Premature bankruptcy is a joke, no offense.
Starting out young is wonderful, starting out young makes you a shining star among the crowd and starting out young means you are reaping the advantages that the world offers much earlier. However, being a young entrepreneur can be disastrous if you don’t keep a close eye on your finances.
This week, I have decided to share 10 money tips with all young entrepreneurs reading this blog so we can stay away from the Generation Debt crowd and avoid the chances of suffering what I call the “premature bankruptcy”.
Take Charge of Your Personal Finance
Personal finance management might seem to be an agenda merely for adults. However, if you seriously think about it, money and your state of finance will not only play a huge role in your life but they also influence the course of both your existing and upcoming ventures.
Set Financial Goals
Just like running your business, you need goals to track your progress and to provide the motivation to take action. Personal finance goals can be divided into short term goals which include spending budgets, monthly savings amount and long term goals like a long term projection of your personal net worth.
Start Reading on Money and Finance
Learn how money should work for you and by reading the relevant books and resource sites, you are able to acquire some basic ideas of how to get the most out of the money that you earned and ultimately, achieve financial success in the future.
Recommended Personal Finance Readings for Teenagers:
- Rich Dad, Poor Dad – A MUST READ classic by Robert T. Kiyosaki
- Stepcase Lifehack Money Section comprises of the most comprehensive and easy-to-understand blog posts about money and personal finance without all the technical jargons.
- Top 100+ Personal Finance Blogs if you are really committed.
First, let me list out some frugal living blogs that I am subscribed to:
Trust me, after subscribing to these blogs for a few days, you will start to realize that you can save money on anything, literally, and even a few cents is considered good (although I am not that cheap :p ). Get the same value by paying less. Why not?
Why save? Have you heard of the popular saying, “Prepare your umbrella before it rains?” Also, by saving, you are keeping up cash that could be invested in your upcoming venture or could be used to expand your current one.
Do You Really Need It?
Admit it! About 90% of the time, we buy stuffs and we regret about it later. Perhaps not, but the product will be sitting on the shelf for years to come after the excitement over it is over within a week or so.
Here’s a tip for you. Whenever you have a sudden urge to buy something, write them down on a post-in note or on a piece of paper instead of immediately rushing to the store or logging into your Amazon account to purchase it. Let it sit there for a couple of weeks, you will find that you don’t actually need it anymore.
Avoid Credit Cards and Debt
Being a teenager or someone young is not easy nowadays. Banks and financial institutions are all targeting people like you and me to sign up for a credit card or to have your signature on the Contract of Sorrow, i.e. a debt agreement. Read: Avoid the “Generation Debt” Trap by Lisa Smith.
Spending the money before you earn it always seems attractive but the reality is always uglier. Do you know what will happen if you realized later that you are unable to repay the debt? Well, you will get a status called “premature bankrupt”.
OK, perhaps things won’t be that bad, well, imagine working for the rest of your life just to pay off the debt. The passion of running a venture which you are always proud of as an entrepreneur will no longer be there because it will just be all about the money.
Understand How Investing Works
Make it a habit to start reading and understanding the various types of investing options out there. Investopedia is a good place to start. Apart from the interest that you earn through bank savings account, there are a lot of investing options out there that you can use to grow your wealth through multiple income streams.
All young entrepreneurs that have read Rich Dad, Poor Dad or those that are into investing should be aware that with higher promised returns, come higher risks. Thus, improving your knowledge is crucial and in fact, the emphasis should be on the research phase prior to placing your money on an investment.
Understand How Financial Statements Work
Financial statements are very important for a business. The numbers presented are able to give you a highly accurate picture on how well a business is performing.
Whether you are using it for the evaluation of companies that you are interested in placing your money on or just to measure the performance of your own venture, you should at least have a basic knowledge on how to interpret financial statements. By the way, you don’t need to have an accounting degree to understand them.
Think Twice about Business Opportunities
Most entrepreneurs are boiling pots for ideas. Some ideas can be started immediately while some others might require a substantial upfront capital. Apart from this, we often get “revolutionary ideas” or “paradigm-shifting technology” pitch from others.
Evaluate these opportunities properly before splashing a huge amount of cash into them. Just like picking a company to place your investment money, you need to be cautious and see through the bells and whistles of the presented ideas.
Filter Your Business Expenses
Every business needs to incur expenses but a sound entrepreneur picks his expenses with due care. Avoid unnecessary expenses and save the funds for emergency use such as an unexpected crisis. Many times we have observed startups overly spending on things like a big office space even though their product is only in the development stage.
If there is a cheaper option for service providers and suppliers that are able to offer their products and services at a better or at the same level of quality as the existing ones, negotiate for a better rate or consider a switch. You’re in a business, not a charity for your suppliers.
Your Tip to Avoid Premature Bankruptcy Please?
Do you have more money and personal finance tips to share with all the young entrepreneurs reading this blog post?
Just leave a comment below with your tip or any questions that you have about my tips above.
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