Recent entrepreneur, here are some financial planning tips for you

Whether it is due to the multitude of job losses during COVID or the ambition and desire to build something is unclear, but the fact remains that entrepreneurship in India is at an all time high right now. moment.

Entrepreneurs should take into account some unique financial planning considerations. Especially if they leave cushy corporate jobs and don’t have a family history of entrepreneurship, they might struggle with money management early on. The fact that the average age at which women and men move into entrepreneurship around the world is 30.5 and 29.9 respectively, as this is usually the age at which family pressures are also the highest.

Optimism in the face of seemingly insurmountable challenges defines the most successful entrepreneurs. Ironically, it is this very attitude towards life that often makes them bad investors. If you’re an entrepreneur or considering starting a business, here are some important financial planning considerations for you.

Save – even if it’s just a little

Entrepreneurs, due to their erratic cash flow, tend to ignore the act of saving money systematically, preferring to invest the money as it becomes available. Although this is a natural tendency, it is essential to at least get into the habit of systematically saving a little money. It could be as little as Rs. 5,000 per month.

Know what you need (and what you want)

As an entrepreneur, it’s likely that if left unchecked, your various spending and saving buckets will be jumbled together into an unwieldy mess. It’s essential for you to sit down and come up with an exact number that will be enough to meet your basic needs each month – for example, rent, groceries and electricity. Multiply that number by six and store it in a liquid fund – you never know when you’ll need to strap in and stop dipping into your business for long periods of time.

Be thrifty – many billionaires do!

Make no mistake, chances are you need to cut back on luxury spending and live modestly for the first three to five years of starting your business. Instead of beating yourself up about it, see it as integral to being an entrepreneur’s success. Depleting your cash reserves – or worse, taking out expensive loans – during the early stages of your entrepreneurial journey is bound to cost you dearly later on. The number of global billionaires who still drive their rickety old cars to work might surprise you!

Protect yourself and your family

At the start of your trip, be sure to cover your bases to protect yourself and your family from unforeseen risks that could seriously erode your personal wealth and put you in a precarious situation. Being delayed five or ten lakhs by a medical emergency at the start of entrepreneurship can weaken your resolve to continue. Make sure you have adequate medical insurance and (if required) personal accident cover in place.

Out of sight, out of mind

When you earn lump sums from the profits of your business, you may be inclined to fulfill your long-held desires and squander them in the process. After all, you’ve been strapped for so long! However, it is essential that you exercise the will and discipline at these times, to instead invest the excess lump sums in long-term, high-growth financial or physical assets. That shiny new luxury car or that trip around the world can wait until you’ve built a stronger financial foundation for yourself and your family.

Avoid personal leverage like the plague

You could borrow for your business, with the intention of paying it back from future profits – but never, ever borrow for personal expenses. In fact, it would be wise to clear all of your pending EMIs before setting up your business. As an entrepreneur, personal leverage is strictly prohibited and could in fact have a big impact on your business decisions. Not having a loan actually allows you to make well-structured, longer-term trading decisions.