Financial independence is one of the leading reasons women choose to start a business. While investing in your start-up should be a top priority. But it shouldn’t be the only one—you have to invest in yourself, too. “There is nothing more stressful than trying to stick to your business plan, but making rash decisions because you’re running out of cash to pay rent,” says Priya Malani, a financial expert and founder of Stash Wealth, a millennial-focused financial planning firm. Here, she gives three top-money moves for a founder to stay cash-flush during the early days:
1. Don’t rush to quit your day job. “One of the biggest financial mistakes future entrepreneurs make is giving up their steady paycheck before their business will support them,” says Malani. “Make sure you have savings to cover your expenses for a few months. Think of it as a runway to get your side hustle up and running.”
2. Be mindful of expenses and learn how to pay yourself. Another reason not to quit your day job immediately—don’t leave until you’ve figured out when the business can support you. Malani suggests figuring out the minimum amount of money you need every month to cover your rent, groceries and discretionary items, then determine what your business needs to make each month or quarter to break even on your expenses. “Many times entrepreneurs are afraid to take money out of their business to pay themselves,” says Malani. But the sooner you can, the sooner the path to true financial independence.
3. Maximize your financial benefits. Owning your own business has a tremendous amount of tax benefits. Instead of a traditional 401(k), you can save for retirement in your own IRA, Roth (if eligible) or SEP – retirement savings accounts for small business owners where a percentage of your revenue can be saved tax-free. And, most of your business expenses will be tax-deductible. “Make sure you are keeping a great record of all your income and expenditures,” says Malani. Companies like Bench or Wave make this super easy to do. Another bonus benefit: “use a business credit card with rewards points aligned to your business spending,” she says. “Those rewards add up over time and can be used for a nice getaway when you need to step away from your business and recharge.”
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