How well do you know money? For most entrepreneurs, the answer is, “Not well enough.” Sure, maybe you took some finance or accounting classes in college and acquired some basic knowledge… But do you really KNOW money? Do you know the right ways to manage it, save it, and spend it, so that you and your business can both thrive?
What we’ve discovered here at Answer 1 is that you can never know enough about money. There’s always more to learn – and the more you learn about it, the better you’ll get at managing it and making it.
So, we’ve compiled a few rules of money that every entrepreneur should know. Check them out below!
1. What You Focus on Expands
You should always be learning more about money. That means doing things like listening to podcasts, reading books, and talking to financial experts.
Remember: what you focus on expands.
The more you focus on money and acquire knowledge about it, the more you’ll see opportunities around it.
So, make “money knowledge” a part of your daily life. Spend at least 10-15 minutes per day learning something new about money and finance. This habit will pay big dividends.
2. Save at least 10%
How are your money saving skills? Ideally, you should save at least 10% of your income. If you can do 20%, that’s even better.
Here are some ways to save money right now:
- Negotiate your current bills. You can start by calling your cable company and other utility companies and trying to negotiate lower rates.
- Outsource where you can. Why pay a full-time employee for something that you can outsource for cheaper? One example where you can outsource is by hiring a virtual receptionist!
- Avoid impulse purchases. For expensive items, think through your purchase decision for at least a day. If you find that you don’t need this item, don’t buy it – save money your instead.
3. Live Below Your Means
Most people spend as much as they make. If they get a raise, they don’t save more money. They just increase their spending habits.
The result? They have a little money saved up. So, when they have unexpected financial burdens, they can’t afford the extra load.
As an entrepreneur, if you run out of money that could mean the end of your business. So, it’s best to live at least a little below your means.
Luckily, this is easier to do than it sounds. Here are a few tips:
- Cook more at home, and limit the amount of meals you eat out
- Create a budget and follow it
- Consider living in one of these booming cities for location-independent entrepreneurs, where your cost of living will be extremely low
- When you get an unexpected influx of money, don’t rush to spend it. Save instead.
4. Take Calculated Risks
Never invest more than you can afford to lose. When it comes to money, finance, and investing, it’s key to take calculated risks.
You see, when you invest more than you can afford to lose, you risk major losses. These are the kinds of losses that can put your business in jeopardy.
Instead, figure out a comfortable amount of money you can invest. If you lose this amount of money, you should still be financially okay.
5. Separate Your Business and Personal Finances
As an entrepreneur, your business and personal finances should always be separate.
The money your company makes is meant to maintain and grow the business. If you start taking money out for personal benefit, the business’ resources can start to run dry.
Instead, it’s better to keep yourself on the payroll. That way, you pay yourself a certain amount each month from the business and don’t take money out at random.
With these rules of money under your belt, you’ll be able to control your finances instead of having your finances control you. In doing so, you’ll put your business in a position to thrive.
Do you have any other rules of money that should be on this list? Let us know in the comments below!