5 things I did to ensure I wouldn't go broke if my business failed
- When I was laid off from my full-time job, I no longer had a safety net while I side hustled.
- If my business failed, I didn’t want it to take my personal finances down, too.
- To protect my money, I started by prioritizing emergency savings and checking my accounts weekly.
A few months after I started a side hustle in the wedding industry, I was laid-off from my full-time job.
I remember looking in the mirror and feeling like the word risk was written all over my face. I no longer had a salary to pay my bills while I built my business on the side. If I wanted to make working for myself a real thing, I had to become a full-time entrepreneur so I could grow my customer base and audience.
I was terrified that the more time I spent figuring this out the more I’d mess up my personal finances, which were just suddenly starting to look bright and promising again. I had spent years making every financial mistake possible (from credit card debt to having no retirement plan or fund) and decided that if I was going to work on trying to turn my side hustle into a full-fledged business, I was going to have to get strict with my personal finances. If my business ended up failing, I didn’t want my money situation to be a wreck.
I had to have some tough conversations with myself and set some harsh rules in order to make my personal finances a priority. Here are the five things I did to ensure I wouldn’t go broke if my business failed.
1. Kept contributing to my emergency fund
During the time I started building my business was also around the time I started contributing my emergency fund. I didn’t have one for very long but knew that It was important (and soon found out just how important it was when I got laid off). I decided that my goal was to save up to six months of living expenses in that fund and not touch a penny of it while I was working on scaling my business.
Having this well-funded emergency savings account would allow me to lean on some of that cash in case my business failed and I needed time to figure out my next steps (whether it was more freelance work or to look for a full-time job). Knowing that I had this fund and that I was actively contributing to it — even though I was making small contributions as my business slowly began to make money — allowed me to have some peace of mind that I would be able to pay my bills and rent in case my business went under.
2. Created a separate savings account
To make sure I wasn’t taking too much money out of my personal savings account to help fund parts of my business, I decided to create a separate savings account that I’d put a couple hundred dollars a month in as a loan to my business.
If I needed to take any personal money to pay for business costs, I’d take it from that savings account only (and make note of that personal loan to pay myself back later on). But keeping money in a separate account allowed me to visualize what funds were available to me and not fall into temptation of using more of the cash in my savings account to pay for business costs. Instead, I needed to be even more strategic and calculated about how I was spending my money.
3. Stuck to a strict personal and business budget
I really wanted to make sure that I wasn’t overspending in any of my life during this time. I decided to stick to strict budgets, both for my personal finances and for any money I was taking from personal accounts and using on my budget.
I set a budget at the start of every month and accounted for my spending on a weekly basis. This helped me be aware of where my money was going and adjust as needed. I ended up spending 25% less than usual during this time as a precaution to make sure I was saving more money than usual and only spending on necessities.
4. Took on side projects and freelance jobs
Even though I was working full-time as an entrepreneur, I decided to use my free time and weekend time to work a few side projects and freelance jobs. The income these gigs provided me helped me make sure I wasn’t taking on any credit card debt and allowed me to contribute to my savings account and emergency fund. I made sure I was only carving out 5-10 hours a week for these side jobs and taking on projects that paid a decent hourly rate so I could maximize my earnings.
5. Checked in on my finances more than usual
Before becoming a full-time entrepreneur I used to look over my finances once a month and it was usually rushed or just glossed over. To ensure I knew where all my money was going and to make necessary adjustments, I started checking once a week.
It was time-consuming, but it allowed me to catch any errors and to notice how quickly I would spend at the start of the month so I could cut back toward the end of the month if needed.
All of this ensured that I wasn’t risking my personal finances when putting so much time and effort into making my business succeed.
Jen Glantz is an entrepreneur and author who writes about perfecting her finances for her business and her life.
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