If you want to tell your boss to take this job and shove it in 2014 to start your dream business, you will need financial resources. It’s amazing how much courage you can have to draft your resignation letter when you have one year’s living expenses saved up. It takes on average 18-36 months for a small business to break even, let alone replace your corporate salary, so saving money will be essential. You must be focused and disciplined in order to build financial stability. If money burns a hole in your pocket, keep it in your handbag or man purse. Banks do not loan money to start-up businesses, so you will be forced to get the money from somewhere else. Most likely, that will be your personal savings. Here are five ways to create financial resources to start a small business.
Track Your Spending.
Collect all if your receipts for 30 days. Once you have one month of data, you can build an accurate budget. Then calculate your regular monthly expenses, such as rent/mortgage, utilities, credit cards and a car payment, and then compare it to your monthly income. It might be best to invest in budgeting software to make it easy. There are many software options, and some are free, but try using Mint.com to build a budget. The software will make budgeting simple, and also will alert you when your bank account is low. The software allows you to organize your finances so that you can manage your money. Otherwise, your bills could be managing you. Above all, try to live below your means to build savings.
Pay Yourself First.
People who have savings have options. Treat your savings account like a top priority bill. If you are making a plan to leave your job or start a new business, I suggest developing a 12 month plan to save up enough money to make your transition to small business ownership. You should be saving 20-40% of every paycheck. And if you are married, make sure you can pay all the household bills on just one salary.
Get to Zero Debt.
Stop making the minimum payments. Try to make payments that are at least two to three times larger than your required minimum payment. If you can, take out a home equity loan to pay off your credit card bill; you will at least be able to deduct the interest from your income taxes. Use your credit cards as sparingly as possible, and pay off new purchases the same month to improve your credit score.
Go Cash Only.
If you don’t have the cash for something, you really don’t need it. Do not open any new credit cards, even if they offer you 10-20 percent off that day. You must raise your credit score or keep it high. Establishing instant credit is a great way to put yourself in a position to lose your good credit rating, especially if you use it. Your debt ratio should not be more that 30 percent of your income. If retail therapy is your addiction, get a hobby such as yoga, running, gardening, or rating iPhone apps on YouTube.
Refinance.
If you’re a homeowner, you need to refinance now, before the rates go back up. Call your lender to try to take advantage of one of the loan modification programs available. I have heard about people lowering their monthly payment by up to $300-$500 a month, and that gives you more money to save to start your dream business. If you are a renter, talk to your landlord about renegotiating your lease. It’s certainly worth a try to reduce your monthly expenses. It doesn’t matter if you’re mid-lease, call your landlord and try to negotiate a lower payment.
If you get your finances in order, if a voluntary separation or buyout comes along you’ll be well positioned to take advantage of it to start your dream business. By the way, if you don’t manage your household with a budget you’ll be far less likely to manage your business with one, and that is a recipe for not knowing the numbers in your business, which could mean you won’t know if you are making any money. Get on top of your money early so that you know how to create financial resources to start your small business.
“A Woman Hold Dollar Banknote In Hand” courtesy of satit_srihin / www.freedigitalphotos.net
Where did you get the money to start your business?
Your article talks about zero debt and then refinancing your home. This is a bit of a contradiction, which in my opinion is very bad. A home-loan is one of the biggest debts that the average person will ever have, and thus refinancing is a very bad idea.
It is the most inflexible loan you can get and based on the term that you are exposed, refinancing will put you under immense pressure.
I would rather sway towards, your comments of “if you can’t manage your finances, then you won’t be able to manage your business finances”.
Be in control!
I enjoyed your post in ROOTS. You brought up some warnings about working from home that I had never considered. I found your post so helpful that I visited your blog for more information. I am not sure how I can incorporate your ideas for my business. I am trying to start affinity training for minority workers who lack business savvy and mentors but want to excel in the workplace. It might be helpful for me to use a blog to begin with. I plan to pick up a copy of your book for more ideas. Thank you.
Good site you’ve got here.. It’s difficult to find good quality writing like yours these days. I truly appreciate people like you! Take care!!| Thanks!
If anyone is going to use a credit card to fund their small business they have to be responsible enough to pay back on time every time. There is never really a good reason to use credit card though imo.
If you know you don’t have the money to pay back, it doesn’t make self to put yourself in a situation where you are in the negative.
Great blog! I adore my home based business because I assist women globally to ‘tell their boss to take this job and shove it and start their dream business…I even assist women to tell their failing husbands to do the same if they need to !! Handing women back the keys to control and drive their lives in the way they want is the best job in the world! It really need not be expensive to raise funds to set yourself in a flourishing business IF you have the right business model. We have plenty of women earning a healthy 6 figure income who are doing so on the back of a $2,000 investment to get started so we are living proof that great business opportunities do exist!
LucyHarper.com