Obviously, entrepreneurs start businesses with hopes of doing what they love to generate income. We spend a lot of time trying to figure out how to create more sales, make more money, and grow profits, but how about learning what to do with, and how to better manage the income we receive? Here are some simple tips for business owners to achieve wealth.
1. Set aside enough money for taxes. It’s tempting to pull out an extra couple hundred dollars each month from your business bank account just because it’s there, so make sure you’re setting aside 25-30% of your net income. If you are a sole proprietor or LLC, you will need to pay 15.3% in self-employment tax, plus federal and state income taxes, so it’s better to be on the safe side and have money saved up rather than have a large tax bill you can’t pay at the end of the year!
2. Live within your means and pay for things with cash. It may seem like a simple truth, but did you know that the average American family carries somewhere around $8,000 in credit card debt? Did you know that most millionaires drive used cars? In a society that is growing more and more materialistic, it may be good to remind yourself that everything doesn’t always need to be new. Find creative ways to cut spending – like buying kids clothes at consignment stores – even if you don’t need to, it all helps in the long-run.
3. Start saving. No really. Do it. Immediately put aside a portion of your pay each month into a savings account – I promise you won’t even miss it! If you do it first, it isn’t there to spend! You should ideally have 6 months worth of living expenses set aside in an emergency fund. Is there something big you want to purchase? Make a goal for yourself and decide how much money you want to put toward your goal each month. When you reach your goal, it will be so much more rewarding than if you just put it on the credit card!
4. Try a budget. Sometimes people don’t even know where their money is going. With all the great apps and free programs, it’s worth a little effort to figure out where spending needs to improve. I recommend www.mint.com – it’s free and will connect to your bank accounts, credit cards and investments. It only takes half an hour or so to set up a budget and get it rolling. Try it!
5. Give to Charity. Nothing helps with a little perspective quite like giving money to the less fortunate. Sponsoring a child in a third-world country can be as little as $30 a month and serves as a great reminder that we are blessed! This time of year, local food banks also need all the help they can get. If you’re short on cash, give your time! Find something that speaks to you and support it.
More than anything, it’s important to have goals and a plan to get there. Think about retirement. Talk about saving money for your kids to go to college. Make a plan to pay off your mortgage early. Be wise with what you have and it WILL multiply! Check out some amazing products at Pretty Actions to help you with your accounting, pricing and starting your Business!