We live in a day and age when most entrepreneurs assume that you have to go into debt if you want to start a business. This idea is deeply rooted in our DNA as Americans; it does not even come to our minds that we could save the money we need to cash in a startup and avoid getting into debt.
One of the reasons this does not come to our mind is that many of us do not have enough money to start a business. And, because we live in a fast food culture where the word "patience" is missing from our vocabulary, we are not willing to sacrifice the sacrifice needed to save more than a few hundred dollars at a time.
While you, as most Americans, are plagued with these problems, there is no reason why you can not overcome these problems and save enough money to start your own. business. Do not believe it? Just read.
The sad state of saving in America
According to a GoBankingRates study dating from 2017, the average American has a rather appalling savings account. More than 57% of Americans have less than $ 1,000 in the bank, while 39% say they have not saved anything.
Only one in four people saved $ 10,000 or more, which means that three out of four families would have difficulty surviving more than three or four months without income.
Although each situation is different, the general rule is that the equivalent of your annual salary should be saved up to the age of 30 years. By the time you reach 35 and 40, you should have two and three times your annual salary saved, respectively. By the time you reach the age of 65 – that is, the age of retirement – the financial experts agree that you should have eight times your annual salary saved.
The overall lack of savings among Americans is scary for a number of reasons, but it seems even more problematic when you combine it with the debt-loving nature of our society. High debt with a minimum of savings is a recipe for disaster. It's also a huge factor inhibiting your ability to achieve important goals – such as starting a business.
When you do not have money saved to start a business, you have to either drop the idea for another day, abandon equity in your startup, or tie up a heap of debts in your name. None of these scenarios being ideal, it makes sense that you change your personal finance habits and find a way to increase your savings.
How to save money to start a business
There is no perfect formula for starting a business. Sometimes they start as a hobby and gradually mature into something much bigger. Other times, they start as formal businesses and end up pivoting into something else entirely.
Different strokes work for different people, but there is a huge value in the cash flow of a business and avoiding the weight and the burden of debt at the entrance of your business. But to finance your own business, you need to review your savings habits and better control your financial situation. Here are some ways to start the ball:
1. Get rid of your debt
Let's start with the subject that nobody wants to talk about: debt. We all seem to have it, but very few of us face it directly until we are above our heads.
That it is a debt of studies, a car debt, a credit card debt, a mortgage, a personal loan or anything else we all have. Run a quick calculation on all your monthly payments. If you are like most, you are spending hundreds of dollars (if not thousands) a month on debt payments. Now imagine what you could do if these debts were gone.
When you get rid of your debt, you will feel like you have an increase. All of a sudden, all this money that was used to pay off a debt can be allocated to something else – like starting a business.
2. Reduce your discretionary spending
How can you aggressively attack debt with limited income? The first answer is to reduce your discretionary spending and put that money on your debts.
Between eating out, shopping online, having drinks on weekends and buying things you do not really need, you should be able to find a few hundred dollars a month. During a year, this can represent a big change.
3. Automate Economies
It's easy to be so caught up in spending that you do not even think about saving. Over time, this can have quite dramatic effects. And while there are many ways to solve this problem, automating the savings process is one of the smartest options.
If you can find a bank that helps you automate savings, that's a good starting point. In an article for Entrepreneur.com, the entrepreneur Renzo Costarella calls ChimeBank.com one of the best money saving apps on the market.
"The mobile banking app also offers an automatic savings account, which allows you to start saving money without thinking about it by automatically setting aside 10 percent of each check that you drop in Chime, "says Costarella. "You can also activate the rounding of your purchases and transfer the difference in your savings every time you use the Chime debit card."
Other good money saving apps include options like Digit, Clarity Money, Qapital, Mint, Acorns, and more. The key is to find a solution that will make you feel good. You are your worst enemy and automated solutions like these will keep you informed.
4. Ask yourself this question
When you're in a store – be it Walmart, a grocery store, or an expensive shop – try to stay aware of what you're doing. Before placing something in your basket, ask yourself this simple question: "Do I really need this?"
Most of the time, the honest answer to this question will be "no". You may not like this answer, but that is what you need to hear to avoid spending money for things you do not need. ]
5. Start small and slow
When you start your business for the first time, you are tempted to do everything at the same time. In many cases, this leads inexperienced contractors to tackle surface tasks (rather than the basic elements that really make a business).
"Marketing material is the most fun part of starting a business: choosing a logo, designing business cards, choosing graphics and colors for your website, doing business, etc. you money, "admits contractor Nicole Crimaldi." Yes, marketing material is important, but making money is more important. "
Starting small and slowly, you can avoid putting yourself in a compromising position on the road.
6. Reinvesting profits
The general rule is simple in theory, but difficult in practice. While your natural tendency is to start spending the money you make on your new business, it is a much healthier practice to reinvest your profits. This will allow you to continue to grow without having to go into debt.
Beware of your savings
When you start a business, the way you manage your money is one of the key factors that determine whether you will succeed or not. While some people are able to turn a couple of small business loans into billion dollar businesses, others find it more reasonable and less risky to grow their businesses and avoid debt. If you want to follow this last path, make sure you have a game plan.
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