If you’re embarking on a startup, you should be prepared for a roller coaster ride. Your journey will include a lot of ups and downs. You’ll be faced with making tough decisions that you don’t want to make. However, you’ll also be doing something that most people never have the courage to do.
One of the drawbacks of starting your own business is that you won’t have the comfort of having regular paychecks. Those days are long gone. Whether you’re paying yourself a low salary just to get by or depending on the monthly recurring revenue, it’s without a question that budgeting is more important now than ever.
Checklist before you start
Before you take the leap of faith to start your own business, you’ll want to make sure you’re mentally prepared to cut back on a lot of your spending. If you’re carrying credit card debt or student loans, explore some options to reduce your interest rate or consolidate your bills into one payment. Having one single monthly payment can help you worry less about paying multiple bills only worry about one payment every month.
You should do everything you can to lower your monthly expenses. This includes looking into balance transfer credit cards, exploring debt consolidation, canceling monthly subscription costs, and most importantly, changing your lifestyle to let go some of the luxuries in life. There are countless ways to save money, some will be more obvious than others. Unfortunately, starting a business isn’t easy and will take a lot of willpower, and the last thing you want on your mind on top of the stress you’re going to face is worrying about money.
When was the last time you actually looked at your bank statements and itemized all your transactions into different spending categories? Mint is a great option to help you facilitate this. You’d be surprised to see how much you’re spending on extracurricular activities or even eating out. This finance audit can help you create a realistic budget and put things into perspective.
Cut most expenses, but not all of them
As mentioned above, trimming down on some of your expenses will be crucial since you won’t be receiving a steady stream of income. However, there are some things that you probably shouldn’t do without.
Gym memberships are a great way to blow off steam. In a study by Karen Postal, a certified neuropsychologist, research shows that exercising not only gets your heart rate up but also leads to improved focus and concentration. It also showed that problem solving, memory, and attention improved dramatically. It makes sense, right? How many times have you felt like you needed to “talk a walk” to clear your head? If you’re stuck in the office all day, you can quickly lose focus and get clouded in all sorts of thoughts that will impede your ability to think straight.
Another item on the list that you shouldn’t cut are healthy foods. Working long late hours can easily make you take the easy route and grab fast food on the way home. Either that or eating out every meal for lunch. One of the worst feelings during a packed day with multiple meetings and schedules is having a food coma.We’ve all been there. Instead, consider eating food that’s packed with nutrients that will give you long last energy throughout the day. Eating unhealthy food can quickly make you feel super sluggish and unproductive.
Don't forget to take care of your credit score
Despite working around the clock every day, the one thing you never want to forget about is your credit score. Anyone can be easily distracted to forget to make their credit card payment. However, as long as you’re not 30 days past due, your creditors won’t report 30 or more days past due remark on your credit report. In addition, creditors can’t raise your interest rate until you’re more than 60 days past due.
One of the primary reasons you don’t want to hurt your credit score is that you’ll never know if you’ll have to apply for business financing in the future. If your startup is going the “seed round” through angel investors and eventually getting financing from venture capitalists, then you’ll probably not have to worry about this too much. However, if you’re going to take out any type of business loans, lenders will most definitely check your personal credit history. On top of this, even if you decide to get a business credit card, part of the qualification process will also be based on your personal credit score.
So what happens if your credit score isn’t in top notch shape? First, you should take a look at your credit report and see what’s impacting your score. There are many free credit score monitoring services out there that you can choose from. Next, if you see anything that looks odd, you should take the necessary steps to dispute any type of incorrect information. Depending on what type of item you’re trying to dispute, some items might be as simple as calling the original creditor or negotiating with the collection agency to remove the account. Lastly but least, try to pay down your debts as much as possible. Thirty percent of your score is comprised of your debt utilization, so paying down your balances can help improve your score over time.
Embarking on a startup journey is a road not taken by most individuals. It takes a lot of grit and hard work to succeed but overlooking your personal finance and credit score may hurt you in the long run. Your credit score will be used for any future financing and it may be difficult to get the loan you need if you’ve neglected it.
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