Every new entrepreneur who has ever dreamed of starting their own business has one immediate goal. That goal is always to quit their day job and get started on making their millions.
Sadly, it’s never that easy and if you’re really serious about succeeding then you don’t make that big leap until you have the funds stashed away that will carry you through the leans times. Those lean times are always there between when you start your business and when it reaches the point where your business generates enough income to support you and to grow the business further.
To reach that point where you can quite your day job you need to build up a cash reserve that you can use in that dry period I just mentioned. So here are 5 tips for building a 6 month cash reserve. Some of these may sound a little strange or perhaps not applicable to you but it really is a situation where you ignore these tips at your peril.
1. The very first thing you need to do is to carefully assess your current financial situation and what you spend each month. Make sure that you include your living expenses, your entertainment expenses, your loan and credit card repayments and the taxes that you have to pay to all levels of government. Look at what you can sell or change for something less expensive. Hint: what sort of car are you driving right now?
2. Start putting away a percentage of your pay each pay period … put it into a bank account and leave it there. Some suggest that you set the percentage as low as 5% but personally I would be looking at stashing away at least 10% of your pay and if you can’t do that then put your business plans on hold until you’ve cut your outgoings to the point where you can save 10% of your pay.
3. Set yourself a goal … a start date … when you want to leave your day job and start working on your own business fulltime. Try to cut your debts way back … even to zero before that date … and maybe even increase the percentage that you’re saving beyond that 10%. I know it sounds hard but when your regular income has gone and you’re living on your savings you’ll be glad you saved harder.
4. Make sure you have a good accountant who can help you minimize your taxes and be sure to set aside money to cover those taxes. There’s nothing worse for a fledgling business than to face a huge tax bill that can reduce your reserves to zero overnight.
5. Read what I’ve just said carefully and honestly assess your situation and start saving money and cutting your debts right NOW! And every time you get paid from your day job make sure that you save that percentage and try to reduce your debt even further.
Now maybe you think that all of that sounds rather tough and it was certainly meant to be. If you want your business to go beyond your dreams and become a successful reality then you have to be tough … you have to be disciplined … and you have to build up those cash reserves and in this situation less is definitely not more.
