Most people make the mistake of looking at a financial safety net as some sort of restriction. However, the truth is, having a financial safety net for your business is the best way to create freedom. The main reason is that it leaves room for a mistake.
Namely, the main reasons why people do not try to experiment and actually take risks is out of fear of making a serious mistake. And when you make a grave mistake in the business world, you are not facing ridicule, but bankruptcy. A financial safety net is there to save you. People make mistakes, it’s a part of doing business, and don’t even get us started on bad luck. With a good safety net you will be able to take that risk, and to put yourself out there. And, of course, if you just want to coast along, you can do so safely, knowing that even the worst market crash is something you will be able to endure.
Never stop improving
A somewhat unorthodox piece of advice but hear us out. Think of yourself as an investment and having the safety net around yourself. If worse comes to worst, and you start getting in trouble, you will at least be agile and ready to move on. By always honing your skills and your professional knowledge, you will always be a valuable asset in your industry. Furthermore, keeping yourself on your toes means that if any serious changes in your industry happen (like a brand-new technological marvel) you will recognise it quickly. Instead of becoming obsolete, you will be able to stay competitive.
Furthermore, a big part of improvement that most people neglect is stress management. Burnout is a serious matter, and stress management means that if tragedy strikes, you will be able to handle it.
Set up an emergency fund
You should set up some money on the side in case of emergencies. A general rule is that you should have somewhere between six to twelve months of your expenses covered with your savings completely. This means bills, rent (or mortgage), food, school supplies, but also, if you can, general daily spending.
Now, of course, the size of the funds is up to you. Think of how risky the venture you are trying out is. Then, see how fast can you get back on your feet if it fails. Can you start up a new company soon? Are other places hiring? Remember, this isn’t about you giving up at the start. It’s more like giving you room to try out exciting new, risky, things, while not worrying about starving to death or not being able to pay the bills.
Make smart investments
Investments on the side are an excellent way to start a financial safety net but are woefully underutilised. By making an investment, you make some money outside of your actual business. Furthermore, if you play your cards right, you may just set yourself up with a stream of passive income.
An excellent option is investing in real estate. Real estate doesn’t devalue with age if you handle it properly, and can even increase its value if the housing market goes into that direction. And if you need to, you have an asset that you can essentially sell whenever you want, if needed. Of course, a couple hundred per month from rent is also a nice addition.
You should also think about getting best alternative investment out there if you really want to stand out. Most people invest in monies, or play the stock market. What people forget is that they can invest in things like wheat, grain, or some other agricultural business. On the other end of the spectrum, diamonds have been proving as a nice opportunity to make some extra money. And of course, if you’re tech savvy, investing in the newest technological trend may just pan out in you favour.
Minimise liabilities and commitments
The point of a safety net is to keep you afloat in case you run into trouble. Another way to do this isn’t just by making extra money, but by minimising your bills and debts. This can range from things like being a bit more thrifty and money-conscious at home, to re-evaluating the entire structure of your business. Trim the fat, get rid of any extra obligations that really have no room to be there. There may be a supplier that can give you the same quality of goods, at half the price, compared to your current one. If needed, hire a tax accountant to assist you in checking where your extra costs lie.
Being an entrepreneur is all about having freedom and control over your time. With a proper safety net, this freedom will be practically cemented. A safety net gives room for risk, challenge, and experimentation.
“The opinions expressed by BizWitty Contributors are their own, not those of BizCover and should not be relied upon in place of appropriate professional advice. Please read our full disclaimer."
