Get your financial house in order! Yesterday I gave you some insight into why you should keep your day job. I told you to not be lured by the sexiness of quitting. Now I will give you ten steps to make your transition from your day job to your home business.
This is not gambling with your family’s savings and hoping to win the lottery with your home business. This is an intentional plan that takes action. It’s not sexy, it’s not a thrill ride, and your success story will be the story of a home business owner who succeeded.
Steps 1-5 deal with you getting your financial house in order. Quitting without being financially secure is not smart. You know the countless horror stories of failed entrepreneurs. Before you make that prison break make sure you can survive the pitfalls that will occur.
Five Steps to Get Your Financial House in Order
Step One: Keep Your Day Job
Your job is your best source of creating wealth. I don’t care if your job sucks, your boss is mean, or you hate the commute. Your job pays your bills and provides food, shelter, clothing, and transportation. Your job is the income source that will fund your business. It will pay for marketing, training, products, and services.
You can build your emergency fund, pay all your debts, and be ready when Mr. Murphy knocks on your door (Murphy’s Law anything that can go wrong will go wrong). Mr. Murphy tends to stay away when you keep your day job.
Step Two: Create a Cash Flow Plan
It’s time to put your personal finances and business on a budget. Oh no the “B” word! People hate budgets. They feel constricted when it comes to budgeting. It has a water and bread connotation. That’s why I call it a cash flow plan. A cash flow plan sounds better and it makes you feel like you have more money.
Creating a monthly budget will help you fund your business and eliminate useless expenses. You can track your spending and uncover any money surpluses. People procrastinate on creating a budget because they fear where their money is going. You are an entrepreneur you don’t know the word fear. Do your cash flow plan.
Step Three: $1000 Emergency Fund
I recommend a 3-6 month emergency fund for living expenses. The first goal is to get $1000 in your savings. Mr. Murphy has a way of visiting people who are not financially ready. Emergencies like blown tires, air conditioner stops working, fender bender, or a trip to the emergency room will happen. If you don’t have any money you are in trouble and you pull out that credit card. You just added more expenses to your cash flow plan. Expenses that your emergency fund could have handled.
With your job and home business you should get to $1000 quickly. Fight temptation and don’t spend the money. It’s for emergencies only! Hint… the pizza guy is not an emergency. New shoes are not an emergency. Fast food for the kids is not an emergency. Only you can decide what an emergency is for your family. Get that $1000 and put it away. Put it in a frame and say “In Case of An Emergency Break Glass”.
Credit Donkey Says that only 59 percent of Americans have at least $500 in a savings account. That’s horrible for one of the richest countries on the planet. Entrepreneurs should have better money habits than the average American. Put away your $1000 now.
Step Four: Pay off those Darn Debts
In my office, I have agents who quit their jobs or got laid off and don’t have a penny to their names. It takes money to become a licensed real estate agent and you have to pay for classes, Realtor dues, and MLS Fees. You may have a monthly office fee. We are talking about at least $1000 and you haven’t sold one house yet. They don’t have the cash and they start using their credit cards. Most agents quit during their first year and sadly the debt stays around.
For my internet marketing team if you buy all of our products you will spend $6000 to learn how to succeed in your home business. Most people don’t have this money saved and they use their credit cards. Saving money to purchase items is smart. It keeps you out of debt. People don’t practice delayed gratification. Sales justify purchases. Bootstrapping is the best way to expand your business.
Going into debt doesn’t guarantee sales. Debt kills businesses, murders your dreams and debt eats up your cash flow. Instead, of reinvesting in your business, you are paying your debts. Do not listen to the people who tell you to use your credit card to purchase the next super-duper scooper. Pay cash only. The next big thing and shiny objects will be there when you can afford to pay for them with cash.
The Real Stats on Debt
Keep your day job and pay off those debts. Take 20% of your business income and pay off your debts. According to Nerdwallet.com and Credit.com the average American household carries this amount of debt:
- Average credit card debt among indebted households: $15,263
- Average credit card interest rate: 14.95% APR
- Average mortgage debt: $147,591
- Average outstanding student loan balance: $31,646
- Average auto loan debt: $30,738
The average nonmortgage debt payment is $1100 per month. That’s monthly payments on credit cards, personal loans, student loans, and car loans. How much marketing can you do with an extra $1100 per month? How fast can you quit your job if you don’t have to pay $1100 per month on debts?
read related story: 4 simple debt freedom solutions
There are plenty of books, classes, and seminars that teach you to become debt-free. I went to Financial Peace University. Three things to do now to become debt-free:
- Don’t buy anything else on credit
- Live on cash only
- Find a book, class, or training program that will help you control your finances
Step Five: 3-6 Months of Living Expenses
After you get your $1000 emergency fund and you paid off all your non mortgage debt it’s time to put away 3 to 6 months of living expenses. When you quit your job this will be your safety net. This will get you through the lean times.
Final Thought
Getting your financial house in order is essential to your business success. Work with your spouse, partner, or friend so you can stay accountable. This is a team effort. Act on these five steps. Be in line with your job, get a cash flow plan together, create an emergency fund, and pay off those debts.
Tomorrow steps 6-10 deal with you keeping your full-time job and building your wealth part-time.
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