Every American dreams of starting their own business. It’s part of the American dream, and it’s one that all of us deserve. However, this dream can be one of the most challenging to do, even at the very start. It requires a lot of time and dedication. It’s also going to need you to work while starting your business.
Small businesses are the most common kind of business in the U.S. They are the easiest to start, and they are the kind of business you should concentrate on as your first business. Here are ways to start saving to create your first small business.
How Much Do You Need to Save?
The average cost of a startup can be around $180,000. That’s a pretty sizable sum and one that’ll require you to work for more than ten years of your life if you’re earning the median income in the U.S. However, the reality is that you don’t need a startup.
Startups are an actual cash dump simply because you’re putting more than 90% of your money into employees who don’t know what they are doing. If you want a successful business, don’t make it a startup with over a dozen full-time employees. Instead, you should start one yourself.
A startup business with only you as the employee and maybe a handful of freelancers can reduce your starting costs by quite a lot. It’s estimated that you only need around $3,000 to $10,000 to start a microbusiness. Now that we’ve got that in order, we’ll teach you some saving skills that’ll help you reach this goal. But first, let’s talk about the easiest way you can get this money.
Business Loan and Mortgage Refinancing
One of the best assets you can have is your mortgage. Many people don’t know it, but their mortgage can easily have the money they need for their business. All you have to do is refinance it.
Refinancing your mortgage is a pretty simple task. All you have to do is visit your local mortgage lender, ask them to refinance your current account, and in a few business days, they should have a quotation ready for you. Also, feel free to create a better offer for you and your lender. However, if you can’t refinance your mortgage, you can always get a business loan.
A business loan requires you to have a good credit score. If you don’t have a credit score or have a mediocre one, you’ll have to improve it. It’s one of the best and easiest options in starting a business, but it’s not better than using your hard-earned cash to invest in your business.
Saving for a Business
If you want to start your business as early as next year, then you should begin aggressively saving your income. For this, we will be following the F.I.R.E. (Financial Independence, Retire Early) Strategy.
This strategy entails that if you follow its principles correctly, you can retire as early as your 40s. However, we won’t be doing that here. Instead, we will use it to benchmark how much money you should save to start a business.
The FIRE strategy stated that you should save about 50% to 70% of your income, and we suggest that you do the same. This is the fastest way you can start your business with your own money, and if you want it to work, it means living with only the bare necessities in life.
This means paying less rent, having fewer hobbies, and only using your income for your survival. So start thinking of relocating to a place that’s cheaper and away from temptation.
If you have some time in your hands, then you should consider investing. It’s a risky option and one that can jeopardize your plans of starting a business, but if you do it right, you can decrease your time frame of starting a business by half.
The rule of thumb of investing is to utilize 10% to 20% of your annual income to investments. The best and safest investments for the long run are high-yield savings accounts and index funds. Put some of your income into those accounts, and you should be ready to start a business in a couple of years.
Sell What You Don’t Need
If you’ve been working for quite some time now, there’s a good chance that you could have a sizable amount of assets. If that’s the case, it’s time for you to clean house and sell assets you don’t need.
Your assets are a part of your savings, and you only need to liquidate them into cash. However, feel free to use certain assets that you might need for your business so you can reduce costs.
Saving money for your first business is such a rewarding experience. Since you don’t have to pay for any business loans, all of your earnings will immediately go to you. This makes it easier for you to expand and grow your business.