Working for yourself is a beautiful thing but then demanding. You get to call the shots, set your working hours and decide how you want things to run. It is also a stage of daily self-discovery, improving yourself and the business daily to meet the demands of your target audience. With hard work, focus and dedication, self-employment is a phenomenal way to achieve the good life.
However, some strategies will bring you financial freedom by running your business while still doing the things you love. Having a clear plan and design for your goals can keep you from going off-course, and in making these strategies, remember to incorporate six things;
- Balance your business and personal goals
Setting short and long-term financial goals is the first and most crucial stage in the personal financial planning process. In many circumstances, company objectives can conflict with personal financial goals and ambitions. Business goals, such as expanding into a new market or purchasing a new office equipment, can conflict with personal ones, such as saving for retirement or sending your children to college. A crucial step is to figure out what is “reasonably doable” for you to attain, given your financial situation. Getting the appropriate balance between your business and your personal life is key to achieving them.
2. Build a working budget
Many business owners have no idea how much they spent in the last month. However, not keeping track of your budget is very risky, especially if you’re also running a business. To stay on top of your spending habits, you must create a plan for your business and yourself. Start by writing down and taking stock of all your current costs, such as payroll and insurance. Remember to include savings. Then, calculate the total factor in your pay and make any necessary adjustments to ensure that income is always higher than expenditure. This task is of the utmost importance for entrepreneurs, especially young businesses, just getting off the ground. A working budget would help tackle insufficient revenue for expenses, support track and analyze cost, show off operational deficiencies and overlaps. It also gives room for ways to increase productivity, which prevents bankruptcy by effectively controlling cost.
3. Diversify to explore financing alternatives for the business.
Every new business idea requires capital to start. The success of your venture depends on your ability to secure financing. Sometimes, the funding comes may come from your personal savings or the sale of a property. Other times, you will need to look for external funding within your social circle or approach a financial institution. The external financing can be in the form of a loan. Another great way of financing your idea is your customers. Indeed, your clients are one of the best and inexpensive sources of financing. If your customers love your product, they will be willing to give you an advance payment, subscribe to your platform or consider a product/service exchange.
First, save and invest money for the future, ensure that it is adequately diversified and compatible with the amount of risk you are willing to bear. Then, spend most of your time and effort on managing your business.
4. Create multiple streams of income
It is a universal truth that some of the biggest and highest-earning companies worldwide have multiple income streams. You can find them in different high earning industries and sectors. There are lots of uncertainties with entrepreneurs like there is to life. A business could inadvertently run into a financial crisis with its income at any point in time.
So, if you have a diversified portfolio, there is a slim chance that you will run into financial difficulty. One of the most reliable team financial strategies is economic diversification. Whenever a risk threatens to happen to your company, having multiple income streams helps against the negative impact of such a threat. Even if such risks occur, they can then be shared equally among the income streams to prevent your company from feeling the drastic consequences of any crisis.
5. Establish a Reserve and Fund it.
For your business, you need a rainy-day fund to cope with any unforeseen difficulties or challenges that might occur. Aim to have at least three months’ reserves set aside for both yourself and your business. To achieve this, set up auto-savings to consistently contribute and maximize your funds. Bear in mind that the account you create for this purpose should be a safe savings vehicle, not one that could potentially drop in value.
In tough times, this money will be vital to your business’s survival. With the savings you accumulate, you’ll be able to pay your staff and overhead costs for a set period. Very important if you want to continue to live the good life, you can’t forget about retirement! When you work for yourself, it’s vital to set up a retirement account as early as possible.
A great rule of thumb is to contribute at least 15 per cent of each paycheck to your retirement. Beyond monetary investments, it’s essential for business owners to establish protection for their families. You can work with a financial adviser, or you can do your research and independently invest. Just make sure that your money is growing somewhere.
6. Pay Yourself
Business owners often pay themselves very little in salary partially due to previously mentioned reasons and the need to minimize personal payroll and income tax. Regular automated payments are set to savings to accumulate enough money to fund one’s hopes and dreams. While these actions can be a big help, they can be roadblocks to helping to get savings for retirement or other goals.