Many people dream of having their own business one day. I think there is something very satisfying about being your own boss and making the decisions yourself. Of course, we all want to be successful and wish for financial freedom but sometimes, being running your own business may not be everything it’s cracked up to be. It takes a lot of discipline when it comes to managing your income.
When you work for someone else you don’t necessarily have to worry about how you will pay for an expensive piece of equipment if it breaks or making sure your quarterly taxes are mailed in by the deadline. There is also something called, a paycheck that employees receive and they only have to worry about depositing or cashing their check in the bank each week and taking care of their personal finances. There isn’t much to fall back on when you are in business for yourself.
One of the most important steps you must take immediately after starting a business is separating personal and business. It helps to start a new bank account for your business rather than keeping everything together. Keeping a notebook of personal bills, basically what your mortgage/rent cost, utilities, car loans, groceries, everything in your personal budget is also beneficial. Making sure you have enough to survive and allowing a little extra for spending is crucial when determining whether or not you are even earning enough when you’re self employed. But, you also need to have enough money in your business account to take care of your taxes and the cost of running your business. If you don’t already have a savings account, now is a good time to start one. You can deposit a percentage of your profit each month (or week, depending on how you are paying yourself.) later, you can make decisions on starting a retirement fund.
Keeping accurate records is crucial when you are self employed. Not just for Uncle Sam but for yourself too. You want to be sure you are staying above water and you want to be sure invoices are sent out on time and bills are paid. I like to use various programs on my laptop but I also keep paper records. Stocking up on manila folders, envelopes, legal pads, and pens is important and a tax deduction too!
There will be times when you may find yourself short and it might seem like a quick fix to start using credit cards. However, this could lead to some serious trouble depending on your interest rates and how much you are piling onto them. Sometimes, checking into self employed loans is a much better idea considering your monthly payments may be far lower than credit card payments and the interest rate isn’t typically as high.
When shopping for a hard money loan, you will need to have your records in order so you can show your loan agent that you have money coming in and are capable of handling your personal expenses. They may ask for your last year’s tax return or a profit and loss statement as well. It’s important to keep in mind that it is common for a small business to need help from time to time. Don’t get down on yourself if you feel like everything is falling apart. Chances are, it isn’t and after some brainstorming, seeking help from a professional whether a lawyer or a financial advisor, and taking a minute to relax, you will find that you will bounce back up in no time. Always remember that these small setbacks are some of the best learning experiences.
