It is a big moment in your life when you decide to set up your business. Taking the self-employment route is challenging but nowadays, more and more people are rising up to the challenge. If you also belong to this lot then you must know that you have a big financial responsibility on your shoulders apart from the huge entrepreneurial challenge. A business is different from a regular job as you will not be getting a fixed pay cheque at the end of each month. Hence, you need to get proactive about your finances. You need to adopt a customized financial management strategy as your income will fluctuate in the initial years and you will not have the income security that comes with regular jobs. So, here are some helpful tips to help you overcome the challenges and make the most of your career.
Adopt a lean budget
With the assurance of definite monthly income no longer in the scenario, you need to get extra serious about budgeting. For entrepreneurs, it is best to have a lean budget that takes care of the essential monthly expenses and helps you focus on your business as much as possible. Your budget should be extremely to-the-point and include basic survival expenses like grocery, rent, electricity bills, and the like. These essential expenses also include taxes, insurance cost and the necessary investments. While making the budget, you should make sure that there is least or no space for discretionary expenses and you should scan every expense minutely. Till the time revenues start pouring in, you should handle your budget with an iron hand. Also, you should have a separate budget for your business that will take care of business expense and income. It will help you achieve your business goals and revenues. Keeping personal and professional budget separate will give you better control over both the aspects of your life.
Save for the rainy day
When you are self-employed or doing your own business, there is no guarantee of fixed income at the end of each month. Cash flow may dry up or shrink at any time without prior information and in such a situation, you cannot afford to be unprepared. So, it is important that you build an emergency fund alongside and keep money in reserve. Such a fund will keep you on your feet during the dry phases. You can manage your essential expenses while looking for clients and new business. So, you should start building a corpus right from the time you start earning revenues. Also, you should take care that the corpus is such that it can last you for months. To be on the safer side, you should aim for a fund that can take care of your needs for more than six months. In fact, the higher the uncertainty in your field, the higher should be your fund amount. Also, you should be strict about using it and also disciplined about replenishing it. You should make sure to fill it once you start earning revenues again.
Get security cover
Being an entrepreneur means no security cover that people in regular jobs receive from their employers such as provident fund, gratuity, health insurance and other retirement benefits which are essential to lead a comfortable life. Therefore, you have to arrange it yourself. All you have to do is figure out your retirement goals, health and life cover needs and make provisions for the same in your budget. The earlier you figure it out and the earlier you start planning for the same, the better it is for your financial health. You can choose public provident fund, national pension scheme, health insurance policy scheme and life insurance policy to secure yourself. It will safeguard you against health and life emergencies which can rear their head anytime. If you have adequate cover, you will be able to fight back and you can also focus better on your business.
So, all you entrepreneurs out there, take charge of the situation. Do not delay planning at any cost. Get up on your feet and get going with your financial planning. It is the best thing that you will do for yourself as well as your business.
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