By Robert Stitt
First-year entrepreneurs are not known for their large and plentiful cash flow. Instead, most first-year business face some pretty lean times. In reality, those lean times of meager earnings can often run for a few years. This makes accumulating savings rather difficult. Challenging or not, few business owners will argue that saving is not important.
Aisha Taylor is a personal finance guru and best-selling author. She gives several ideas for young businesses to put some money aside so there is something to fall back on if times get tough.
- Use a financial tool like mint.com to help you evaluate your true survival costs. This means taking out everything that is not essential. Taylor recommends limiting the costs to groceries, housing, utility, insurance, and transportation. She cautions that medical insurance must be considered an essential expense because “medical costs are the number one reason why people go bankrupt.”
- Save no matter how small the amount. Even if it is $20 a month. Put it away. Don’t get into the mindset that you don’t make enough to save. Find a way to put something away every month and make is automatic. When income increases, you can increase your savings contribution. Just don’t wait until you have a large amount to start or you might never do it.
- Keep your expenses separate. Having business and personal bank accounts not only protects you, but it prevents the commingling of funds and assets. This makes taxes easier. Taylor also recommends setting up two business savings accounts. One account is for savings, and the other is “used for annual and semiannual payments like taxes and certain insurance costs.”
- Pay those taxes. While paying taxes might not sound like a way to save money, businesses must pay quarterly taxes. If you underpay, you end up paying penalties and interest – there goes all that savings you’ve been slowly putting away. Cutting expenses never means skimping on your quarterly tax assessment.
Saving money may be tough, but with a solid plan and a bit of perseverance you can make it work. Just remember to keep putting one foot in front of the other. Even small steps will eventually get you to your goal.