Are you worth the risk? 11 tips on becoming financially stable to launch your company
If you’re anything like me, you are just now thinking about financial security in your early 30s, but have goals to meet an amazing partner, get married, buy a house, have children, buy a car, and launch your own business — all at the same time! OK, maybe you’re not as crazy as I am, but I’m sure you can relate to the desire to become financially independent. As soon as I decided to launch a global social enterprise, I had to make steps toward financial security. Luckily, I have had access to amazing financial mentors, role model parents, and educational resources online and in print. However, not everyone has the time to do extensive research, so I've provided some tips to get you started.
First, you need to assess the level of risk you are willing to take to grow your money, save, and invest in your company. Second, set some achievable short term goals. Also, set some harder, long-term goals. Work backwards from those goals to identify the steps you need to take to achieve those goals. Third, talk to A LOT of people about how they reached financial independence and what tools they use to help them manage their finances.
Here are some steps I took to gain financial security:
1. Complete a financial spending assessment worksheet.
Check this one out by Smart About Money.
2. Set (realistic) limits on your daily, weekly, and monthly spending.
I set a spending limit of $100 per month on new clothes, but I rarely actually spend that much. I use credit cards that accumulate points to build in monthly discounts for clothes spending at my favorite retail store. Also, I love to eat out, so I allocate more money toward that indulgence each month.
3. Do NOT sign up for a bunch of credit cards.
I only have two credit cards, one for clothes points and the other for travel points. I maintain a zero balance on each card every month and treat them like debit rather than credit cards. This means that I only spend what I have cash for and do not purchase items that I cannot pay off at the end of the month.
4. Find extra cash around the house.
No…not loose change, although that would be nice. Identify ways you can sell items that you no longer use, donate items to charity for tax write-offs, or pick up a hobby/talent that can generate additional income, etc.
5. Start a retirement plan NOW.
I allocate a certain amount of my paycheck to retirement savings before it even hits my checking account.
6. Open a money market account or a CD (certificate of deposit) account rather than a traditional savings or checking account. These types of accounts invest your money in low-risk stocks and mutual funds that earn moderate interest — better than a traditional savings account, at least.
7. Invest in stock. Stock investment is not just for the wealthy anymore! Many people have told me they are afraid to invest in stock, either because they see businesses as untrustworthy or they are overwhelmed with trying to understand the investment process. To address these concerns, you can invest in ethical businesses. You can also use low-risk, low-cost trading apps like Robinhood, Betterment, and Acorns* to get your “feet wet.” Even when the economy is not as stable, people who invest in stock still make money!
8. Join an investment club. If you don’t have a lot of money upfront for large investments, grow your money by adding it to a larger pot with friends. These clubs often invest in businesses that will give you a long-term return on investment.
9. Itemize and deduct EVERYTHING you possibly can on your taxes. As someone interested in being self-employed, it is absolutely imperative that you keep receipts, document every purchase, trip, mileage spent, square footage of your home/office, donation, and volunteer time. Consider maintaining an enrollment in at least one course a year to access lifetime education tax credits. The course may also help improve your skills!
10. Invest small lump sums to support growing businesses. Many small businesses who are trying to launch need small loans to help them get off the ground. Contributing $200 with an agreement that you’ll get $300 in return once they generate some revenue or book their first contract is a quick way to earn some cash. Of course, there is risk because they may not pay you back, so be careful and do your research!
11. Watch YouTube videos, read blogs, and download financial market apps to stay up to date on the latest economic news and learn the basics about ways to grow your money from the masters.
*Disclaimers: The advice I provide in this blog post is based on my personal experience and does not guarantee anyone will make substantial amounts of money. I did not get paid by any of the companies mentioned in this blog post to suggest their services.