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Whether you’re taking a leap of faith and starting your own business or you’ve been running a successful business for many years, it’s important that you save for a rainy day. Like any business, there are good times and bad times. Your income may exceed all expectations one year, followed by lagging sales the next year.
Truthfully speaking, there’s no way to predict how much you will earn from year to year. You may not be able to control every financial aspect of your business, but you can take steps to save money and build your emergency fund.
1. Pay yourself first
Even if you’re operating a startup and don’t have a lot of disposable income, always pay yourself first. This is one aspect that’s often overlooked by new and seasoned business owners.
Understandably, it can be difficult to pay yourself first when bills are due. But if you get into a habit of feeding your savings account, you can quickly build your cash reserve, which can help you survive slow periods.
How does this work?
Each time you receive a payment from a client, take 10% of the earnings and deposit it into a savings account. If 10% is a stretch, start with 5% and gradually increase contributions as your income grows.
2. Compare certificate of deposits
Your regular savings account is one option for stashing emergency cash. But you might do better with a certificate of deposit. If you’re able to snag the best CD rates, you can maximize your savings and reach financial goals sooner.
And the best part is that there are several options available to you. For example, Discover Bank offers competitive CD rates plus a variety of CD terms. This is just one of many banks available to you. Do your research, know what’s available and choose the best account for your money.
3. Use a professional tax preparer
You can save money by preparing your own income tax return. However, unless you have a background in accounting or tax preparation, you may overlook some important tax deductions.
As a small business owner, you need to take advantage of every legitimate tax deduction to lower your taxable income. The lower your taxable income, the less you owe the state and federal government.
For example, you may be familiar with mortgage interest deduction, childcare credits and self-employed health insurance deduction. But did you know that you can write off the depreciated value of your vehicle and other business equipment?
A professional tax preparer can bring overlooked deductions to your attention, which can reduce how much you owe, or increase an anticipated refund. The money you receive from the government can help grow your savings account, or you can use this money to open a CD with your bank.
4. Shop around
Whether you’re buying clothes, other personal items or equipment for your business, always shop around and look for the cheapest prices. Even if business is booming and you have plenty of disposable income, a frugal attitude increases how much you can save each month, which ultimately builds your bank account.
If shopping online, conduct a Google search and look for coupon codes or promotional codes. Use coupons when grocery shopping and plan your trips around double coupon days. Look for buy-one-get-one-free coupons when dining out or share an entrée.
When planning a trip, shop around and compare airfare, car rental and hotel prices among different companies. If you have a rewards credit card, redeem your points for travel and save.
5. Skip the help
You may be eager to hire an assistant. However, seriously consider whether this is necessary. Sure, this person can help with day-to-day operations and lighten your load. But if your savings account isn’t where it should be, hiring help may not be the best move for your finances – at least not now.
Hold off on hiring an assistance and focus on feeding your savings account.
6. Run the business from your house
There are benefits to getting an office space. You don’t have to worry about family distractions, which can decrease productivity. Plus, it’s easier to separate work life from family life. However, it’s important that you count the cost.
This decision adds new expenses, as you’ll have to pay a monthly lease and utilities, plus spend money to acquire the necessary equipment. This is an excellent move if you have a solid savings account or certificate of deposit, and if you’re able to continue saving once moving into the new place. But if you don’t have a six to eight-month cushion, or if an office space will significantly impact your ability to save, it’s probably best to keep your office in the home until your income grows.
Saving money can be challenging when you’re self-employed, but it’s possible. Just remember the basics: pay yourself first, find and compare the best CD rates, and limit your expenditures. These measures can free up cash, plus take your savings to a whole another level.