Finally, you can assist yourself in becoming a more intelligent and capable entrepreneur!