If there is one thing that people fear the most in life, it has to be debts. Now, there are two sides to debts that you ought to know of. A debt can come in handy when you actually need it for a right cause. It could bail you out of a dire situation, you can use a loan to start up a business and it actually succeeds eventually and you get to pay off your debt.
On the other hand, a debt can become stressful when you are unable to pay it off within the agreed time frame. Talk about the pressure that will come along with the constant reminders that you need to pay off your loan. It even gets worse when your debt starts to accrue interest and you are not able to pay it off. This is one thing that makes most people want to stay away from debts.
It is advisable though that if you can, stay out of debt. The reason behind this is that as an entrepreneur you will never have constant pay. Never will you find that your business gives you the same amount of money daily or even monthly. There are good days and bad days as well. This is why as an entrepreneur, you need to stay out of debt.
There are some tips that you can have in place to ensure that you stay out of debt as an entrepreneur. Some of them are such as:
- Have a budget
This is one main tip that is applicable to not only entrepreneurs but just about anyone who is earning some money. It is important that you have a budget and stick to it, more so, if you are an entrepreneur. This is for the same reason as the one mentioned earlier, that you can never have a constant pay monthly.
Visit www.entrepreneur.com/article/204868 to learn more on how to stay out of debt.
Without a budget for your business, you may find that you are spending more than what your business is bringing in which could possibly lead to losses. While creating a budget for your business, there are various things that you need to know. Below are a few steps that will guide you in making a budget for your business:
- Tally how much money the business brings in monthly.
- Know the fixed costs that exist and how much they add up to. This could be the bills that one needs to pay to keep the company running.
- Know the expenses that vary and how much they add up to as well.
- Set aside money for ‘miscellaneous’. This is basically money that you do not spend each month, but you may need to use in case of emergency. For example, when you need to buy another machine.
- Sum it all up then come up with a workable budget.
- Stay away from credit cards
If you want to know the easiest way to get yourself into debt, it is through credit cards. As an entrepreneur, you need to stay away from credit cards. Spend money that you have on things that you need only when you have to. In as much as it may be tempting to swipe that plastic card and get what you please, try and stay away from it.
You may be tempted also to have the notion that you will simply apply for a debt consolidation plan and get everything in place into time. This is the worst mistake that you can ever make. These are some of the debt consolidation traps to avoid.
On the other hand, though, in case you find that your company is not doing well and is heavily in debt, then you can consider taking a debt consolidation plan. Notice that this is a debt consolidation plan for a good cause, for the benefit of the business and not self-gain.
- Master the art of prioritizing
This is more so when it comes to bills payment. Have a list of the bills that you need to settle and know which is more important than the other. Pay off the ones that the business cannot run without first and so on. You credit card debt should definitely be at the bottom of the list. In whatever you do, try as much as you can to stay out of debt.
- Have something on the side that is income generating
Besides the business that you are running, you need to ensure that you have another source of income so as to ensure that you can still pay your bills even without the business or just in case things don’t work out.
It is in the mind of every entrepreneur to do all it takes to ensure they succeed. So it should be in yours.
- Do enough research
No one dives into an ocean without knowing what awaits them. This is why you need to ensure that you do your research before taking any loan, to begin with. Know what interest that it may be accumulating and after how long. Find out whether the loan that you are taking is suitable for your business plan or not.
Find out also whether or not the loan will affect how money flows in your business. After putting all these into consideration, then you can now make the decision.