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Why You Need to Focus on Your Personal Finances to Have a Successful Business
I want to start by saying, that when you want to start a business, the first place that you need to focus on, is actually your personal finances. You need to really get control of your personal finances, because that is what is getting your business up and running. You likely don’t have someone else paying for all of your capital start-up costs, so you need to use your own personal money, which means, that you need to get your personal finances really dialed in first, so you have the money you need for your business and to reduce the feelings of stress and anxiety that you feel when you feel like you are running out of money to continue to fund your business.
Often I see people who think they can just earn more money and that will solve any cash flow problems. Let me tell you, getting financial coaching sooner in your journey, will be a catalyst that can make it so you are able to earn more money, quicker!
I want you to know that earning more money, doesn’t solve money management problems.
I want you to think about this, picture someone who has won the lottery. Many people who have won the lottery actually end up broke again in a few years or in even worse situations than they were in before they won the lottery.
Why? Because they didn’t know how to manage their money, you need to know how to manage the money that you have right now, so when you have more money, you know how to manage it then.
I work with many people who have great incomes, I’ve worked with accountants and 6 figure earners, and I can tell you, just earning more money, doesn’t solve your problems and it doesn’t end your anxiety around money.
So even if you do make more money, it doesn’t mean that you’ve solved the problems because the problem really lies in not knowing how to properly manage your day to day money, your cash flow into your account and out of it and having the awareness of your habits and actions when it comes to making decisions with your money.
If you want to learn more about how you can improve how you are managing your personal finances, you can read some of the blog posts here that I have written on those subjects:
- How to Plan Your Finances For an Entire Year (in under a couple of hours)
- 11 Ways to Save Money on Groceries
- Frequently Asked Questions about Financial Coaching
- How I Saved Thousands of Dollars so I Could Leave My SIX Figure Career
- How I Made Over $9000 Just by Selling Things I Already Had in My House
- How to Make Saving Automatic & Easy
- 9 Things You Are Spending Way More Money on Than You Think
- 3 Real Reasons You Are Overspending & How to Overcome It
Make it a Priority as an Entrepreneur, to Have Emergency Savings
I see a lot of entrepreneurs who are building their businesses, without any emergency savings and this scares me, so I want to share some insight.
An emergency fund, is just that, for emergencies.
An emergency fund, is for true emergencies such as someone losing their job or taking a pay cut, a family member getting sick and needing you to take time off to help them, to help pay for medical bills, you, your partner, a child or family member’s health suffering and being diagnosed with a condition, a death in the family, etc.
When you first begin your emergency fund, you will want $1000 in it. Then you will want to work towards about 3-6 months of expenses, depending on your lifestyle. I know this sounds like a lot, but if you were to lose your job, lose your customers or your main income sources for your business, you would need enough money to know that you would be able to make it until you get another job, until you sign more clients or have more orders come in, which may take a few months.
An emergency fund is especially important when you become an entrepreneur.
There are so many more things that can happen, that can affect your finances, so you really need to be prepared, even more than the average person who is employed by someone else.
The 4 Seasons of Entrepreneurship & Why Knowing Them, Should Matter to You
I want to talk to you about the 4 Seasons of Entrepreneurship, because they are very important to know, so you understand how the cash flow in beginning your business, is affected by the stage you are at in your business.
I am telling you this because I want you to know that there are stages you will go through building your business and some of the things you will experience, so you don’t feel like giving up before you’ve hit your tipping point and to remind you of the seasons you will go through, so you can prepare yourself financially for it.
The First Season, is Spring – the Season of Creation, Plans & Projects
Here is how I would describe the Season of Spring:
- You’re full of ideas and super excited
- You’re feeling clearer about your purpose
- You start planting your seeds, you plant a ton of seeds
- It is a very, very busy season and you feel like you’re in hustle mode
- You have so many choices of what kinds of seeds to plant and might almost feel as if you are being pulled in every direction possible, which can really affect your focus and cause you to put too much time, energy and focus into multiple projects, instead of having a clear focus on getting your main offerings and systems set up and running
- You are spending a lot of time “doing,” you are doing the hard things
- This time requires a lot of effort, to get the crop in the ground, because if you don’t plant the crop now, you won’t be making any money come fall time, when it’s harvest
- You spend a lot of time watering these seeds and nurturing them
- You may have a small network and not as much influence, but you are building it in the spring season
- You don’t have very much income coming in yet
- The season of spring can last longer than you think it will, when you first begin your businesses
Summer – Season of Business Growth
- You are spending time continuing to nurture what has blossomed
- Business is in full bloom and flourishing
- The seeds that you were planting have now blossomed and your business is thriving
- You start to feel super excited because you now have some money rolling in and you might even feel on top of the world!
Fall – Season of Harvest
- Now you have finally made it to the fall, the time that you have been so excited to finally reach
- When you reap the rewards of all your dedication and hard work
- You feel more in flow now, your income is more stabilized as you have more steady clients, projects or product orders
- But, something you do need to prepare for, is for winter, which is often something we don’t prepare enough for, because we are super optimistic that business will always be this steady and we almost forget that there are going to be ebbs and flows
- Because the winter season is coming soon, you need to be mindful of it and have money set aside for the time that you need to take for rest or when it slows down
Winter – Season Where Things Slow Down
- In winter the cashflow might start to slow down, so you need to prepare for this, in this fall
So, the seasons you can compare to those of planting a crop and harvesting it, but what I don’t want you to compare are the time periods, because your season of spring, will take you months or maybe even years, everyone is different.
This is something that I don’t think enough entrepreneurs talk about and when we go into entrepreneurship, sometimes it’s almost as if we have blinders on because we are so excited about our idea and all of the people we will be able to help and the lives that we will be able to change, that we sometimes don’t prepare for the time that things take.
That’s why I wanted to share that with you, is to really help drive my point home about getting your personal finances, in order as quickly as you can and to keep on top of managing them really well, so you have the sufficient time needed, to get through the spring season and to those summer and fall seasons in your business.
- How to Save Time in Your Business & Be More Productive & Profitable Now
- How to Avoid Burnout as a Female Entrepreneur
- 5 Best Courses & Programs for Female Online Entrepreneurs
- 4 Things You Need in Your Health & Wellness Business to Save You Time, Energy & Money
- Why You Need a Blog & Start One
- 6 Things Every Entrepreneur Needs to be Outsourcing Right Now
- What Kind of Education You Need to be Investing in to Make More Money
- Frequently Asked Questions about Financial Coaching
One of the Biggest Mistakes I See When People Go into Entrepreneurship
One of the biggest mistakes that I have seen, is that people don’t allow a big enough “gap” for them to build their business. The gap is the difference between your income and your expenses. In order to create the startup capital that you need and the money to sustain your business until the income coming in is greater than your expenses, you need a greater gap between your personal income and expenses, to have more money available to fund your business.
The problem that I see, is that people don’t create this greater gap soon enough. You can’t keep living the same lifestyle that you currently have and create the necessary capital needed to start your business.
The reason it is so important and helps you to really succeed with your business, really dialing in your personal finances as soon as you can, is because we are often optimistic about how much income we will have coming in right away and often underestimate the amount our expenses will be, to bring this income in.
We often think things will pick up faster than they will. I am not saying this to alarm you, but I am saying this to help prepare you. I see the back-side financials of many entrepreneurs, and while it looks like they are earning a lot, many of them have very high expenses as they are trying to grow their business, therefore they have high income, but not high profitability. And I want you to know that income and profitability are two very different things. One does not equal the other.
So I encourage you, to ask yourself, what do I value most in my life? What are my core values? Are they freedom? Are they flexibility?
Do I need these things or these expenses right now in my life, or can I reduce them temporarily while I am getting my business up and running and profitable?
Because if you value freedom, it takes structure to get to freedom. And having structure helps to reduce emotional spending, accidental overspending and giving into the short-term indulgences and impulses, that can hold your business back while you are trying to grow it.
Another thing, is to sit down with your partner if you have one, and really talk to them about your goals, about your vision with your business, you “why,” the reason it is so important that you become an entrepreneur or have a successful business, so the decisions you both make with your finances, supports your business and your vision. Having you both on the same page, right from the beginning, can reduce a significant amount of stress in the beginning stages.
Focus on where you can reduce your expenses in your lifestyle, while you are building your business. And then when you do that, use that money that you are now saving, to put towards your business.
By improving how you manage your personal finances, you actually set yourself up for greater business success. Because when you know how to handle money better in your personal life, you will be able to handle money better in your business, which is a huge issue that I see commonly is entrepreneurs, not knowing how to handle their business finances, it all starts with your personal finances.
If You Have the Mindset of “I’ll Just Hire a Bookkeeper,” This is For You
And a mindset that I see so commonly, is people saying, “well I will just hire a bookkeeper.” Having a bookkeeper is great, but 1) you won’t have one as soon as you begin your business and 2) a bookkeeper is recording the transactions and decisions that you’ve made and you are still the one in charge, so it really does all go back to you and your money management skills.
The Mental Health Connection and Entrepreneurship
Entrepreneurship is hard and you wear a lot of hats, especially in the beginning stages, so I really encourage you to reach out when you need help, reach out to people who can help you in the areas that aren’t your strong suits and to reach out sooner than later.
Please don’t struggle for a long time before asking for help because it really takes a toll on your mental and physical health and it weighs you down.
This has a huge effect on your income because it affects your energy and your energy is one of your biggest resources needed, to be profitable. Don’t think that you are the only one who has experienced what you are going through or what you are going to go through and please don’t be ashamed or embarrassed to reach out for help, do it for your body’s sake.
There are people out there who can help you, so your struggle is so much shorter than what they’ve experienced.
If you need accountability to succeed with how you’re managing your money and to be able to create a much larger gap to fund building your business faster, or if you want to achieve your goals quicker, check out the services that I offer as an online financial coach. I would love to help you succeed quicker in your business and with less stress!
Do you want to finally feel confident in how you are managing your everyday finances? Click here to download my free checklist!
I am very active on Instagram, follow me here for more financial tips & tricks: http://instagram.com/mandyythomas (@mandyythomas)
Do you have any questions or anything to add? Leave me a comment in the comments below and I will respond back to you!