In the early stages of building a company, it’s not uncommon for there to be months or years where you don’t make a whole lot of money. It’s one reason many experienced entrepreneurs encourage first-timers to save up at least a year of living expenses before rolling up their sleeves and getting started. But if you’re already in the thick of things, it’s too late to rewind and pile up cash. There are, however, smart things you can do to ensure you survive and thrive.
5 Tips to Keep Your Finances Afloat
Life without a paycheck is something most entrepreneurs have to get used to (at least for a few months). But if you want to last, you’ll need to come up with a plan. Here are some suggestions for keeping your personal finances under control:
1. Adopt the Right Frame of Mind
It’s absolutely essential that you go into the process of launching a business with the right mindset. If you’re new to the startup world, you probably have a very sanitized view of how things go. You know there will be challenges, but you’re inclined to think they’ll be short-lived. Unfortunately, this isn’t always true.
“I wish someone would have warned me to control my thoughts before I opened up shop,” entrepreneur Allison Martin writes. “During the initial months, when things weren’t going my way, I’d sit and have a pity party because I knew I had the tools to get what so and so had, but luck simply wasn’t on my side.”
What Martin and others have learned is that a mind-over-matter outlook is the only way to survive – both in your business and personal life. Adopting this frame of mind on the front end will help you stay the course.
2. Document and Categorize Expenses
You have to be meticulous with how you document and categorize expenses in your personal life. For best results, base your budget on Maslow’s Hierarchy of Needs. You pay for expenses as they fall into the pyramid, starting with physiological needs (food, water, clothes, and shelter) and safety needs (security).
Only after these needs have been fulfilled should you venture into the other broad categories (belongingness, esteem, and self-actualization. In almost all cases, these are wants, not needs.
3. Save Where You Can
In order to avoid burning through your savings faster than you can afford, constantly be on the lookout for new ways to save. One simple suggestion is to cut the cord on cable.
“Considering that the average homeowner pays somewhere around $90 per month for cable – and a streaming service from a provider like Sling costs just $20 per month – you could potentially save $70 or more per month and only lose a few channels,” property management firm Green Residential explains.
You can also save some big money by not eating out, unsubscribing from subscription services (we’re looking at you Amazon Prime and Spotify), and doing your own projects around the house (rather than hiring someone).
4. Add a Side Hustle
You can only spend money without making money for so long before your bank account hits zero. If you don’t have a spouse or someone else supporting you, you’ll need to add a side hustle for a little extra income. Something like driving for Uber, working as a nighttime security guard, or starting an online side gig could be enough to keep you afloat.
5. Keep the Business Lean
Eventually, you’ll have to take some pay. In order to speed up the time it takes to reach this milestone, keep your business as lean as possible.
A lean business is a more profitable business. The more profitable your business is, the more money you’re able to pour back into the company to fuel growth. The more your company grows in a sustainable manner, the faster you get paid.
Stay the Course
It’s important to remember that things won’t always be as they are now. Life is tough at the moment, but this is merely a season. By remaining patient and staying the course, you can set yourself up for financial freedom in the years to come. Keep working hard and use your long-term goals to help you push through the short-term challenges.