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Budgeting Tips for Entrepreneurs

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After years of hiding, you’ve finally admitted it. You’re an entrepreneur. Congratulations!

You rode the high of naming your business, designing a logo, and choosing your company mascot (even if it’s your pet parrot).

Now what?

You’re in this for the money, right? And the freedom of working from wherever and whenever.

Your parents were on to something when they told you money doesn’t grow on trees. Your dog doesn’t drag it home in a bag he dug up at the neighbor’s house either.

Most of us have complicated relationships with money. It’s the root of all evil. Or is it the love of money that’s the root of all evil?

If your goal is financial independence (and it should be) you’ll need some tools designed for embracing your relationship with money.

Hint: Money isn’t evil and it’s a driving force for most entrepreneurs.

Next hint: Entrepreneurs make more money when they understand budgeting.

To that end, I’ve put together a list of budgeting tips engineered for entrepreneurs who are ready for conquering the world (and learning more about money).

1. Research Start-Up Costs

It’s true. You can start a business with little to no money but the wise entrepreneur researches potential start-up costs. Depending on the type of business you choose, your costs may be minimal.

But don’t make assumptions or take the word of a friend who’s also an entrepreneur. Your business and your finances are not just like other entrepreneurs. Do your due diligence and research the following start-up costs:

  • Business License
  • Costs of incorporation
  • Business cards
  • Marketing collateral
  • Website
  • Software
  • Office space

As you can see, there’s more to starting a business than deciding on a clever name or choosing a product or service. Solid research helps you avoid financial surprises.

Your next step is preparing a business budget.

2. But I Don’t Even Have a Personal Budget

Have you ever heard the old adage “there’s no time like the present?”

Not having a personal budget is no reason for not using one for your business.

A business without a  budget sets itself up for future financial problems. It doesn’t matter how big or how small if you want long-term success in business, you need a budget.

Yes, you’ve spent time researching your ideal business and start-up costs but budgets also include ongoing expenses.

Budgeting isn’t a one-time deal.  A budget is a living document (or spreadsheet) and subject to change. Set a calendar reminder for at least quarterly budget meeting with yourself as the attendee.

You now understand why a budget makes sense but how do you create one?

Certainly, you could start with a simple spreadsheet but you could also make life easier by purchasing budgeting software.

3. Budgeting Software Takes the Stress Away

If you’ve never worked with budgets, be aware that budgeting can be stressful. Creating a working business budget may not be as fun as choosing your business name and logo but budget software can reduce stress.

Several years ago a small business had just a few options for budgeting software. Now, entrepreneurs can choose from a wide variety of budgeting resources. Look for software that allows personal and business budget creation.

While you should avoid mixing business money with personal funds, it does make sense if you can use one software program for both.

Next, read tips for online entrepreneurs regarding the separation of business and personal finance.  

4. Don’t Mix Business and Pleasure

Did we say pleasure? What we meant was personal. Of course, there’s nothing wrong with getting pleasure from owning a business just don’t do it with personal funds.

Experts in the legal, accounting and financial fields all agree it’s bad for business when you mix your business and personal expenses.

Separate expenses make record keeping easier. You’ll also give your tax accountant fewer headaches.  

Separating business funds from personal means you’ll need two separate budgets. If you don’t believe it go ahead and combine the budgets. Have fun at tax time!

Another reason for separating business and personal expenses is tax deductions.

Tax deductions are a huge advantage of keeping business money separate from personal funds. You can deduct all kinds of business expenditures, including meals and travel.

Speaking of tax time the IRS gets a little worried when businesses commingle funds. What does commingle mean? Glad you asked!

The money that comes into a business is for business purposes. It’s intended for paying business expenses, including supplies, payroll, rents, and any other operating expenses. It’s not for buying groceries (unless they’re for a business-related event), paying your mortgage, or buying your kid’s shoes.

Likewise, personal funds shouldn’t be used for paying employees or for business cards.

When you keep your personal funds in your business account and vice-versa, your risk upsetting the IRS. And when the IRS gets upset, they may target you for an audit. Even if you’re careful and don’t use business funds for paying personal expenses, how will you show that on paper?

Create a business and a personal budget. Go to the bank and open up a separate business account. Avoid an audit at all costs!

This may be one of the most important budget tips you’ll read today but if you’re looking for a little light reading, let’s talk for a minute about your emergency fund.

5. How Much Is in Your Emergency Fund?

You know all about emergency funds, after all, you’ve been tucking away a small portion of your paycheck for years, right?

Chances are you’re in the same boat with many Americans. You don’t have an emergency fund. Or if you do, you couldn’t pay for a major car repair or other significant unplanned expense.

Don’t beat yourself up! You’ve focused on getting out of debt, which is commendable. Take it one step further and start, or build-up your emergency fund.  

Bank three months of living expenses. That’s one of the budget tips most often included in any advice given to entrepreneurs.  Fund a separate emergency account with enough money for six months of mortgage and car payments. comfortable with it.

These are minimum dollar amounts. You may feel more comfortable with more in your emergency bucket. The point is don’t start a business without emergency funds.

If you’ve invested in a 401K or similar retirement plan through your employer, you understand about preparing for the future. An emergency fund is a preparation for the near future.

Speaking of retirement, what will you do now that you don’t have anyone pulling out automatic contributions and depositing them to your retirement account?

6. Look Forward to Retirement

Don’t get so excited about starting a business that you forget about retirement.

Formal retirement for traditional workers normally starts around age 63 but not every person sees retirement as a viable option. If a person hasn’t funded a retirement account they depend solely on Social Security.

The average monthly Social Security payment is meager when measured against the cost of living for the average retiree. Lack of retirement planning is one reason people close to retirement age remain in the workforce.

Entrepreneurship is an answer for people who aren’t ready for retirement but who no longer want traditional jobs.

Remember, you won’t have automatic contributions from an employer feeding your retirement account. The burden for saving is on you. A good understanding of entrepreneurship finance will help you understand saving and investment options.

You may love owning your own business so much you can’t imagine retiring at any age but in case you change your mind in the distant future, be proactive now.

Make saving for retirement a priority in your business budget. Start by working retirement savings into your overall financial goals.

7. What Are Your Financial Goals?

If wealth is your “why” for starting your own business, welcome to the club. While every entrepreneur has their own reason, financial independence is definitely a motivating factor for most.

The surest way to financial independence is hard work and time spent creating and managing a business budget.

When you’re first starting out your focus will be handling finances for your business while balancing your living expenses. Once your business takes off, you can give more thought to long-term financial goals.

Things like hiring employees, upgrading equipment, funding new ideas, and considering larger space will all be worked into your budget.

Financial goals are a must if business growth is part of your plan. There’s a big difference between dreaming and doing and many novice entrepreneurs get stuck somewhere between the two.

If you’re having trouble determining realistic financial goals for your business, consider seeking help. A good financial planner can offer budgeting tips designed for the future growth of your business.

A business mentor is another helpful resource for entrepreneurial tips.

8. Ask a Mentor for a Few Good Budgeting Tips

Financial planners are excellent resources for all things money but a mentor can also offer tips for online entrepreneurs.

Mentors are seasoned entrepreneurs.

They’ve created budgets. They’ve felt the stress of the stretching the dollars, so expenses can be met. A mentor understands the balance between running a business and having a personal life.

Locating a mentor isn’t difficult and may be the best decision you make after choosing your business niche.

A mentor isn’t an employee, they’re more like a partner.  

Choose a mentor who has a growing business. They’ll inspire you more than one who’s still looking for their niche. The ideal mentor isn’t a perfect entrepreneur and they’ve made mistakes along the way.

They’ve likely experienced the next topic and can share how they dealt with the distraction of shiny object syndrome.

9. Beware of Shiny Object Syndrome

Entrepreneurs by nature are creative individuals. Their minds work overtime churning ideas and dreams into reality. They thrive on starting the next new project.

Entrepreneurs also suffer the effects of shiny object syndrome (SOS).

It’s like a kid in a candy store who grabs their favorite piece of candy but before they get it to their mouth they spy something else that looks even better. This scenario continues until they have a handful of half-eaten candy.

Half-eaten candy isn’t so bad, but replace the discarded candy with half-finished projects. Or courses started but never finished. What about business tools and apps paid for but never used.

Don’t let the distraction of the latest program or service wreak havoc on your budget.

Do your research and don’t be impulsive. That app will be available in a few months if it’s as great as they say it is. The course will be offered again.

Along those lines, be careful who you hire.

10. Are You Ready for Employees?

Once your business grows you may start wishing you had help with day-to-day tasks.

Of course, you’d like the perfect employee, who wouldn’t? There are a few problems with the perfect employee.

If by perfect you mean experienced, they’re usually expensive. If you’re strapped for cash hiring above what you can afford is a BIG mistake.

Consider the applicant with less experience but a hunger for it because they’ll be cheaper. They need more experience for their resume. You need help with operations so you can keep firing ideas out of your creative entrepreneur brain.

Sounds like a benefit for both of you.

The point is don’t look for the perfect hire until you can afford them. Better yet, hire the one with stars in their eyes over the prospect of working with you– even if they have less experience than you’d like. It possible they’ll stick around and become one of your biggest assets.

Hiring well means you have more time for expanding your current venture and looking for new opportunities.

11. Save Some Cash for New Adventures

Congratulations are in order if your business generates income and has cash left over after you’ve paid your expenses and yourself!

Consider saving the excess.  

It doesn’t take thousands of dollars each month. Start with 10% and if you can save more, great but put away at least the ten.

You never know when the next opportunity will knock on your door. Cash is still king!

Any Favorite Budgeting Tips?

What are your favorite budeting tips? Anything come to mind that has help you be more successful as a writer and entrepreneur? I’d love to hear from you!

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