A passion for your work and an entrepreneurial spirit are most likely the driving forces behind your desire to start your own business, but very few business owners don’t go into it without considering the potential profit.
Whether you have a modest ambition to earn as much from your business as you would working for someone else, or whether you have loftier dreams of entering the ranks of the millionaires and billionaires, being able to live a comfortable life from the fruits of your labors is a driving force for many startups.
There are two traps that business owners tend to fall into regarding business and personal finance:
- Taking to much out of the business: When you see the money starting to come in, it’s so tempting to think, I earned it, why shouldn’t I spend it? Unfortunately there are very good reasons why you shouldn’t spend it, however tempted you might be or however justified you think you are. Those early days of business are about consolidation and investment, and if you take too much out of your business too soon, you could run into cashflow problems and lack the capital to support change and expansion.
- Taking too little out of the business: Some business owners are so focused on their business that they forget they are entitled to enjoy their personal lives, or they become fearful of taking any of the profits for themselves in case something goes wrong.
Both these attitudes are flawed because neither gives you the best of both worlds: reward for your efforts without compromising business stability and growth.
If you want to increase your personal wealth, you can do it without taking too much from the business or risking its future. The first step is to make sure you’re managing your finances efficiently. Do you have a personal budget that you can use to forecast spending and income?
Taking a couple of hours to set one up and using it to manage how you use your money is invaluable, giving you an insight into where your money’s going, where you could economize, and how much spending money you have available each month
You should also look at how you use credit cards, any loans you’re paying off, and how you manage your credit. For example, if you ever borrow to cover small amounts for short periods, a pounds to pockets alternative like LoanPig could be a useful resource.
Once you’ve got an accurate budget in place, options to consider for increasing wealth without affecting your business include:
- Investing in stocks and shares
- Buying real estate
- Pension investments
- Other kinds of investment, e.g., cryptocurrencies
It’s possible to make a good return on your investment with these methods, although you do need to be sure about what you’re investing in and seek professional advice before committing to anything where you risk losing your money. Of course, you could just save your money and earn interest on it if you want to keep it safe.
A happy medium between taking too much and not taking enough out of your business is the recipe for success in both your work and personal life.