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How to Manage the Start-up Cost of a Business

How to Manage the Start-up Cost of a Business

Starting a business is never easy. Regardless of size, industry, and the nature of what you are intending to sell, establishing an organization for the sake of generating profit will require a lot of sacrifice. As well as physical resources, time, energy, relationships, and peace of mind are just some of the things that aspiring entrepreneurs must be prepared to exhaust the moment they decide to follow through with their start-up.

It doesn’t matter if you have the most innovative business idea of all or if you are the foremost expert in the field you’re about to enter; without proper knowledge of how to generate and handle finances properly, your business will fail. Of course, coming up with a business plan is the first step. After establishing the creative aspect of your business model, you need to determine your objectives, needs, and expected sales forecast based on the initial scale you have in mind. Once you have all of these set in place, you can start your pursuit for capital.

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Producing and managing assets are two very different things. While the first one will challenge mostly your creativity and resourcefulness, the latter requires more focus and organization. Here are some practical tips that can help you in both areas:

1. Ask Uncle Sam.

Believe it or not, the federal government is one of the best sources of funds for entrepreneurs managing the start-up cost of a business, even during times of financial crisis. One bureau to approach is the National Institute of Standards and Technology, a branch of the government that offers grants to co-fund “high-risk, high-payoff” projects with the hope of providing Americans a higher standard of living. However, keep in mind that government agencies get tens of thousands of requests for grants each year and are therefore are very selective.

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2. Look around you.

One of the biggest mistakes aspiring entrepreneurs make is being too focused on finding money outside their homes and not looking at existing resources that they can convert to cash. Do you have any clothes that you can sell at the local surplus shop? What about kitchen utensils you aren’t using or toys that you’ve outgrown? Be creative. There are many places you can go to raise some extra cash. Why not check out some freelance jobs on the Internet for some extra income?

3. Get a loan.

As an entrepreneur managing the start-up cost of your business, you should be aware that—unless you’ve got a lot of extra cash stored in your basement—you will likely need to apply for a loan. The trick here is to find the institution that will offer you the best terms. Don’t be afraid to ask around and try to get a loan that will be enough to cover all of your initial expenses and sustain your operation for 6 to 12 months. In that same vein, make sure that you do some credit monitoring as well. Checking your credit score at freecreditscore.com can help you narrow down your choices by giving you an idea as to which types of loans and interest amounts you qualify for.

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4. Acquire a credit card.

You may be thinking, “Isn’t getting a loan enough?” but chances are that it isn’t. Any business is at risk of failing due to a multitude of unforeseen circumstances, such as an increase in the price of raw materials, the sudden appearance of a formidable competitor, or even something as sudden as a tornado. It’s always better to have places where you can pull up extra funds in case of an unexpected incident. Again, checking your credit score prior to applying for a card is important because having lenders deny your application due to a low score can lower your score even further.

5. Practice good management.

So you’ve already acquired the funds you need for your business. What do you do now? Keep in mind that running a business entails a lot of strategizing and math. As an entrepreneur managing the startup cost of your business, you must be prepared to do a lot of management. Make sure every single thing you purchase is documented and properly categorized as either an asset or an expense. Keep your record books clean and your files organized and be sure to always maximize any resources you have at hand. These are the makings of a good businessperson.

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6. Don’t forget about credit monitoring.

Part of managing your business is making sure that all your payables (business and personal) are paid on time. Remember that you and your business’ credit score are now connected to each other, so be sure to always keep on top of anything that needs settling. The importance of doing this cannot be overemphasized. If you’re thinking of sticking with your business for the long haul, then keep in mind that regularly checking your credit score can help you get better business opportunities in the future.

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Published on January 8, 2021

How To Pay Off Credit Card Debt Fast: 7 Powerful Tips

How To Pay Off Credit Card Debt Fast: 7 Powerful Tips

Ever wondered whether your credit card debt is the reason you’re in a bad financial situation? You can’t enjoy any fun activities because a good chunk of your money goes toward debt payment. Heck, you’re even behind on some of your monthly bills.

The effects of clumsy debt management are too many to list here. This guide is going to help you discover how to pay off credit card debt fast and start chasing your financial goals.

Debt problems are the last thing anyone wants to encounter. But things can get out of hand when all the “little debts” you take accumulate in interests.

What if you knew some simple and proven ways to be debt-free quickly? Implementing them would mean better financial health for you. It becomes possible to free up cash for your “wants.” These include taking a trip or buying something you’ve always desired. All that while paying your bills on time!

Let’s not wait any longer. Here are 7 powerful tips for paying off credit card debt fast:

1. Pay More Than the Minimum Credit Card Payments

Many people only pay the monthly minimum on their credit cards. Truly, that’s the right amount for staying on good terms with your credit card company. But you need a different approach if you’re looking to achieve financial independence within a short time.[1]

Most of your payments go toward interest costs when you only pay the minimum amount. A substantial sum of your balance remains standing. As a result, it becomes more expensive to eliminate your debts.

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You don’t want to wait more than 10 years to get rid of debt while it’s possible to do it sooner. All you have to do is double that $100 minimum payment to $200 or go higher.

The good thing is that minimum credit card payments are affordable in most cases. By paying a higher amount, you reduce your interest costs, lessen your borrowing period, and boost your credit score.

2. Start With High-Interest Credit Card Debt

If you have more than one credit card debt, prioritize putting the extra money toward the ones with the highest interests. This debt pay-off strategy, known as the debt avalanche method, is essential for being debt-free quickly.[2]

First, you need to list down all the credit card debts you have in the order of their interest rates. Next, you choose the one with the highest interest and pay a significant amount toward it each month. It can be an amount twice or even thrice larger than the minimum payment.

At the same time, you make monthly minimum payments on the other debts. Their interest charges won’t be as costly as that of the first debt on your list. You only move on to the next high-interest debt after the first one is gone. Remember that your focus is on the interest rates and not the balances.

3. Revisit Your Budget

Budgeting is useful for tracking your financial moves. Once you create a budget, some tweaks along the way can make it work for you better. One situation that requires you to revisit your budget is when you’re struggling with debts. It might hurt a bit to slash some expenses. But you also don’t want to miss out on achieving financial freedom in the long run.

You can reduce some variable expenses to free up more cash for credit card debt payments. They’re the ones that change from time to time. Some examples are groceries, fuel, and clothing.

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Other opportunities for cutting down your spending lie in non-essential expenses. Instead of dining out all the time, you can cook at home more to save money. You can also share some subscriptions with friends and pay a fraction of the cost.

If you’re determined enough, you can eliminate all your unnecessary expenses and focus on paying off your credit card debt first.

4. Avoid Using Your Credit Cards

Do you want to know how to pay off credit card debt with a low income? One simple way is to stop using them. Having your credit cards everywhere you go means that you’ll be more tempted to buy unnecessary stuff. In this case, you spend money that you don’t really own and get deeper into debt.

The quickest fix to stop the debt build-up is spending with cash. You’ll be more aware of everything you can afford at any particular time. If you decide to keep one or two cards to ease the transition, always make wise choices. For instance, only use them when experiencing financial difficulties.

It’s best to categorize your fun activities under “discretionary spending” in your budget. This way, you won’t need more debt to kill your boredom. By halting your credit debt from accumulating, it’s easy to pay down what you already owe and be happy with the progress.

5. Start a Side Hustle to Boost Your Income

You’re probably turning away a lot of money by not monetizing your skills. Everyone has something that they’re good at doing. And you can use that to generate extra income for attacking your credit card debt.

If you look around your neighborhood, you can find several side hustle opportunities. It can be pet sitting, tutoring, or lawn mowing. You can start an online business by offering services such as digital marketing, content creation, and web development. Such skills go in high demand on freelance sites and job boards.

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Finding clients on social media is also a good strategy to utilize your skills and make more money. Facebook groups, Quora Spaces, and subreddits are some places to look for side jobs. You only have to join a niche-specific platform, share your services, and respond to any opportunities.

It’s possible to learn a skill, practice it, and earn from it. Use the free resources online or purchase some e-courses to get started.

6. Sell Your Used Items for Extra Cash

Starting a side hustle isn’t the only way to generate extra money. You can turn unwanted items into cash for paying off credit card debt. Whether it’s an old TV, book, or furniture, there is always someone itching to buy your used stuff.

A garage sale, as much as it’s old-fashioned, is perfect for getting your neighbors and passers-by to buy from you. You keep all the money because there are no business permits or taxes involved. While you may not make much cash, it’s better than leaving your stuff to go defunct in your storage.

Other than that, you can sell your used stuff on online marketplaces. Facebook groups are great places to start if you want quick approvals and hence sales. You only have to ensure that your listing follows Facebook’s commerce policies.

When selling any pre-owned items online, ensure they’re in good shape to avoid problems with your buyers.

7. Know When to Seek Help With Your Debt

Asking for help with your credit card debt can be challenging to do. But letting it drown you is a road you don’t want to take. While you may feel embarrassed at first, it’s the best way to get back on track when you run out of options.

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There are tons of non-profit credit counseling organizations that can offer you free guidance on how to escape the debt trap. An example is The National Foundation for Credit Counseling. They simply review your finances and help you determine the source of your financial problems. After that, they match you with an actionable debt management solution.[3]

In extreme cases, the debt solution can be:

  • Debt relief – where your debt is partially or wholly forgiven
  • Debt consolidation – taking out one loan to repay others
  • Debt settlement – the creditor forgives a significant portion of your debt
  • Bankruptcy – legal process for seeking relief from some or all your debts

It’s necessary to carefully weigh your options before deciding on the way to go. Find out how it might affect your credit score and any other risks.

Wrapping It Up

Debt is a major setback when you’re trying to prosper in life. Paying off credit card debt is essential if you want to reach your financial goals. That means having more free income, a good credit card score, and even a chance to retire early. You become more productive each day because of the peace in your mind.

So, you now have some tips on how to pay off credit fast. Go ahead and get rid of that good life progress killer!

More Tips on How to Pay Off Debt

Featured photo credit: rupixen.com via unsplash.com

Reference

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