Starting a business can be a lucrative and fulfilling task, and I don’t just mean financially! When a person starts and grows a business, they put a piece of themselves into it.
That’s what can help you put the time and effort into making the business a success. More and more people are looking to start businesses, and for good reason.
Has the thought of starting a business crossed your mind? If so, I challenge you to tap into that power! However, you’ll want to make sure you have a few money moves completed before getting started.
Not only will this help set your business up on the right foot, but it will help ensure you have exactly what you need to have in place before diving in.
Keep reading for 6 money moves to make before starting your business.
6 Money Moves to Make Before Starting Your Business
#1 Pay down your high-interest debt
Take it from me, you want to get rid of any and all high-interest debt before you get your business up and running.
If you don’t want to wait, at least get your debt to a place where it’s manageable. Your business will eat up your funds, especially in the beginning or before you start making a profit.
Because of this, you’ll want to make sure your cash flow isn’t tied up in debt payments.
You can also consider a consolidation loan. Basically you put all your balances into one loan with a much lower interest rate. Your monthly payment may be high, but at least it won’t fluctuate over time.
It’s not easy or fun working to pay down debt, but you’ll feel so much better about starting your business knowing that you don’t have to worry about interest-bearing debts.
#2 Make sure you’re saving for retirement
The one thing I love about working for someone else is they usually offer retirement plans with matching contributions.
This allows you to get more bang for your buck each pay period and contribute more towards your retirement. Not to mention, 401(k) plans have higher contribution limits than IRAs.
When you start a business and focus on it full-time, you won’t have the option of contributing to a 401(k) plan. At that point, your only option is an IRA.
It’s still better than nothing! Get into the habit of saving for retirement before you start your business, so you have peace of mind knowing that you’re looking out for your life at retirement.
#3 Start eliminating any unnecessary expenses
As I mentioned before, your business will eat up a lot of your funds in the beginning. There’s always a new cost or unexpected expense coming up.
It’s much easier to deal with this when you have the extra money on hand. Get rid of any unnecessary expenses before you start your business to free up monthly income.
Save extra money and put it into a high-yield savings account to help cover your business costs. Since you eliminated unnecessary spending, you transition that money right to something worthwhile.
This is where a budget can come in handy! Your budget should outline everything you spend and allocate your money to.
When you have that holistic view, you can pinpoint things that don’t need to be there. Once you’ve identified costs that aren’t serving you, get rid of them and put that money somewhere else.
#4 Have a personal emergency fund
Do not start your business if you don’t have any form of savings in place. Whether you’re running your business full-time or not, you absolutely need an emergency fund.
I would suggest having 3 months’ worth of expenses saved before starting your business, at minimum. Personally, I had 15 months’ worth of expenses saved before I took my business full-time.
I did this because I share expenses with my boyfriend and I didn’t want him (or me) to worry about costs not being taken care of.
When I first started my business, it was a part-time side hustle. I had money saved because I had forecasted some start-up costs for my business.
I didn’t have that much saved, however, because I knew I had a full-time job with income coming in to support my lifestyle.
If you’re not taking your business full-time right away, you still need an emergency fund. You never know what could happen or what costs your business may need to get up and running.
Having that savings will make you feel more at ease and comfortable financially.
#5 Decide how much you want to start your business with and save that amount
It’s not realistic to expect that your business won’t need money to get up and running. In fact, it’s wise to take a conservative approach.
Expect to need more money than you originally think you will. Whatever amount you think your business will need to get up and running, multiply that by 2 or 3.
Once you have identified the amount you need to start your business, it’s time to start saving for it! Have that amount saved before you start your business.
I promise you that mental security is priceless. Knowing you have the money before you need it is so valuable. It also allows you to focus on your business without worrying about making money right away.
You don’t want a scarcity mindset when starting your business!
#6 Have a plan in place for adding personal funds to your business (in case revenue is slow)
Let’s assume you saved money to start your business and ended up using it. What now?
If your business has additional costs, you’ll need to pay with your own money. Start thinking about this before it happens! What is your game plan?
How will you know when and how to add funds into your business?
Maybe you have a line item in your budget for business. If you need it, it’s there and if you don’t, it gets saved.
Your plan could also consist of the business earning money. That puts some pressure on you and your business, but it means you won’t need your personal funds for the business.
Another option is loaning money to your business. Anytime you use your personal funds to help the business out, your business has to pay it back at some point in the future.
I did this early on in my business. Since I was running my business part-time, it wasn’t making as much. When I had a big expense, I would loan the business the money.
The business eventually paid it back, with interest, and it’s all legal.
Regardless of the option you go with, have the plan in place before a situation comes up. It may be difficult to think about, but it’s be one less thing to worry about when you get your business started.
Related: 5 Ways to Find Motivation to Start Your Side Hustle
Once you have the 6 money moves above in place, there’s no financial worry that should be holding you back from starting your business!
You have put yourself in the best position to succeed financially as you get ready to start your business. That’s a wonderful feeling.
Remember, you don’t know what the future holds, but you can do things now to set yourself up for success!
You got this! Have you started a business? What money moves did you make before getting your business up and running? Post a comment below to share your experiences or questions!
