6-Step Guide to Saving Up Enough Money for Your Business
Saving money is easier than you think. We’ve all had a good laugh at that viral comment about 'skipping your daily avocado toast'—but that guy had a point.
Not familiar with the reference? Let me refresh your memory:
Australian millionaire and real estate mogul, Tim Gurner, famously said in an interview with '60 minutes': "When I was trying to buy my first home, I wasn’t buying smashed avocados for $19 and four coffees at $4 each...”
Now, we're not saying you fit into that 'Avocado Millenial' stereotype, but you do have to admit that the little pleasures in life—whatever yours may be—might just be the reason you find your wallet lighter than you'd otherwise expect.
Yes, life is meant to be lived— and enjoyed. But if you want to save up to start your own business you'll have to put certain luxuries on hold. Luckily, this is easier than you might think.
So get ready to fasten your bootstraps and take notes.
Here’s how you can save up to become an entrepreneur.
Step 1: Examine your current spending habits
Make a list of everything you spend money on in a month — we mean everything. There's no expense too small to list because we are looking for even the teeniest cash leaks which you may have barely noticed before. We're going to use this list to identify the leaks and fill any cracks.
Step 2: Analyse and Subdivide
We've all become more than familiar with the term 'essential' over the past year. Re-examine your list and honestly determine what is and isn't an essential spend.
This next line from sba.gov sums it up perfectly:
"Do you really need that $3.50 cup of coffee every morning? That adds up to $875 each year for a 50-week work schedule."
It's time to start making your own coffee at home. It's not that hard, we promise!
Step 3: Slash and slash some more
If you're really willing to do what it takes, you need to get rid of the dead weight. What expenses on your list do you keep just out of habit? Do you spend money on cabs when a bus will do just fine? Have you renewed your gym membership even though you barely went at all last year? Is your current phone plan really best-suited to your needs or do you pay extra for texts and pictures when you don’t need to? Ask yourself these types of questions about each and every item on your list and you will be able to identify ways to trim the fat in no time.
Step 4: Lower your interest rates
If you rely on a credit card, you're most likely racking up more debt than you know. The three main ways to avoid this are:
Pay your bills on time
This is absolutely essential to living debt-free. If you miss a payment, you'll be charged a late fee. If you miss two payments, your second late fee will likely be higher than your first late fee (it's a vicious cycle). Additionally, two missed payments in a row can trigger a higher penalty rate and cause a spike in your monthly finance charges.
Making only minimum payments each month
This is a sure-fire way to land yourself in some hot water. According to an article by sba.gov:
"If you have credit card debt and are making minimum payments each month, you are in for a long ride of paying an inordinate amount of dollars on interest payments when compared to the actual principal dollars. For example, if you have credit card debt of $3,000 at 17% interest and make minimum payments of $25, it will take you 126 months to pay off the original $3,000. And, you will have paid $2,241 in interest charges for a total cash outlay of $5,241."
Contact your card issuers to request a lower interest rate as soon as possible
While most interest rates are fixed, there's no harm in checking whether your providers offer a cheaper option.
We’ve talked enough about the non-essentials— now let’s talk about how you can save on your essential expenditure as well.
Step 5: Prioritize
Reorder your list in terms of priority; Example: Rent, Food, Utilities, Groceries, and so on. Ensure that the amount needed for these important items are kept aside and paid on time before spending on anything else—a ‘Do Not Touch’ pile if you will. Whatever money is left over is for the remainder of our living expenses. Keep a keen eye on how you spend this ‘left-over’ money as most of it can easily be added to your ‘Savings’ pile.
Step 6: Set up Automatic Deductions for your Savings Account
This is one of the best ways to save money. You’ve already created your ‘Do Not Touch’ pile so now you know what amount you’re left with for living expenses. To ensure that you DO NOT spend the so-called ‘leftover’ amount to splurge in celebration, set up automatic deductions that will squirrel away a fixed amount per month for your future business.
Becoming an entrepreneur is one of the most challenging — and rewarding — things you’ll ever do. A good way to make a serious commitment to this journey is by making sure you have enough resources to get you through. By following these simple steps, you will soon be well on your way to having the pool of funds you’ll need.