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Ask the Entrepreneurs: 12 Ways to Shore Up Your Company Finances

Ask the Entrepreneurs: 12 Ways to Shore Up Your Company Finances

Ask The Entrepreneurs is a regular series where members of those involved in the Young Entrepreneur Council are asked a single question that aims to help Lifehack readers level up their own lives, whether in a area of management, communication, business or life in general. Here’s the question posed in this edition of Ask The Entrepreneurs:

What is one financial resolution that all aspiring entrepreneurs should make for themselves in 2013?

1. Track Your Monthly Income and Expenses

Nathalie Lussier

    This might seem a little too basic, but if you’re not doing at least some bookkeeping on a regular basis, you don’t have your pulse on your business’ numbers. Being able to look at how much money came in and went out in one month is crucial to any startup or aspiring entrepreneur. Even if you’re not bringing much in, you need to know that.

    Nathalie Lussier, The Website Checkup Tool

    2. Increase Your Rate of Savings

    Lawrence Watkins

      Becoming an entrepreneur can be a scary proposition, and one factor that keeps many people from making that leap is finances. If you’re living paycheck to paycheck, then it can be hard to make those tough decisions that may be rough in the short term, but very beneficial in the long term. Once you answer how you’re going to eat and where your’e going to live, you can then focus on your business.

      Lawrence Watkins, Great Black Speakers

      3. Can You Really Live on Ramen?

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      Erik Severinghaus

        It’s easy to assume that if you quit the high-paying day job, your expenses will decline in tandem with your income. In reality, that’s a lot harder after you’re used to nicer meals, vacation travel, etc.

        Before you quit your job, figure out what you can really live on for two months and test your ability to stick to that budget. It’s a great way to see if you’ll be happy living on ramen noodles.

        Erik Severinghaus, SimpleRelevance

        4. Take an Accounting Class

        Thursday-Bram

          Even if you never have to do any accounting work at any company you ever start, understanding the basics of accounting will be very useful. Just being able to read accounting reports may save your bacon if there’s a potential issue in your company that your accounting software or a human accountant haven’t managed to pick up on.

          Thursday Bram, Hyper Modern Consulting

          5. Create a Personal Budget

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          Derek Flanzraich

            Sometimes, amidst all the startup craziness, entrepreneurs forget to plan and organize their own finances at all. Then, all of a sudden, you’ve ordered expensive sushi delivery for dinner every night and the numbers keep stacking up. Take some time over the holidays to plan out your own budget.

            Derek Flanzraich, Greatist

            6. Join the Peer Economy

            Eric Koester

              The Peer Economy, companies that help you buy, sell, or transact with your peers (think eBay, Etsy, Airbnb, Getaround, Taskrabbit, Zaarly, Odesk or dozens others), is a great way to make money or save money. So participate—either by renting your couch out or staying in an Airbnb place when you travel; finding a developer or selling your services on Elance; or more. But just participate.

              Eric Koester, Zaarly

              7. Give Yourself Permission to Fail

              Dave Ursillo

                Every aspiring entrepreneur should give themselves permission to fail in 2013 because the greatest obstacle that every entrepreneur must (and always will) encounter is fear; especially fear of uncertainty and the unknown. When you give yourself permission to fail—financially or otherwise—you really give yourself permission to try in the first place.

                Dave Ursillo, The Literati Writers

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                8. Pay Down Debt

                Elizabeth Saunders

                  If you have personal debt, try to dramatically reduce or ideally eliminate it prior to starting your business. Having lower recurring expenses will give you more freedom to take risks as you build your company.

                  Elizabeth Saunders, Real Life E®

                  9. Real-Time Visibility

                  Robert J. Moore

                    Establish a system to access financial data about your company’s performance on demand and in as close to real-time as possible. This will allow you to feel highly in tune with business growth and tackle challenges as early on as possible.

                    Robert J. Moore, RJMetrics

                    10. Launch Their Company

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                    Aron Schoenfeld

                      Too many people network, brainstorm and whiteboard continuously and just keep adding ideas and layers to their concept. Aspiring entrepreneurs need to draw a line and say “this is our MVP and now we will build it.” Sitting on an idea does not help you or make you any money but building your idea into a product or business will help you validate it and test the marketplace.

                      Aron Schoenfeld, Do It In Person LLC

                      11. Find Great Clients

                      John-Hall

                        Improve profit through better clients. Having great clients really does matter with overall happiness of a company. Make an effort to improve profits by taking on the right clients, not just more clients.

                        John Hall, Digital Talent Agents

                        12. Keep More of the Money You Make

                        Brian Moran

                          Keep more of the money you make! Strive to make sure that your costs are under control, make customers happier, and focus on stimulating repeat purchases from new customers. That doesn’t mean becoming a penny-pincher, but if you have costs that aren’t advancing your bottom line, cut them out! A business is only as strong as the money it keeps at the end of the year.

                          – Brian Moran, Get 10,000 Fans

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                          1 The Definitive Guide to Get out of Debt Fast (and Forever) 2 25 Easy Tips on How to Save Money Fast 3 What Is a Good Credit Score (And How to Get One) 4 9 Millionaire Success Habits That Will Inspire Your Life 5 10 Reasons Why Following Your Passion Is More Important Than Money

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                          Last Updated on July 10, 2020

                          The Definitive Guide to Get out of Debt Fast (and Forever)

                          The Definitive Guide to Get out of Debt Fast (and Forever)

                          Debt can feel crushing, like a weight that is always weighing you down. Looking at those numbers, it can feel as if you’ll never get out from under it. However, if you really want to learn how to get out of debt, it is possible with a great deal of focus and self-control.

                          Getting out of debt isn’t impossible. Like any big goal, all that it takes is an action plan to identify where you are and creating a plan to zero out your debt.

                          Identifying All of Your Debts

                          The first part of paying off your debt is getting a complete picture of what you owe. When you have everything written out in front of you, it makes it much easier to create an action plan. Depending on how much you owe, it might also help you realize it’s not as bad you might have originally thought.

                          Here’s how you can get started identifying your debts:

                          1. Own Your Debt

                          Before you start identifying all of your debts, take a moment to process that you have debt but want to get out of it.

                          Forgive yourself for any past mistakes, missed payments, or overspending. It might be painful to accept how much debt you have at first, but you must own it.

                          2. Make a Debt Tracker

                          It’s astonishing how few people ever created a tracker to understand their total debts. Most likely, it comes from not wanting to accept the guilt of having debt, but, if avoided, it can make it nearly impossible to get out of debt.

                          Open up a new Google or Microsoft Excel sheet and list out all of your debts. Start with the name of the creditor, interest rates, total balance, loan term length (if any), and the minimum amount due each payment. This will include student loans, credit cards, and any other type of debt owed.

                          3. Get Your Debt Number

                          Once you’ve made your debt tracker and taken the other steps, identify your total payoff number. This is crucial, as you will have a starting point and a clear goal that you are trying to achieve.

                          Prioritizing Your Debts

                          All debt is not created equal. It’s imperative to understand that there are different types of debt.

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                          1. Understand Bad and Good Debts

                          Bad debts are usually paying for things you want instead of always need. While there might be some emergencies that max out your credit cards, often times it’s excessive spending[1].

                          There are three main types of bad debt:

                          • Credit Card Debt: The average American household owes over $16,000 in credit card debt!
                          • Auto Loan Debt: According to CNBC , the average auto loan in the US is $30,032!
                          • Consumer Loan Debt: Consumer loan debt isn’t as common as credit card and auto loan debt, but it’s still considered bad as interest rates are usually between 10-28%.

                          Good debt is identified as investments in your future. Here are three common types of good debt:

                          • Student Loan Debt
                          • Mortgage Loan
                          • Business Loans

                          2. Decide Which Debt to Pay off First

                          Once you know each type of debt and their interest rates, you can begin to pay off debt quickly.

                          Focus on paying off bad debt first, regardless of if it is a credit card or auto loan. Start by paying off the loan with the highest interest rate first.

                          If you have several credit cards with different interest rates, you want to focus on the one with a higher APR. You will actually save more money by eliminating the card with the highest interest rate.

                          3. Don’t Pay the Minimum Amount

                          Paying the minimum amount digs you into a hole as interest rates will offset your payment. Even a small amount more than the minimum can help you pay off debt much faster.

                          Removing Obstacles to Pay off Debt Quickly

                          Creating a debt tracker and prioritizing a plan is simple, but avoiding temptation can be difficult.

                          1. Set a Reminder to Track Your Debt

                          “If you can’t measure it you can’t manage it.” -Peter Drucker

                          It’s so important to track your debt to ensure that you get it paid off quickly. Similar to working out and measuring your results, you need to track your debt constantly. Start with a weekly reminder, where you sign on and log your updated number. Did you increase, decrease, or stay the same?

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                          Regularly tracking your student loan balance can be incredibly motivating, as well. You will get a huge confidence boost each time you see your total debt amount decreases.

                          Set weekly and monthly goals so you can have short term wins and keep the momentum going.

                          2. Hide Your Credit Cards

                          If your biggest debt is credit cards, you need to eliminate temptation and remove them from your wallet.

                          Some people have gone to extreme measures by freezing their credit cards. Why? This would create an ice block around your card, which would require you to chip away at it slowly. This will give you time to think if it’s the best idea to buy that thing you’re about to buy.

                          3. Automate Everything

                          Willpower can be a huge downfall to paying off your debt. By automating your bills each month, you will ensure that willpower isn’t involved.

                          4. Plan Ahead

                          Getting out of debt will require some sacrifices, but with enough planning, you can make it work.

                          For example, if you know that you have a friend’s birthday or family dinner coming up, plan ahead for the costs. Whether you need to cut back on spending the week before, pick up a side job, or meet them after dinner, do what is needed.

                          5. Live Cheaply

                          The only way to get out of debt is to make some sacrifices on your spending habits. Find ways to save money each month so you can apply that amount to your outstanding debts. Here are some ways to save money each month:

                          • Live with roommates
                          • Cook dinners and prepare lunches for work instead of eating out
                          • Cut cable and choose Netflix or Amazon Prime
                          • Take public transit or bike to work

                          Finding the Lowest Interest Rates

                          The higher your interest rates, the harder (and longer) it will take you to pay off any debt.

                          If possible, you want to find ways to lower your interest rates to help get out of debt quickly. Here’s how you can get started:

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                          1. Maintain a High Credit Score

                          Your credit score will have a large impact on your ability to refinance your loans and receive a lower interest rate. If you have a low credit score, it’s unlikely you will be able to refinance your loans. Use these credit tips to increase and maintain an excellent score:

                          • Never miss a payment
                          • Don’t exceed 30% of your credit limit
                          • Don’t sign up for more than one card at once
                          • Limit hard inquires, like auto-loans and new credit cards
                          • Monitor frequently with free credit-tracking software

                          2. Find Balance Transfer Offers

                          Start by opening a free account on credit.com. Credit.com offers you the chance to open a free account and see what type of balance transfer offers you can receive. Some of your existing credit cards might already have 0% or lower APR balance transfer offers available.

                          Contact each of your credit card providers to ask about lowering your rate for a one-time balance transfer offer[2].

                          If you do take advantage of this option, make sure that you use a balance transfer and not a cash advance. Cash advances have a ton of high interest fees (15-25%, depending on your credit card) and will only compound your debt problem.

                          How to Get Rid of Debt Forever

                          Setting up a plan, removing temptations, and getting the lowest interest rates is the first step to get out of debt.

                          1. Keep Monitoring and Adjusting

                          Once you have a plan, don’t get comfortable. Track your debt payoff plan and make the necessary adjustments when needed.

                          Monitor your credit scores with a free site like CreditKarma. The higher your credit score climbs, the more likely you will be to secure a new, lower-interest loan.

                          2. Earn More Money

                          There are only so many ways to save money. Instead of clipping another coupon or making sacrifices for your morning coffee, find ways to earn more money!

                          Think about it…it is much easier to find ways to earn an extra $1,000 per month than find $1,000 to cut from your budget.

                          Here are some examples of ways to earn more money:

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                          Talk to Your Boss

                          Have a conversation with your boss about current salary and/or commission rates. If you’re not satisfied or want a change, don’t be afraid to look around at other positions. Some of them might even have a student loan debt reimbursement plan!

                          Start a Side Hustle

                          This could be coaching students on the weekends, driving for Uber, or taking paid online surveys. There are tons of ways to make money outside your 9-5. Now that you have a clear plan to pay off your debts, you’ll be more motivated than ever to figure out creative new ways to earn money.

                          Build an Online Business

                          There are so many websites and blogs that earn money from ads, affiliates, and other online products. Find your niche and get started.

                          3. Celebrate Your Wins

                          As you progress in your debt payoff journey, don’t forget to celebrate your wins. You need to always reward yourself for the hard work and discipline that is required to get out of debt.

                          While you shouldn’t celebrate so big that it increases debt, make sure to factor in little rewards to keep you motivated.

                          4. Set New Financial Goals

                          Eventually, with a plan and these steps, you can rid yourself of your debt. Once you do, make sure to celebrate your monumental achievement, but don’t stop there.

                          Now, you can focus on acquiring wealth and increasing your net worth. Set new financial goals so you have a new target to aim toward. Here’s how to set financial goals and actually meet them.

                          These could be anything now that you are debt free! Think about where you want to travel, buying your first home, or saving for your future retirement. Just like before, make sure that your goals are specific, measurable, and achievable.

                          Conclusion

                          Congrats, you can now set a plan in motion to finally pay off your debt quickly (and hopefully forever)!

                          Remember, if you want to get out of debt quickly, it’s not always easy. Just like any big goal, there will be sacrifices, challenges, and problems to overcome.

                          More Tips on Getting out of Debt

                          Featured photo credit: Pepi Stojanovski via unsplash.com

                          Reference

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