About 6 months ago, my wife and I decided to start a cafe and especially during the last 3 or 4 months, we’ve had our heads buried in starting up said venture. If you’ve followed this blog for a while, you may have noticed my sudden and mysterious absence. This was due entirely to starting up the business. Now that life has more or less returned to normal, or as normal as life will ever be while running a business, I shall return to blogging.
Starting a business has changed how I handle my personal finances, and since entrepreneurship is a dream many people share, I’ll tear into some of the specific effects entrepreneurship has on personal finance. Of course, these effects won’t be universal. Different businesses, different environments, and different owners will all mean different circumstances. But perhaps my experience will at least give some food for thought for aspiring entrepreneurs or fellow new business owners.
Starting a Business Cost us Money
Let’s get the obvious out of the way. Our business came with significant startup costs. These were largely from re-modelling an office space into a food service space. We were fortunate to be able to start the business without touching our retirement savings. However we also put on hold any further contributions to our retirement accounts. This will probably mean that we will have to play a little bit of catch-up. And had we tapped our retirement accounts we would have had to play a lot of catch-up.
During part of the startup process, my wife and I continued to work at our previous jobs. For the month prior to opening our cafe, however, we had both gone down to just a handful of hours. This meant that most of our income had dried up. Between this and the startup costs, we learned to pinch every penny. We thought we were thrifty before this. This pushed us further.
Starting a Business Changed my Perception of Money
Starting a business is risky. We knew that there was a very real chance of not ever seeing a return on the money we were spending. This was thousands of dollars that we had spent years saving up. There were times where I thought I was insane. But the experience really forced us to re-evaluate money and put money in perspective. In the end, it’s just money. It doesn’t define us (or shouldn’t anyway). If the business does flop, and we don’t ever see a return, it won’t ruin our life. In fact, because of the experience I’ve gained from the venture, I would walk away without regret if the business failed, despite having sunk significant money in (although of course, I’d still rather see it succeed).
Starting a Business Introduces a Lot of Uncertainty
When you work a regular job, you get used to counting on a paycheck, week in, week out (or month in, month out). There is a sense of security to this regularity. Perhaps a false sense of security, but a sense none the less. This goes out the window when you start a business. Sure, you can make all sorts of goals and predictions for how your business is going to do, but in the end, you just don’t know. You don’t even know if your business will be profitable, much less whether you’ll be able to take an owner’s draw. And if you do, how much can your business sustain? In time, trends will appear, but until then we continue to pinch every penny, and hope that the business will produce enough income to cover our needs.
Starting a Business Clarifies our Financial Goals
One thing that put us at ease amidst the expense and uncertainty of starting the business is how few financial obligations we have. We don’t have any car payments or credit card debt. We aren’t locked into a cable or dish subscription. Our insurance premiums are relatively low, in part because we have high deductibles.
This helped clarify our goal of making our budget as lean as possible- where we are locked into as few expenses as possible. Having a lean budget is beneficial more than just when starting a business. A lean budget makes it easier to weather any period when money is tight. On a lean budget your emergency fund will stretch further and you’ll be able to make ends meet on a smaller income. And of course, the flip side of having a lean budget is developing a strong emergency fund and investment income.
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- While I do strive to only write accurate information and dispense valuable advice, I am not a licensed financial adviser. All information is based solely on my personal experience and personal research and should be treated as such. Find out more.