Have you ever had a great idea and wondered if you could make money off of it? Enough money to maybe one day quit your current, full time job?
Before you start daydreaming about creating your own, “I Quit” YouTube video, there are some things you’ll have to do before your side-hustle can become your main hustle, especially if you’re working with limited funds.
Do both: The good news is you have an income. The bad news is, it probably comes from your job, not your business. As a new entrepreneur you may have to work for both your boss and yourself until your business makes money. It can take a number of months, even years before you’re able to make your part time gig a full time endeavor. In the meantime, use the income from your J-O-B to fund your start-up. Do this by setting aside a percentage of your total income to invest in your dream.
Budget: When you first start your business, it may take a while to be profitable. This means that the money you’ll need to run it will have to come from your current source of income, most likely a job. You may already feel that your job isn’t paying enough (hence, the desire for a side-hustle). But you’ll have to find the funds anyway by beginning with a budget. Here’s how:
1) List everything you spend money on (bills, groceries, grooming, entertainment, medical, kids, transportation, everything). This is your Money List.
2) Write down how much each item on your Money List costs you monthly.
3) Add up your Money List and subtract it from your monthly take-home pay. If you have any money left over, that’s savings.
This is your basic budget (income, spending, saving). As a new business owner, it’s important that you keep a physical, monthly budget somewhere visible. Your budget can’t just consist of numbers floating around in your head. How you manage your money directly correlates to the success of your business. Work on automating your budget so that you pay bills, save, invest and spend automatically.
Save, save, save: Once you have your Money List in place, it’s time to cut down on spending. Contrary to popular belief, you can’t have it all, at least not at first. Look at your budget and make spending changes. Do you really need cable? Are there magazine subscriptions you can get rid of? Can you workout at the park and drop the gym membership?
One of the best ways to cut costs is to call your service providers and ask for a discount. Businesses like phone, cable, insurance and even energy companies will reduce your rate in an effort to keep your business. If your current company says no, switch to a new one with lower payments.
The excess money you find in your budget should go to savings and be invested into your new business. Open a free, online-only, savings account with an institution like Ally Bank and auto-transfer the money you find by cutting costs. The beauty of an online-only account is that it takes 2-5 business days for your money to transfer back to your regular bank, so you won’t be able to impulse buy with the money you’ve set aside.
Spend wisely: A typical, new-entrepreneur mistake is overspending on the business in the beginning. Many first-time business owners splurge on business cards, a logo, stationary and things that look like a business, but have nothing to do with actually making money.
The rule of thumb is this; In the very beginning, do not spend money on anything that does not directly make money. This means if you’re a baker, your money should be spent on flour, eggs, sugar and milk, not rent. The materials you buy for baking can be made into a cake and sold for a profit, a space cannot. Bake out of your home until the business makes enough money to justify renting a location.
So many new business owners run out of money before their business has a chance to grow. The best way to avoid that mistake is to only spend money on products or services that will directly make you money (at least at first).
Cut back again: Now that your side-hustle is up and running, the real decision-making begins. You’ll have to choose where or not to continue to work at both your job and your business, or to eventually take the leap into full-time entrepreneurship.
If you decide to take the leap, you’ll have to make another round of financial cuts. Being a full-time entrepreneur means that if you don’t work, you don’t eat. The best way to make your transition easier is to dramatically lower your monthly spending and to stock your savings account in anticipation of slow business months.
Some of the ways many entrepreneurs reduce their spending is by moving back home, getting a roommate, selling their car, cutting out almost and all non-essential spending etc. Taking these measures has a two-fold benefit:
1) Your business won’t have to make as much in order for you to maintain your life after you leave your job.
2) You’ll be able to divert extra funds to your business savings account which you’ll need should your business not make enough to cover your expenses.
Starting and running a business is one of the hardest, most frustrating, rewarding, and empowering things you’ll ever do. The ease of your transition into a business owner is largely based upon how well you use your money as a tool. Spend, save and invest in yourself and your business wisely. Welcome aboard, fellow entrepreneur!
Tiffany“The Budgetnista” Aliche is a speaker and passionate, award winning teacher of fun financial empowerment. Since 2008, The Budgetnista has specialized in the delivery of financial literacy education that includes seminars, workshops, curricula and trainings. Tiffany is also the bestselling author of the book, The One Week Budget .
Tiffany is the financial literacy expert for City National Bank and she and her financial advice have been featured on the TODAY show, PBS, Pix11 Morning News, News 12 New Jersey, The New York Times, ESSENCE Magazine, FORBES, PBS, The Star Ledger, Ebony Magazine, Fox Business, MSNBC, Redbook, CBS MoneyWatch, Black Enterprise, USA TODAY, as well as numerous online publications. She also blogs about personal finance, for The Huffington Post.
You can learn more about Tiffany and The Budgetnista here: thebudgetnista.com