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Expert Answers to Biz Questions
Listen in! Pick up some expert advice to a reader's question that we selected from CyberSchmooz.
5 Ways to Save Money to Start a New Business
In a world where Hollywood glamorizes entrepreneurship and the term “startup” conjures up associations with billion-dollar companies like Facebook, Twitter, and Uber, it’s easy to assume that new ventures are always started using seed money from venture capitalist firms or wealthy private investors. However, the truth is that most new businesses are bootstrapped with cash that’s pieced together by the startup’s founding team.
If you’re looking to start a new business venture, your best bet is to fund it with your own cash. And if you don’t have cash on hand, now’s the time to start saving.
5 Ways to Save Up Money for a Startup
Everyone has a unique situation with different expenses and challenges. It could take one person a couple of months to save up enough money to launch a business and another person a couple of years. But with the right amount of patience and discipline, you can make it happen. Here are some smart practices and rules of thumb:
- Get Your Debt Under Control
There’s a time and place for debt, but too much personal debt will weigh you down and make it nearly impossible to save money. In order to meet your financial goals, you’ll need to begin by getting debt under control.
If you have lots of debt spread out across different lenders and categories, consider consolidating them with a short term installment loan. This will allow you to combine everything into a single payment, which simplifies and (potentially) lowers the interest rate on certain high-interest debts.
It’s not enough to just consolidate, however. You also need to be aggressive about paying down debt so that you can remove it from your monthly expenses.
- Live Lean
Most people live up to or above their means. Whatever money comes in, they spend it. But if you want to save money, you have to live well below your means.
Living lean means understanding the difference between needs and wants and resisting the temptation to constantly satisfy the latter desires. It means doing away with your Netflix subscription, brewing your own coffee at home, packing a lunch instead of eating out, and removing your credit card information from Amazon so that you have to think twice before buying something.
Most people can easily save $100 or more per week by stripping away superfluous expenses that have become second nature. You may even be able to save more!
- Automate Your Savings
Once you curb your spending, you need to get your savings out of reach so that you don’t spend everything in a moment of weakness. The best way to take control is to automate your savings through an app like Chime, which allows you to safely deposit and track your money
“The mobile banking app also offers an automatic savings account, which allows you to start saving money without thinking about it by automatically setting aside 10 percent of every paycheck you deposit into Chime,” entrepreneur Renzo Costarella says. “You can also enable rounding-up on your purchases and have the difference transferred to your savings every time you use the Chime debit card.”
- Add a Side Hustle
Maybe you’re already living lean, but you don’t have enough cash coming in to save money. In this case, you should consider adding a side hustle.
Side hustles are easier than ever in the gig economy. You can make money by listing your house on Airbnb, driving people around with Uber, or selling services via an online marketplace like Fiverr or Upwork. You could even deliver pizza or do some babysitting for people in your area.
- Lower Your Expectations
You don’t need as much money as you think to start a business. Lower your expectations and understand that you can get up and running with very little capital investment. Over time, you can expand up as cash becomes available.
Be Smart With Your Money
Good money management – whether in your personal life or a business setting – is all about common sense. Make smart choices with your money and put it to work for you. Avoid dumb impulse purchases and focus on intelligent investments that yield a positive return. Eventually, your smart choices will provide you with a nice fund to bootstrap your business and avoid debt.
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