Being an entrepreneur is exciting! If you find something you are truly passionate about it can be an amazing learning experience and a wonderful way to live your life. When it comes to money and entrepreneurship, it’s a case by case thing. Everyone has their own way of handling money. The key is knowing that you must handle money and to figure out how you do that best!
I have always loved money. As a kid, I had this toy called Mr. Professor and it was basically a giant calculator I would use to crunch numbers. Regularly, pass bedtime I would pretend to be asleep but I was actually under the covers punching numbers and calculating things. I have always been fond of numbers. I have learned in my many years of handling numbers and money that if you don’t have the money to pay for something don’t start using debt to access that thing. Debt should not be used unless you have the ability to make payments monthly.
Oftentimes, what happens is people get a credit card and think that equals an unlimited source of money. They start to spend and spend and spend some more. As an entrepreneur, it is easy to spend money to grow your business but you have to be conscious that if you are going to spend money that you don’t have, you also have to have a plan to pay off that debt. The interest rates that you’re paying on the monies left on the balance of your credit card every month is more than any amount of money you will make from any sort of investment, mutual fund, stock, or in a bank. That is how banks make money off of the money that you are spending.
Let’s say you buy a computer for your business that is $1,500.00 and you put it on your credit card. If you don’t have the money to pay it off in a year you are paying an additional 15% – 20% extra for that computer that you “bought” because you didn’t actually have the cash to buy it.
When using credit cards in your business:
Create a plan for how long it will take you to pay off the debt. Fees and Interest on any money left on your credit card each month get more and more expensive and can be daunting, overwhelming and increase stress in your business.
You can effectively use credit cards when growing your business if you are able to spend money that you pay off entirely each month allowing yourself to get extra time with other purchases needed for the business but not accrue insane interest rates and (depending on the credit card of choice) maybe even cash in on amenities like cashback, flier miles, etc.
Potential entrepreneurs looking to take the leap
If you are extremely passionate about something that has you excited each day there is potential there for starting a business. There are things every day that I think to myself “Oh my gosh, I wish I could create this because it would be helpful to me.” A lot of great ideas are created out of the necessity of someone who needs to use it. A great example of this is the boy’s car seat. For the first year of the boys’ lives, we had the best car seat that worked well and did everything we needed it to do. However, we did not have a car seat option after that which worked just as well. I said to myself if I could only create this car seat for kids out of the infant stage I would be a multimillionaire.
Being financially solvent is as important as the concept, idea or product you are creating as an entrepreneur. If you are not able to stay open because you’re in debt and you spend too much money then the world will not be able to appreciate the product you are trying to offer them. If we compare it to fitness, people say all the time “Oh my gosh, I work out every day and I don’t know why I am not losing weight”. Shaun’s first question is “what are you eating?” If you are eating things that are not helpful or you are drinking alcohol and diet sodas to the excess that it’s adding extra calories then you are not doing yourself any favors. You are ultimately spinning yourself in a circle. As an entrepreneur, you need to be as conscious about your finances (the money you are spending and the money you are bringing in) as you are about the passion you have for the product you are creating.