The one thing that has connected most us small business owners during this period of lock down are concerns over money. Literally overnight we went from having viable businesses that kept us afloat to being literally unable to operate.
For so many of us this has led to a period of reflection, what do we really need vs what do we want, can we manage on less? Because money is so deeply rooted within us emotionally sudden significant changes in attaining it can cause severe anxiety and stress, so it’s crucial that before we venture back into the big wide world, we earn some strategies that help us cope in what may be a brave new world.
1. Start by making a list of every single thing you pay out, and I do mean everything. Those small magazine or app subscriptions, mobile data costs, everything. You may be surprised at just how all the little things add up into a sizeable amount.
2. Make sure you know and have taken advantage of what financial help is currently available to you, personally and as a business owner. Dependant on your particular circumstances there are a raft of different schemes that you may be able to tap into, make sure that you what these are and that you keep updated on what’s available as this changes from week to week due to the level of complexity involved especially around business finance. If you are still unsure check out our blog post “Some business help for COVID-19” which offers advice and links to available schemes.
3. Look at your usual spend and where you can cut back. The obvious ones are eating out and cinema trips etc however also check on things like gym membership, some gyms have automatically stopped taking fees but double check this is the case. Make sure that you are aware of any household bills that can be delayed until you are earning again such as your mortgage, and make sure that you are aware of how and when any shortfall will be repaid. Consider things like car insurance as your payment is likely to be linked to your mileage. Given that your mileage will have significantly reduced especially for mobile therapists you may be able to negotiate a better deal to take account of this lack of use.
4. Automate your money, you may think you do this already, but do you really? Is every single bill you pay set up as a direct debit or standing order? If not look at what isn’t and understand why you haven’t set it up, if it was just can’t be bothered then get on that now, once it's automated you don’t need to remember that payment again and risk forgetting and incurring charges. If you automate your financial world, you uncouple it from your emotional world and can enjoy that feeling of control instead of the panic that so many of us attribute to finances and its planning. Do it now today before the busy world is back at our doors and it slips down the priority list.
5. Create a financial plan. What do you really want from your life and your finances, what is your goal and what steps do you need to take to get you there? Having a plan reduces the emotional burden created by finances. Start by having that up to date list of what you spend v what you earn. Whatever is left is your money, this is the money you can use to create or grow the dream. The point of the plan is detail out how you use your current finances to get you closer. By creating the plan not only does it remove the emotion, but it sets out your intention and makes it real and tangible.One word of caution though, the plan is supposed to be used and flowed (like a recipe)it’s not done as a one-off exercise it needs to be the framework for your financial future.
6. Download a spending tracker app. There are lots to choose from so take a look and see which its your requirements best. The key here is to use it, every single time you pay for something put the details into your tracker. Not only is good discipline but it will allow you to see clearly where you can make additional savings that you hadn’t considered before.
7. Save for a purpose, this links back to your financial plan that we discussed earlier. That proportion of money that belongs to you once all of your commitments have been satisfied needs to include a savings element. Ideally your financial plan will have this money split out to include saving for a rainy day money (the money you need tucked away with easy access for things like a burst tyre or a broken boiler) then there is the dream making money, this money may be saved in a bank account (not the best idea from a compound interest perspective) or it may be invested in anISA, property or shares etc. This money has a longer-term purpose which may be as simple as taking early retirement, funding the dream house/car. Whatever the dream is saving toward it is saving for a purpose and the dream is what makes putting that wee chunk away every week or month all the more palatable, hence it’s an important strategy.
8. Reduce your bank accounts, how many of us end up with savings account in one place, a joint account in another, current account somewhere else and then there are your business accounts. Take a look at where you stash your money and try to simplify this as much as possible. Do you really need all these fee attracting accounts and cards and PIN numbers, passwords etc. Try to whittle it down to the minimum you need and preferably all in the one place. Not only will this simply your financial life but may also save you over the longer term in fees.
9. Do you know what is essential in your life?this links back to both your saving with a purpose strategy but also to the first pout that underpins everything and that is knowing what your outgoings are v your income. How much of that is really essential to your life? Do you actually know, have you sat down and really interrogated every area to make sure that its needed? Does what you buy get you closer or further away to the dream, you now the saving with purpose dream? If not, do you really need it? Do you remember the episode from Sex and the City when Carrie realised that she didn’t have enough money for a down payment to buy her apartment, when she counted the cost of her shoe collection, there was her down payment. Her spending didn’t take her toward her dream of owning her flat, it took her away from it!
10. Be properly insured, ok I’ve been telling you to cut costs and insurance is an expensive costs for sure BUT it’s a necessary evil which prevents you having to dip into that saving with a purpose plan to bail out a break in, a flooding ora fire. Now is a good time to review your insurances, are they still relevant, do they still give you adequate cover for your belongings if you were to lose them and crucially do you have insurance at all. More now than ever your business insurance is crucial, make sure you have reviewed this cover in light of current events and ensure there are no small print clauses that prevent payout, as we move back to re-opening our businesses make sure that you are covered for any coronavirus related issues that may potentially be an issue for you. This is one area of your finances that you don’t want to skimp on even if it reduces the save for a purpose fund.
I hope you found some of these strategies useful, some you may have done already as you hunkered down into lock down but there may be others that haven’t occurred to you. A wee bit of time now working through these 10 points may potentially help you hugely in the future so get cracking.