One of the positive effects of the lockdown has been the time that it’s given us to really tap in to our interests and hone them – to the point where a lot of us are considering entrepreneurship more seriously than ever. Having a side hustle in addition to your job can be hard to juggle, and the temptation to jump into your passions full time will be strong.
Entrepreneurship is often portrayed to be something that’s very sexy and appealing, but it can also be extremely stressful. And one of the most crucial ways to reduce stress is by having a strong financial foundation.
Here’s how you can prepare yourself, financially, to save for your entrepreneurial dream –
Don’t Quit Your Day Job To Get Started
A steady stream of income is hugely underrated. If you are itching to act on your entrepreneurial venture, don’t quit your job to get started! Setting up websites and social media accounts to start selling can be done in a snap, so there’s really no need to not get started. Holding on to your day job while getting started with your business journey also allows you to gauge how you feel about dealing with customers, vendors, queries and all the administrative dailies that come with running a business. I’ve personally noticed that a lot of people who love what their hobbies end up hating it simply because the administrative tasks put them off. When you hold on to your day job, you can gauge your own reaction to the every day stresses of business and figure out your next steps. Yes, juggling both will be hard and you’ll definitely see yourself working longer hours but the peace of mind that comes with this security is priceless!
Save For Six Months
If you’ve decided that you are indeed going to go down this path, allow yourself to save for a six month runway, or six months of your pay in the bank. This will be your capital and peace of mind! It also enables you to take the decisions you want to take without the pressure of banks or lenders who you might have to answer to. While loans and funding will eventually follow, this six month runway means you can set up on your terms.
Check Your Credit Score
Speaking of loans and funding, if you’re looking to start up on your own, definitely take the time to check your credit score. Your credit score is a 3 digit number that conveys how trustworthy you are as a borrower. Your credit score determines the amount you can borrow from the bank. Checking it in advance – and consequently – improving it can help you borrow on better terms from banks. You are eligible for a credit score report from CIBIL, the government’s credit information agency, once a year. Alternatively, there are a number of other options including creditmantri, paisabazaar etc.
Prep Your Insurance & Savings Accounts
A day job comes with certain savings and insurance protection – PF, health insurance etc. The moment you shift to entrepreneurship however, you need to set up alternate insurance policies and savings channels to make sure your savings don’t stop and that you’re always have a backup if you or your family runs into health issues. This is often overlooked, so make sure you set up alternate channels of saving and get yourself a health insurance policy even before you start pursuing your entrepreneurial dream full time.
It’s nearly impossible to predict the financial needs of your business, which is why you should aim to stay liquid during the initial days of setting up. Remember that 6 month runway we spoke about? Make sure it’s instantly accessible, either as a fixed deposit, or even in another bank account that you may have allocated for your business. The idea is to always have it on hand and not in hard to access investments like long term bonds or in mutual funds which may experience fluctuations in the short term. Staying liquid will help you stay on your feet as you set your business up!
Those are my five principles when it comes to saving for a side hustle. Are you a recent entrepreneur? How have you approached your finances? Let us know in the comments!