All the financial advice I’d received went out the window when I was no longer drawing a salary. My ability to buy or even rent a place to live got super complicated, and the employment benefits I’d so taken for granted – health insurance, life insurance, 401k – were gone.
Then my husband followed his entrepreneurial dreams (“Yay!” – then a big “oh my god!”) and we had to do some serious revamping of our finances and lifestyle to accommodate for two cash guzzling, 100% self-funded start-ups. Ouch.
It takes money to live and it takes money to grow a business. In the words of Shark Tank superstar, Robert Herjavec, “the business eats first” (insert: serious tummy rumble).
After a few years of balancing two self-employed “incomes” and sporadic start-up cash flows, I’ve learned a few entrepreneurial money management tricks the hard way. May my pain bring you peace – here are a few life hacks for the cash strapped entrepreneur who’s sick of eating beanie weanies:
The reality of cost of health insurance was a big shocker when saying “goodbye” to the paycheck and “hello” entrepreneurship. A benefit previously taken for granted would now cost me over $1600/month + $6,000 a year deductible – no way in hell that was going to fit in my self-employed salary. Despite political (and economic) misgivings regarding Obamacare policies, I checked my family’s quote on the exchange – more unaffordable insurances for next-to-nothing coverage. So much for healthcare "reform".
That’s when I became a huge fan of cost share health insurance programs. For $90/month, I have a $5k deductible with over $1 M in coverage. Routine doctor visits, prescriptions, etc. come out of my pocket (FYI: most doctor’s offices give you BIG discounts if pay same day) but that $1 M is there for all the unexpected – good peace of mind of under $100/month.
“You mean because we’re self-employed – making twice what we were as employees – we don’t qualify for a traditional mortgage?” I asked in exasperation.
“Well, the qualification process for self-employed individuals is much different than what you may have done to process mortgage approval as an employee,” the loan officer responding, evading a direct response to my question. “Maybe try again in a couple years.”
Since the mortgage bubble burst, and America said “good-bye” to subprime mortgages, young entrepreneurs struggle to secure mortgage solely on self-employment income. Unfortunately, rental application approval may not be much easier to attain – some property managers will ask self-employed individuals to pre-pay for the entire lease period upon signing. Talk about a cash flow nightmare…
Seeking an alternative to the denied mortgage and $17k upfront for a 12-month lease, I discovered a pretty cool little movement – tiny houses. Environmentally and super budget friendly, these little 200 sq ft DIY wonders save their resident thousands in would-be rental fees or home maintenance expenses. It’s become a very viable housing option for millennial entrepreneurs needing to reduce their fixed expenses – like housing – to reinvest in their business.
Working a Side Gig
Cash is king in business, and sometimes you just don’t have any.
Or maybe you had some, but your business needed it to sustain operations during a cash flow “hiccup”.
Sometimes the best way to combat a dry spell is to pick up a little side gig. Here’s a few side-gigs I’ve picked up over the past few years as a self-funded, self-employed professional:
Not very MBA-ish, eh?
Picking up a side gig may nick your ego, but you’ll get over it.
Last thing you need as an entrepreneur focused on growing your business is to be evicted, lose your primary mode of transportation, or not able to eat.
Tough times call for tough measures – we all have to put in our time somewhere.
Saying goodbye to the steady paycheck meant turning my back on employment sponsored retirement. I could no longer mindlessly rely on employer matching program to grow my 401k, or bet on 20-year tenure to provide my family with “she’s old and incapacitated” money – I had to invest myself. For most, I’d recommend consulting with a trusted financial advisor; for me, I decided to make the most of my MBA Finance courses I’m still paying a premium on and take a more DIY approach to wealth building.
Wealth isn’t cash on hand; it’s assets (what you own) – liabilities (what you owe). My investment goal was to own stuff that appreciated – plain and simple. I LOVE the Robin Hood app; it lets you buy and sell stock shares in small quantities. They’ve got some really cool publically traded, millennial-friendly companies listed – like Tesla, need I say more? Figure out what assets work for you – stocks, real estate, business equity – and invest your margin.
You’ve got to get away sometimes – even if it’s a last minute Groupon offer to Sioux Falls, South Dakota (not many peeps reserving that one). Vacations are essential for your well-being. As an entrepreneur - esp. those who live a breathe their business from 5 AM to midnight - reserving time for a little R&R is not fiscally irresponsible – it’s essential.
Over Christmas I got a last minute holiday deal to snow ski in a not so well-known ski town just east of the Rockies. $35/person got me all day ski passes + equipment rental + food = super budget friendly. Finding these super cheap deals takes a little digging. I find it easiest to start by thinking out of the box and asking, “where are people not going this time of year?”
Starting a business on your own dime requires a lot of sacrifice. It’s not easy, comfortable, or even cool.
Sometimes, it’s a downright nightmare.
I swear, every stomach ulcer I’ve developed as a young trep can be correlated with a business cash flow “hiccup”. Yuck.
Starting a successful business and establishing a financial security on the personal side of things may require some out of the box finagling. You may find yourself asking, “what can I cut?” more often than not.
Building a successful business takes time. Success – neither business nor personal finance – is just going to “happen”; it’s going to take a few lifestyle “adjustments” along the way. Don’t let a few temporary financial bumps along the way deter your entrepreneurial dreams. Apply these entrepreneurial life hacks to your self-employment journey for smoother sailing.
About Hannah Becker:
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