When you work for yourself, there are many financial challenges that come along with it- especially when you’re just starting out. In the U.S., there are currently millions of Americans who work for themselves, and many of them dig themselves into debt without a safety net. Not only is this a difficult and unpleasant situation, but it can significantly hinder your ability to do the work you set out to do.
You don't have to let debt stand in the way of your dream of running your own business. Here are three things you can do to keep your debt to a minimum as you go about building your income stream:
1. Pay attention to your cash flow. You need to be very clear about the flow of money coming in and going out of your business. This is particularly important if you are bootstrapping your operations. The best and easiest way to do this is to get an accounting suite, such as Quickbooks or if your budget is really limited, you can also check out the free opensource option GnuCash. These programs generally offer a full range of features, such as financial reporting and billing- all of which will help you to stay on top of your cash flow. By being in touch with your income and expenses, it puts you in a better position to make the financial decisions that keep you within your means.
2. Know when and how to hire. As a self-employed professional, it often makes sense to outsouce some of your responsibilities. But when you do, here's a rule you want to stick to: never bring anyone on board unless by doing so you can anticipate gaining twice that person's wages in new revenue- whether directly or indirectly. For example, you may hire a freelance virtual assistant or social-media expert who can free up your time for more direct revenue generation. To ensure that your hired help will deliver on the additional revenue, you need to be very clear about this person's goals and job summary, and then carefully monitor your revenues after hiring.
3. Use credit and financing responsibly. Even if you are a conscientious budgeter, you may find yourself needing to tap into outside financing- whether it is in the form of a credit card or even a small loan from friends, family, or peers. The process of deciding if and how much money to take is similar to that of whether or not to hire someone. You want to be as certain as you can that the financing you receive will either be paid back quickly when products are sold, for example, or will be used to expand your business in a way that will lead to an increase in revenues.
In short, working on your own doesn't have to leave you drowning in debt. With a little forethought and discipline, you can keep your debt manageable.