To say entrepreneurship is vital to the U.S. economy would be an understatement. The evergreen benefits of unlimited earning potential, no boss and prospect of work in a field of interest lead many people to follow their dreams and creating jobs that fuel the economy as a result.
Nearly 28 million small businesses exist in the U.S., compared to under 19,000 companies with more than 500 employees. More importantly, small businesses employ 99.7 percent of the U.S. working population.
But in an age of exorbitant student loan balances and excessive credit card debt, the dreams of many otherwise-promising entrepreneurs are being squashed before they can begin.
To leave your financial turmoil behind so you can start the SMB you aspire to run, consider the following tips.
Commit to a Debt Avalanche Plan via Debt Snowflake Approach
Even with income, a hearty debt amount can be intimidating to approach. This results in a lot of people paying the minimums on all their balances to keep their heads above water. But every month spent not aggressively repaying debt means additional months spent living in it. Entrepreneurial-minded individuals are well-primed for the debt avalanche plan but exercised with a debt snowflake approach.
The debt avalanche plan focuses on paying the minimum balance on each account and allocating any remaining money toward the balance with the highest interest rate. The snowflake approach offers the entrepreneurial spin, every day-to-day dollar saved, found or made — such as cutting your gas bill in half by biking to work, finding $10 on the ground, selling an unneeded possession — is funneled to the highest-interest balance to accelerate the time until your debt free.
Leverage Balance Transfers
If you’re dealing with multiple credit card balances but haven’t damaged your credit too much with your payment activity, a balance transfer could be the boost that gets you out of the hole.
Balance transfers usually carry a 3–5 percent fee but can also offer terms like zero interest for 12 months. The savings on interest and time to pay back debt make many balance transfers financially advantageous even after factoring in the transfer fee.
Align Your Monthly Budget & Lifestyle
What kinds of purchases do you feel guilty about? Which ones bring you enjoyment? How can you exercise frugality in your day-to-day spending lifestyle without severely constricting the hobbies and activities that bring you pleasure? You should be asking yourself these questions and more when trying to determine a monthly budget that works both for your current lifestyle and long-term goals.
Set Incremental Savings Goals
You can’t save money without keeping a monthly budget. However, without setting incremental savings goals in the short- and long-term, you’re leaving your SMB plans up to chance. Consider advice from financial thought leader, Andrew Housser, who recommends envisioning where you want to be in one, three, five years and beyond—and then aligning your daily actions to help that vision become a reality.
Keep Learning About Financial Wellness
The internet opened the floodgates for knowledge on every topic imaginable. Finance is no exception. From finance blogs and podcasts to industry newsletters and in-depth books from experts, plenty of resources exist to improve financial acumen. Financial education might seem like a moot point as you’re steadily climbing out of debt, but running an SMB requires a whole other level of economic understanding and know-how. Starting sooner versus later gives you more control over your business’ initial trajectory.
Personal debt ranges from being a racket to a life-altering haze that can affect every area of life. Don’t let something as exciting and ambitious as starting an SMB fall to the wayside because you can’t get out of debt. Employ the above strategies to climb out of the cellar, and then ride the momentum into the launch of your SMB.