Saving for entrepreneurs can be an afterthought, when you spend most of your time running your business. If you are a start-up entrepreneur, then you may be in for some lean times for the first couple of years as you grow your revenue. This makes saving very difficult. However, saving is extremely important since there is no consistent paycheck to fall back on during lean times. How do you save when your focus is on reinvesting into your business to help it grow?
I caught up with personal finance guru and bestselling author, Aisha Taylor, who provided these five tips that will guide you on how to save despite a lean and irregular income.
- Reevaluate your monthly bills. Ask yourself, “What are the non-negotiable bills that I have to pay in order to survive?” When you are considering your survival costs, only focus on groceries, housing/utilities, insurance, and transportation. Make sure you include medical insurance because, according to Harvard University, medical costs are the number one reason why people go bankrupt. Use a tool like Mint.com to understand how much money you are currently spending.
- Pay your quarterly taxes. Uncle Sam wants his money! If you underpay your taxes, you risk owing the government interest and penalties on top of your tax bill. This could further strain an already tight budget. Calculate your estimated quarterly taxes by dividing the taxes that you owed last year by four, and then set that money aside.
- Start off small with savings. Don’t make the mistake of thinking that the small stuff doesn’t matter. Even if you can only save $20/month, save it anyway and make it automatic.
- Set up separate bank accounts. It’s critical to have both a business and personal bank account. This eliminates the mixing of your personal and business assets. Additionally, set up two separate savings accounts from your checking account. One account should be used for emergency savings. The second one should be used for annual and semiannual payments like taxes and certain insurance costs.
- Maximize your tax refund. Use one third to pay off debt, another third for emergency savings, and the final third as a treat for yourself. This helps to avoid deprivation by rewarding yourself for sticking with the financial plan. Similarly, if you have a really good month for the business, determine what you need to reinvest in the business and then use the ‘dividing into thirds’ strategy for the remainder.
Gwen Jimmere is the first African American woman to hold a patent on a natural haircare product. She is the CEO & founder of Naturalicious and the creator of the popular OooLaLocks Hair Box. A healthy haircare expert, Jimmere is also a frequent keynote speaker and panelist on small business and entrepreneurship topics. Her natural haircare line is sold in Whole Foods, as well as other fine retailers across the U.S. and internationally. She can be found at GwenJimmere.com.