Making enough money to sustain your family and your business is hard. No way around it; it’s a simple fact of life. In today’s ever-fragile economy, practically nobody is safe from the effects of coronavirus on the world economy, and jobs are more at risk than they have been since the 2008 financial crash. Due to this fact, many business owners are paring down and becoming more careful, more frugal, and playing it safe. While playing it safe is sometimes necessary to achieve your goals and stay financially risk-free, making your money work for you takes guts, and isn’t for the safe-players.
What Does ‘Make Your Money Work For You’ Mean?
Making your money work for you means investing it. Money invested in assets means it can expand as the asset accumulates value. Take your home, for example. When you bought your home, it was worth what you paid for it. In ten years’ time, with good maintenance and the occasional renovation, it will probably be worth more. You have invested money in an asset which has then grown in value, and therefore the money you earn from selling the house will turn a profit. This is called return on investment or ROI. Your wealth has built up over time, simply by being invested in a valuable asset.
How Do I Invest If I’ve Never Done It?
Your home is only one example of a plethora of investment opportunities out there. Investment in assets doesn’t stop at homeownership; assets can also include land, cars, jewellery, or shares in a company. Many people own shares in the company they work for or have strategically invested in small businesses which are on the rise. Take Netflix, for example: if you had invested $990 in Netflix shares when it went public in 2002, you would now be sitting on $340,956. You didn’t go out and graft for that money, it simply increased over time, as the value of the company it is tied up in began to rise.
Of course, it’s not usually that simple. Buying shares or investing in cryptocurrency such as bitcoin, for example, is a risk. You are not guaranteed to get any return on investment, and if the business fails, you will lose money. That is why those new to the business should take advice from companies who use safe channels, such as Forex Trading, to invest. As well as this, it is important to start small, building up your investments once you gain experience and knowledge in your field of investment.
How Do I Get Paid From Investments?
This depends on the type of investment you have made. If your home is your investment, you will be paid either by selling it or letting it out to a tenant. If you buy shares in a company, you will be paid each year in dividends. Stock and cryptocurrency investments fluctuate, and depend on the channel you invest through.
Making your money work for you is an incredible way to sustain your income and help you achieve your financial goals!
So, you’re a business owner looking to make some smart choices with your money.
Don’t worry too much about it. We’re all in this position. Running a business can be challenging when you’re not being sensible with how you manage your money.
To make the right decisions, you need some good tips. Luckily, we’ve got just the ones for you. Let’s take a look at some of the best options out there.
Make a Business Budget
The very first trick is just to budget. This may seem quite simple, it may even seem quite obvious, but the number of people that do not budget when they need to is astronomical.
At a very fundamental level, you need to have a business budget. This is a budget where you plan the business expenses, not just the cost of living. It’s probably a good idea to treat your business as a completely separate entity to your other finances because there will be different rules and regulations in place.
Assess Needs and Wants
When looking at how best to spend money, it is probably important to sit down and look at your needs and your wants.
See, every purchase can be broken up into two different categories – a need and a want. It’s all about not getting the two mixed up and giving yourself the breathing room that you need. It’s important to make sure that you start to get the best possible options, and decide if you need or want something – it’ll make a big difference in the long run.
Find the Creative Solution to Problems
It’s pretty important to make sure that you try and find a creative solution to problems where you can. It can be pretty difficult sometimes to try and justify making a big purchase or spending a lot of money.
This is where it really does pay to try and find a creative solution to some of your problems. It’s all about how you can come up with the ideas and options which are going to be cost-effective and solve the issue.
For example, fixing a computer might be as simple as going to get a component repaired instead of buying a new one outright. It’s this kind of sensible thinking which will give you the best kind of options for the future. Get creative!
In conclusion, there’s a lot of different things that you can do to make sure that you manage your money a little better as a business owner. Our first instinct is often to spend, which is crazy. If you’re going to be sensible and pragmatic about things, then it’s easy to get yourself the type of experience that you need. If you’re clever about things, then you can probably come up with the best options possible. If you think before you make a purchase, and budget right, it’s possible to manage your money a lot better as a business. Not every problem can be solved in the most efficient way by simply throwing cash at it!
Keeping a close eye on costs is essential to keep your business healthy. Spiralling costs are sometimes out of your control, as they can be dependent on external factors. However, taking charge of the expenses that you can control is vital for the long term success of your company.
Many businesses get into financial difficulty because their outgoings have not been monitored. Taking a proactive approach will ensure that every penny is accounted for and that you have a clear idea of how further savings could be made.
Are you getting the best deals from your suppliers? If not, it may be time to renegotiate your agreements with them or adapt your orders to make them more cost-effective. Don’t compromise on quality in your quest to save money; it is essential to achieve a balance between quality and value to maintain the quality of your products. It is helpful to use suppliers that specialise in a specific product, as they often offer both quality and value. companies such as Gas Oil Drums specialise in gas oil which means that your business can benefit from their professional service, quality, and value.
It is beneficial to nurture relationships with your suppliers. Make sure that you pay supplier invoices on time to maintain your relationship, and also prevent your business from incurring late payment penalties.
Re-Evaluate Your Premises
The cost of renting and maintaining business premises is one of the most significant expenses faced by companies. Make sure that your building provides everything that you need to keep your business running as it should. There is no point in paying a significant amount of money each month for a building that no longer works for you.
If you have lots of space in the building that you do not use, then it may be worth moving to smaller premises. Paying for square footage that you don’t use is a drain on your business, as you will be paying more in rent, heating, and other running costs.
Re-locating your business can sometimes be a useful way to cut costs. Moving to a building that is closer to main transport routes can lessen fuel costs and reduce the mileage travelled by company vehicles.
Reducing waste in your business is not only good for the environment, but it also makes good business sense too. Encouraging staff to only print when they need to is excellent for reducing the amount of paper, ink, and toner used by your business.
Re-examining your manufacturing processes can also help you to spot areas where waste can be reduced. Are your employees getting the most out of the materials provided? Is the equipment being turned off when it is not in use to save electricity?
There’s no need to wait until cash flow issues hit your business before you start to look at ways of reducing waste and cutting costs. Making cost assessments a regular activity will help to save you far more in the long term.
If you are someone who dreads looking at the online banking balance or your bank statement, then chances are it is largely due to the fact that you don’t feel as though you have the tightest control over money.
You’re probably not alone though, because many people also worry about their income and outgoings constantly, and often it seems that cash flow is always moving in the wrong direction.
There are simple ways that you can fix your financial situation, and very often, with a bit of work you can start to see the back of nagging money worries. If you have debts too, eventually, you may also see the light at the end of the tunnel for these by putting some simple practices in place.
Go Through Your Finances
Often, when we ignore our finances, we end out paying for things that we don’t even need. Because we are not paying attention to our money, we don’t notice regular bills going up, and we miss out on cancelling services we no longer need.
Go through your bank statement on online banking with a fine-tooth comb. Work out what you have to pay out, and look for things that are not essential.
Some services such as insurance products, or energy and phone bills may be cheaper elsewhere if you switch to a different provider. Start looking at contracts for services that you are using, and see if there is anything that can be cancelled.
Often, by switching to a new supplier on everything that you possibly can, you will free up quite a bit of money.
Consolidate Your Debts
If you have multiple loans and credit cards, you may find that your debt never really goes down. Sometimes payments will only cover the interest, and the overall balance never drops.
By consolidating your debts into one loan, you will only have one set of interest to pay and one loan. This will make things easier to manage, save you money, and set a definite end date for you to have cleared your debt by.
If you have a poor financial history, you may want to look at guarantor loans for bad credit as a way of managing your debt.
Be Strict On Spending
By creating a budget based on what you have to spend each month after bills, rent, mortgage, and loan repayments have all gone will mean that you can be stricter with yourself in terms of spending money.
Work out a budget for important areas such as food and transport first. Try and keep your weekly food shop within that budget. Avoid expensive branded foods and eating takeout, and focus on homecooked meals that are more cost-effective.
If you have any additional money left each month, make sure that you only spend within this limit. If you cannot afford to buy something, be strict with yourself and save up for it. Avoid impulse buys that push you back into unmanageable financial situations.
The best things in life are free, of course, but there are moments when life, cannot be free! Kids are expensive, from the moment they are born, they cost you money. Here’s the thing: children are pricey, and they will cost you money right up until your own death. That’s not a bad thing; it just means that preparation is key from day one. It’s only when you decide to have children that you decide to look a bit deeper into the future and figure out what you can offer. Not only will putting money to one side give them a chance to plan their future, but you’re also going to provide them with the right support along the way.
There are many ways that you can give your children the best possible future, and that starts with sitting with companies like Keoghs Solicitors. They will be able to take you through estate planning and writing a will, which is a must when you have children. Below, we’ve got five ways you can look after your children in the future ahead.
Setting Up Bank Accounts
Children may not use their bank accounts in the same way that you do, but opening an account for them is so important. Doing it when they’re young will give time for interest to build and as they get older, they’ll be able to take over the account. You can develop good savings and strictly speaking, there will be no tax to pay on those accounts.
A Junior ISA enables your child to take over the account at the age of 16, though there are restrictions on money withdrawal until 18. They are a tax-free savings account and they’re specifically designed for under-18s. You can get a cash ISA set up straight away, and when money is invested, tax is not paid on capital growth. If you’re worried that your child will take control of this account and end up splurging the money, then you can still keep tabs on it with limits of withdrawal.
Writing A Will
Writing a will with Keoghs Solicitors is so much more than jotting down who gets the children in the event that you die prematurely. It’s about detailing where you want your money and your estate to be. You can also talk about who is going to be in charge of ensuring that your wishes are adhered to. A will can secure your children’s future, as you haven’t left it up to the government to decide what happens with their childhood home and all of your money and bonds. It’s a good investment, and it gives you peace of mind, too.
By having a life insurance policy in place, you cover an amount to keep your children secure and solvent, paying off the mortgage and their education at the same time. Life insurance is going to give you peace of mind that you have looked after your children even when you’re not here and it’s going to be a smart move in securing their future. Life insurance is going to secure your own future as well as your children’s, so it’s a smart decision either way.
An Education Fund
Wherever you are in the world, education costs money. Some universities won’t charge massive fees for tuition, but your children still need help with living costs. The best thing that you can do is set up an education fund. Some people may use this for tuition, but others can pay for their children to live comfortably and have all of the equipment that they need for success. Education is going to cost, and if you can alleviate the pressure on your teenager getting their own job, then it makes sense to take it easy on them as much as possible. Your child can then grow into an adult with options and choices when it comes to their education, and this is one of the best gifts you can give them.
You want to give your kids the best possible future, and putting aside even a small amount of money can make a big difference to them. Over time, this will build up and be something to boast about knowing that you secured their future from the moment they were born. Children need support, and you can ensure that the support that you give lives on long after you do when you go through these five tips and get them into action as soon as possible.
Running a business can be stressful, and one area that often causes us anxiety and sleepless nights is the financial side. Entrepreneurs have the freedom that comes with not being employed, but there is no financial security of a payslip each month, paid holiday and time off when sick. Here are four ways to put that stress monster to sleep and avoid business money worries.
This is the basic one; most people have some form of indemnity insurance in case a customer raises a serious complaint, but what about you? Loss of earnings from sickness can be really unbalanced, and you need to be mitigated against this happening. Life insurance and critical illness is one thing, but what if you have a smaller medical issue that stops you working? Look into the different policies and if needs be seek advice from a financial advisor. There are ways to replace monthly income if the worst happens and you need to stop working for a while.
Book recommendation You Are a Badass at Making Money: Master the Mindset of Wealth
Know Your Books
An accountant is great and worth their weight in gold, but you need to understand what is going on. Knowing your cash flow as it comes and goes will help you feel more in control of your financial status. So, don’t just blindly hand things over, ask for monthly reports, understand when money arrives and what invoices you have to pay. This gives you the opportunity to plan for drier spells and make arrangements with creditors if needed, which in turn can help you save penalties if you need to make a payment late occasionally. People prefer and open dialogue to staunch silence and no money coming in, so make sure you act as you would wish to be treated.
Book recommendation Profit First Transform Your Business from a Cash-Eating Monster to a Money-Making Machine
Does your business really need an external premise? Many people save thousands by working from home. If you have a virtual presence and rarely meet your clients in person having an office space could well be a waste. Coffee shop meetings are perfectly normal, and no one will question your reasons. Working from home also saves on the temptation to go and buy lunch or expensive takeaway coffees which can soon rack up the spend. It may only be little, but everything you can save will help. Consider making your own website or trading services with a web designer to get a better deal. The only limit to saving money is your imagination and creativity.
Consider a Side Gig
There are lots of ways to bring in a little more cash in a passive way, or even in an active way, and we call these side gigs. With an entrepreneurial brain, you are likely to be able to turn your hand to more than one thing. Passive solutions include renting your driveway as parking, pet sitting or selling on eBay. There are plenty of others, so you are bound to be able to find something that appeals, and it can be useful to have a change and focus on something different for a while.
Running a small business can be a hectic time with many variables to think about from products to sales to marketing, and if you are doing your own accounting on top of that, it can be all too easy for mistakes to be made.
Those who are new to business might think they can save money by doing all of their own financial management but accounting is a skill in itself and trying to take on too much when you don’t know what you are doing, can cause all kinds of problems.
Some mistakes can be small; others can be the difference between your business succeeding or failing. Ongoing mistaken accounting practices can skew your figures and create significant issues for your company.
Here are some of the most common accounting mistakes which small businesses make so you can avoid making them as well:
Making assumptions about cash flow
Just because you’ve landed a new client, you can’t make assumptions that the money you have planned will actually come in on time. They might be late payers, or the project might go on longer than first thought.
It’s good to have an idea of what’s coming in and what’s going out in your business, but you shouldn’t assume what your cash flow is going to be based on proposed projects and potential new work.
As well as knowing what money is coming in from clients, you need to know what is going out, and the best way to do this is to set budgets in place. Have a budget for advertising and marketing and have a budget for all project costs.
That way you will know exactly what money is due to go out of your business account every month and why, and you won’t be tempted to spend ad-hoc on special offers for advertising or one-off project costs. Setting budgets helps to keep you on track.
Leaving book keeping to the last minute
It’s vital to keep accurate records of all the money coming into and leaving your business account, and the only way to do this is to keep on top of your book keeping. You need to record every business transaction accurately.
If you leave it all to the last minute you might find receipts missing, transactions recorded in the wrong category and your books will be a mess. The key to business success is making sure all of the financial records are up-to-date and correct.
Not understanding employees vs contractors
You need to understand the difference between employing people in your business as employees and using contractors. There are different taxes and financial requirements so make sure you are very clear on the law and very clear on what kind of contracts you are offering.
Trying to do all of your finances yourself
While it’s true that you will have to pay for an accountant to support your business finances, trying to do all of the accounting by yourself is one of the most common mistakes small business owners make.
Even if your business is small and the finance is simple, as you grow and expand it will become more complicated and more time-consuming to manage all of the finances by yourself. You don’t want to be up into the early hours balancing the books so let someone else do it for you. Accounting services offered by companies like Crunch allows small businesses to simplify their accounting needs through their unique approach.
Using cash to buy a set of stamps to post out invoices is still a business transaction, no matter how small and you need to make sure you record every single transaction accurately. It’s all too easy to forget some of these smaller transactions and overlook them.
But if you forget a number of smaller transactions in your books, it will all add up, and your business accounts will quickly be affected and become inaccurate and potentially misleading records of how much money you are actually spending.
Not making sure your books match your bank account
While it’s important to keep records of all of your income and outgoings, it’s also vital to check your records against what is actually on your bank statement. It’s all too easy to overlook small expenses that you might forget about.
You need to make sure your accounting records match with every transaction that shows up on your business bank account so that you have a very clear and accurate picture of your actual real-time business finance.
If you employ a book keeper to help you then you need to tell them everything that goes on within your business and you need to keep records of all transactions and copies of all receipts to give to them at least every month to make sure all the transactions reconcile, so your books always match your bank account.
Cheryl Davis Freelance Writer
Business building is a difficult task at the best of times. Factor in being full time parents and the business only being a startup and you’ve got your work cut out for you. However, it’s also a very costly endeavour if you’re not properly prepared to do so. Cutting costs for your business is difficult, but not impossible. We’re going to be taking a look at three different ways that you can effectively cut back what you spend and not have to worry quite so much.
Use Social Media Where You Can
When building a business, who wouldn’t want to take advantage of free marketing? That’s where social media comes into play pretty effectively. Often one of the best tools for entrepreneurs, social media offers you a wealth of resources for basically no cost. Facebook, Twitter, Instagram. These all offer you a unique way of cutting costs without compromising on marketing and reach.
As parents, you’ve probably had to improvise a situation before. It’s unfortunately not a guaranteed thing that every event will go according to plan. Therefore, a lot of parents will be able to adapt and be creative. This skill set can actually help you to cut down on costs. By getting creative with your business, you can save a lot of money. For example, why spend money on accounting software to track finances when you can work a spreadsheet with the correct know how? It’s little things like that which will really help. You’ll be saving money and also demonstrating a unique and creative approach to problems, which will help you during the life of your business.
When you’re trying to cut costs, why not ask other people to do it for you? Crowdfunding is a great way for people to save money on the building of their business. It means that someone else is funding your business because they like the idea of the services and goods that you offer. They’ll often be some of your best customers as well because they’ve seen your idea from the very beginning and support your way of doing things. It’s definitely a good way to reduce your expenses, and can even help you to find entire portions of your business without paying a penny.
Overall, these are three of the best ways for startups to cut costs. It’s not always easy to do, but it is highly recommended because you don’t want to spend masses to get started. You won’t be making any kind of profit until you’re generating more than the startup costs and more than the running costs. Therefore, it’s best to keep these kinds of costs as low as possible. Otherwise, you’ll find that you’re not making enough money to get by, and this can be dangerous. It’s important to try and bring down all of the different costs for your business, and this can be accomplished in a variety of different ways. You just have to stay calm and figure out what’s best for you.
For some of us, money isn’t something that comes easily. This is particularly true when you have a family to care for. A common misconception when you own your own business is that you are going to be wealthy. However, this isn’t always true, particularly during those early days.
This means that parentpreneurs, in particular, have to work hard to ensure that they look after their money. But how can they do this? How can a parentpreneur ensure that they focus on saving money?
Have an accountant or use accounting software
There are so many business owners out there that decide to save money by doing their own finances. This may work for some of them, but for others, there needs to be some professional support in the process. If you are not great with money or have no idea on where to start with your business finances, then you need to invest in an accountant or find appropriate accountancy software. Both of these things can have a huge positive impact on your business finances and make things easier for you too.
Keep your business and personal finance separate
One of the worst things that can happen for a parentpreneur is for their business and personal finances to blur together. During the early days, it may seem easier to have one account for everything, but in the long-term, this isn’t a good approach. It makes much more sense to leave things separate from the beginning so that you can see how your business is growing.
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Focus on paying off debt
Debt is something that many of us have, and it can have a huge impact on where we stand financially. This means that one thing that you should always focus on when you run your own business and bring in profit is paying off your debt. It may seem like an obvious thing to do, but you would be surprised how much it can help you on a month to month basis, simply making an effort to bust some of that debt that you may owe.
Save and create an emergency fund
When you make a profit in your business, it can be all too tempting to spend it. However, you may find that next month you are not so lucky. This means that an important approach for any parentpreneur to take is to save money as and when they can. Think of it as creating an emergency fund which will come in useful if anything was to go wrong and you will feel much better about putting money away.
Of course, from time to time everyone deserves a reward for working so hard, which means that you can spend out on a treat for you and your family. Why not save for a big day out? Or perhaps a small break somewhere? It doesn’t have to be a grand gesture; in fact, you are likely to find that your family truly appreciate simply spending some time with you away from your work!
*Affiliate links are included, this means I will receive a commission for products you purchase through my links, at no additional charge to you. All of the products I recommend are things I have used myself and love.
Starting a business is hard work and comes with a lot of risks. You need to create a product or services that prospective customers want, you need to find the right team that will complement your management style, and you need to stay on top of your finances. With all the possible pitfalls. No-one is an instant expert in business. Chances are, no matter how much you think you know, you could make some costly financial mistakes along the way.
Of course, everyone makes mistakes, that is how we learn and grow, but if you can minimise the mistakes that you make, then you can try and make sure that your start-up business has the success that it deserves.
We have put together three financial mistakes start-ups should avoid.
Not understanding the market
Market research should be a substantial part of the foundation of any startup. Not completely understanding your marketplace can prove detrimental to your business. If you don’t correctly understand your market, you may miss-pricing your products and services. Who is your customer, what need do your products and services fulfil, what do you have to offer, who is your competition, what differentiates your offering, what is your unique selling point why should customers buy from you? Without a good grasp of the market you plan to break into, you will likely make poor business projections.
Doing your own accounts
Knowing the difference between what you do best and what you do each day because the task “needs to get done.” Wasting time with a task that is not on your highest skill set is a misuse of your time and, your money. If you don’t have strong skills in financials, then recruit an accountant or retain one on contract to do your accounts and account to provide them to you in an easy-to-understand format.
Every business should keep detailed records of expenses and transactions, start-ups often overlook the importance of bookkeeping, but they are invariably reminded of its significance when the taxman comes to collect his dues. Also not keeping track of expenses also results in tax reliefs going unclaimed.
Ensure you maintain separate bank accounts for business and personal finances. You can get a 30-day free trial with FreshBooks small business accounting software here
Recruiting employees is exciting, to keep your costs as low as possible, you need to consider ways to save money on staffing. You might have some busy months, followed by a slow quarter. When starting up recruiting too many employees can have financial and psychological cost to your business.
As you start to build your team, look for people who have work experience of working in a start-up business. A good startup employee needs to have a specific mindset that isn’t often found in traditional companies. They need to be prepared to possibly work quickly and for long hours. And they need to be willing to take on responsibilities outside of their defined job description.
It good practice to set financial goals as it’s a way to measure how well you expect your business to be doing giving yourself a framework in which to operate and make important business growth decisions.
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