I want to be the boss! – Part 2
Question: 6 frogs sit on a lily pad, one decides to jump off – how many are left?
Answer: 6 frogs
So often people decide on something but forget or fail to take any action about it. It’s important that you take action – no matter how small – toward your goal. If you don’t take any action – physically – nothing will happen.
Many times fear paralyzes us from taking action. Following are some action steps to prepare for your business (before you quit your day job!).
Step 3: How much do you actually need? Many people think they have to replace their current income 100% before they start their business. When you first start your business, you need to cover your obligations and may choose to forgo some of the extras while your business grows.
Sub-tip: For dual income households, you’ll want to track the contribution of the person who wants to start their own business to stick with realistic numbers.
To determine what you actually need – track what you actually spend. You can do this in one of two ways – looking back or tracking your expenses forward. Either way, you’ll want to track your expenses in two main categories:
Sub-tip: You’ll want to review 6 to 12 months worth of expenses to make sure you don’t miss any – especially if you pay expenses such as insurance once or twice a year.
Category 1: Living expenses – these are expenses that don’t go away, whether you’re working or not. They may include average groceries, utilities, mortgage payments, loan payments, taxes, and any other expenses that are not optional to keep living. Another way to look at it, if you lost your salary today, what would you still need to pay for?
Category 2: Discretionary expenses – these are expenses that would go away if you no longer had your salary. Tracking these expenses can show you areas you might consider cutting back on for a period of time. Pay special attention if you withdraw cash from your account each week – where does that money go? Does it just seem to disappear? It could be another area you could cut back.
Next week we’ll talk about what to do with all these numbers and what your next step is to becoming your own boss.
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