Becoming an entrepreneur is a risky endeavor, but one that can generate a massive income. If you’re looking to get out of the eight-five grind and strike out on your own, you’ll need to have a stable financial footing that ensures you’ll never need a “day job” again.
If you’re already self-employed and want to know how you can grow your finances and business, here are a few steps you can take.
Stay on top of your personal finances
You can’t run a business if your focus is on getting better control of your personal finances. If you’re trying to dig yourself out of debt, check out this debt guide from Credello for ways you can stop paying for past mistakes.
Above all, ensure that your personal credit score is good as it could be used for leverage should you need to get a business loan or credit card. Keep your utilization under 30% if you can, and make sure your payments are always on time.
You must have an emergency fund
Being an entrepreneur can mean having an unstable income from month to month, so shield yourself from financial problems by creating an emergency fund. Your emergency fund should have enough money to cover your expenses over a certain period of time. Experts will recommend anything from six months to one year’s worth of expenses, but it’s more about what amount is best for your situation. If your business is seasonal, you should have enough to get you through the slow periods and into your busy time of year.
If you don’t have an emergency fund, start saving $1,000 in a dedicated savings account. Once you hit that, you can start working towards your ultimate savings goal. Don’t feel like you need to have your fund created all at once. Start slowly with transferring just 10% of every deposit over to it until you better develop the habit.
Use credit cards as loans instead of extra money
Whether you use business or personal credit cards, it’s critical that you see them as short-term investments into your business instead of “extra” money. Paying interest on things you’ve already bought is just wasteful and can throw a wrench into your finances. If you want to use debt effectively, use it to purchase assets that accrue value over time instead of liabilities that either decrease or never change in value.
Don’t neglect your retirement
Since you may not have a payroll department managing your income, you need to be proactive with investing in your retirement. There are accounts entrepreneurs can use to save for retirement, such as IRAs and SEPs, that you should start utilizing as soon as possible. While you might love what you do, you might not want to do it into your 80s, so start thinking about what your long-term financial strategy looks like.
Invest in yourself
The best money you can spend is money that adds value or opportunity. Consider investing in your education by taking business classes, attending industry conferences, or hiring a coach to keep you on track. The upfront costs may sting, but the dividends they’ll pay are worth it.
Final thoughts
Being an entrepreneur means having to make big decisions on your own. By prioritizing your finances through the tips above, you’ll not only ensure your business revenue is optimized, but you’ll also have a stable financial foundation that helps keep you self-employed.
