If you’ve ever worked at a startup business, you know they face several challenges. Perhaps the biggest is getting enough funding for your startup to thrive without putting your personal finances at risk. Luckily, you can take several steps to fund your startup without taking too much money out of your own pocket.
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Know Where Every Dollar Is Going
Image via Flickr by 401(K) 2013
Most startups fail because they run out of money before they can ever gain traction. That’s why it’s so important to know exactly how you’re spending every dollar your business has. You need to establish a strict budget and then make sure you’re always following it. This is also true for your personal finances. If you track every expense you have, it’s easier to see where you’re spending money and where you can cut back to save money.
Get Startup Funds From Outside Sources
Although many entrepreneurs think they have to dip into their personal savings to fund their startup, you can find a variety of other sources to tap for funds. While bank loans and loans from the government are two of the most common options, you can also try crowdfunding, applying for grants, or looking for an angel investor. Additionally, consider joining a startup incubator, which can provide free resources that include consulting, office facilities, and funding.
Separate Business and Personal Finances
Keeping your personal and business finances separate is one of the most important steps you can take early on to fund your startup without bankrupting your life. This can help you in several ways. First, it gives your business more credibility. Second, it makes it easier to pay your taxes. Finally, it’s essential to helping you reduce personal liability should something negative happen with your business or if you ever want to sell it.
Plan Your Personal Finances Appropriately
You never know what will happen as you get your startup going, so it’s always a good idea to have a plan in place for your personal finances. This includes making sure you have enough money in savings to help you cover a couple of months of living expenses and managing your personal cash flow just like you manage the cash flow for your business.
One step you can take to get your finances in line is transferring your credit card balance to get lower payments or interest rates. This can help you save money so you have more available to deal with the irregular income that comes with a startup.
Make Sure You Pay Yourself
You’ll be putting in lots of hard work and effort into your startup, but that’s not going to put food on the table or pay the bills. It’s important that you pay yourself, even if it’s just enough to cover your living expenses. Additionally, don’t forget to set up a retirement account and put away as much as you comfortably can each month.
While running a startup has many challenges, funding it without hurting your personal finances won’t be one of them when you follow these tips.
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