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?