Saving for Success
As an aspiring entrepreneur, you are building something, going all in on efforts that will allow you to truly make it. The end goal will look different for everyone but for most of us it involves being successful, financially independent and totally free to live and work on our own terms.
Regardless though of if you are aspiring or already successful, the key to sustaining your gains and transforming your riches into wealth is saving. If you have already made a great deal of profit from your ventures, but haven’t started saving correctly then you have likely seen your spending skyrocket, while your financial obligations only seem to grow.
This is where most people living in the modern economy find themselves if they are fortunate enough to live in the western world. People with lots of money and those with less, more similar than they are different due to their inability to save. The term rat race was coined many years ago and for many, that is just what it is: a constant battle to stay afloat, make ends meet, and keep up with the Joneses.
To save for success, you have to make saving a priority. That means trimming the fat and getting real about spending. Build it and make it real before splurging. As much as you think you need to go on a spending spree with your new found riches, you really would be better served going on an investment retreat or a seminar around how to maximize return on investments (ROIs)
Starting a business is a huge undertaking and you need to do everything you can to reduce costs. Build your dream and make it real, i.e. sustainable before you shift your focus towards celebrating for all your hard work in the form of huge, new, cash depleting expenses.
If you want to save your money, get savvy about it. Make it a priority. You don’t want to be just another person stuck in the endless rat race, struggling to keep up. If you are making serious money but still find yourself in debt, you need to get a handle on that as soon as possible. It is very challenging to grow wealth when you are in debt.
The first step to saving for success is to make saving a priority.
Business and Personal Accounting: Separate But Equal
Entrepreneurs often fall into the trap of thinking that because they are founders and creators that they are their businesses. In the day and age of the internet guru and personal branding maybe it is easier for this to look, smell and even feel mostly true. Financially speaking though, it is very different and the reason is simple. You cannot run a successful business the same way you manage your own finances.
As an individual, you might make certain choices such as buying gifts for loved ones, taking destination getaways, or purchasing vacation homes. These choices are perfectly acceptable however they conflict with what might be best for your business.
This is why it is essential that you separate your personal and business accounting but realize the importance of each of these for plotting your financial future. Money made from business should go back into the business. Without the separation, it will be very easy to dip into the money your business makes to fulfill unnecessary personal benefits.
As tough as it might sound, even if your business is making a ton of money, it might be smart to give yourself payroll just like all the rest of your employees to help you further define the line between you the individual and the business you are seeking to lead. When you receive a fixed paycheck, you can account accordingly without dipping into business profits to fuel personal benefits.
What is best for the business may not be best for you and vice versa. Keeping things separate offers both entities the best opportunity to coexist. Though it might seem like separating finances adds more for you to worry about, once you have your new system up and running it will save you time AND money.
The second step to saving for success is keeping adequate financial records at all times.
Live by the Budget
The more you buy things simply because you can, the faster you will watch your savings erode. If you keep buying products and services “just because”, you might never stop, your purchases will just grow larger and larger and if you haven’t been savvy when your success dries up, say goodbye to all those ridiculous things you thought you wanted.
Look, we all want to enjoy the money we make but some of us are better at moderating spending than others. If you are good at saving and very successful then you already live by a budget. If saving has been a struggle, you need to start to get tough about prioritizing expenditures and strict about avoiding impulse buys.
If you plan your purchases strategically, you control runaway spending. If you are the type who just goes on massive emotional spending sprees, you really need to control that if you truly hope to build wealth. Simply buying because you can or worse because you feel like it, is not the way to grow your savings. It’s the surest way to deplete them.
There are millions of discounts, coupons and freebies out there. Seek them out and try to reduce your actual spending on purchases wherever possible. You can often get the things you want for less if you are just willing to be savvy instead of impulsive with that trigger finger.
Your budget is your roadmap to savings. Use it or lose it. The choice is yours.
The third rule of saving for success is maintaining strict reliance on a short, medium and long-term budget.
Expand at Your Own Risk
Real Estate is an extremely attractive investment to nearly anyone who is starting to make money. It is extremely easy to imagine that you suddenly deserve a fancy corner office or new luxury apartment the moment you can afford them. Expand at your own risk though. Real estate investments should be thought out carefully and may not support your long-term sales goals.
If you are thinking about buying a new piece of real estate simply because you want to show off and not because it will actually help your business to be more profitable, you are missing the mark when it comes to saving for success.
You can always scale up, but if you spend too much of your business’s cash on hand to buy real estate too soon, you are not hedging bets in your favor. Instead, work with what you have and take a good hard look at the real estate market vs your business’ financials.
If your company expands organically, naturally taking on better and more talented human capital, your technological and space requirements might change. Expansion can be wonderful. Just make sure it matches your goals.
The fourth rule of saving for success is making business real estate investments only if they strategically support growth.
Guard the Castle
In every successful business, there are key elements of success which if removed from the equation, the entire future becomes uncertain. A tech firm, for instance, might revolve around its core engineer and technological mastermind. This individual might be capable of doing things that no one else in the world can do. Even if his or her talents are less specialized, it might take time and money to try to replace them in the event of a catastrophic accident or other unplanned situation outside of your business’ control. One of the best ways to protect your investment is to purchase key person insurance.
Key person insurance is a great choice for anyone who represents just that: a key role within your company which would be exceptionally hard to replace. As the business owner, founder or creator, it is very likely you will fall into this category yourself. This policy will help your business to stay afloat should you suddenly become ill or otherwise unable to perform your duties.
Key person insurance is often underlooked by young companies and those operating in a DIY startup type approach. It should not be however because things happen and without a policy of this kind the entire business could go under if you lose key staff at the wrong time.
The fifth rule of saving for success is protecting the assets and resources you need to continue making money in the future.
Legitimate and Automate Operations
The less time you put towards thinking about how to save money or make ends meet, the easier it is for your money to actually accumulate and grow. Today there are a million and one ways to legitimate your business practices. What I mean by this is to create an organizational culture and operational integrity within your brand. These are fancy terms which describe that everyone in your business knows how to handle policies in the same ways and with the same attention to detail.
The more legitimate your operations are, the easier it will be to turn your focus into fine-tuning your marketing, sales, and customer relations approaches. Additionally, when operations run smoothly in all areas of your business, it is easier for you to capture the right data as well as picture of your financial past, present and future.
As your business has more and more legitimate practices, you will be able to automate many operations related to financial activity. I do not recommend getting into this until you already have a clear sense of what and why things are happening with your financial backend. Once you have a good handle on the in and outflows of cash, however, automation can really help you to ratchet up your saving.
When the money you take in, gets automatically directed to investment accounts, savings accounts and creditors, your money works more easily for you. Not only will you never miss a payment again, you will never decide to opt out of saving. Set it and forget it. When you automate your saving, you don’t have to worry about when or if it is taking place.
The sixth rule of saving is to legitimate operations and automate savings practices as much as possible.
Invest for Success
Compound interest is pretty special. When compounding is involved, even small but consistent investments can very quickly grow into wealth. You don’t need to wait to invest, though you should be cautious about getting into any ventures which could unnecessarily threaten your ability to gain a return. That means thinking of small but sure bets might be better than betting the farm hoping for a huge return.
Even your small change can be invested in ways that guarantee returns. Check out something like Acorns for a neat way to invest spare change for purchases for instance. The app will round up your purchases and use the change for investments. You can literally start putting your chance to work for you.
There are literally millions of ways to invest for success but the key takeaway is to remember that while risky investments might seem sexy and cool, wealth is often built is very boring yet reliable ways. If you aren’t making savvy and smart investments on the regular, you ought to consider making your money work for you.
The seventh rule of saving for success is making your money work for you in the form of proven and reliable investments.
Saving for Life
Learning how to save is definitely a lifelong aspiration.
The better you get, the more complex your approaches can be.
In the beginning though, just consistently applying the previously discussed 7 rules can take you from a position of barely staying afloat to one of sailing blissfully on waves of wealth.
Don’t put it off until tomorrow.
Start getting serious about saving today.
Save for success, save for life!