Are you a millennial entrepreneur? According to the Ewing Marion Kauffman Foundation, the peak age for starting a business “is closer to 40 than 20,”1 which is not surprising considering the maturity and life experience needed to effectively run one. Because of this, millennials still have a few years left before they’re the prime age for establishing their own company; however, that’s not to say those in their 20s aren’t pursuing entrepreneurship currently. The foundation also found that millennials are founding businesses at lower rates than previous generations when they were around the same age.1
While there is no definite answer for why this is happening, some people contribute this slowed pace to “student debt, timing of entry to workforce…and housing costs;”1 the list goes on and on. Young Invincibles, a millennial advocacy group, polled millennials and found that many view student debt and minimal retirement savings as obstacles to forming their own company.2 This poll, conducted by North Star Opinion Research in 2015, also discovered that about 50 percent of millennials “either own a business…are planning to start [one], or would like to” (but don’t currently have any concrete plans).2 If you’re a millennial looking to start your own business, here are four essential financial tips to reference as you work towards building your empire.
Tip #1: Don’t Put All Your Eggs in One Basket
As cliche as it sounds, you never want to solely rely on your new company for income when you’re just starting out. In some cases, you may not actually turn a profit for a couple of years (if at all). Because of this, you want to make sure you have multiple streams of income to help support you as you grow your business. From Ubering to renting out your apartment as an Airbnb, there are a variety of ways you can ensure you always have some cash coming in. Before you quit your full-time job for good, think about all the ways you can generate income in the meantime while you generate some initial revenue. You never want to cut cords completely without first having an idea of how you’re going to financially support yourself while your business grows.
Tip #2: Get Professional Advice Anytime You Can
While you may not have a bunch of assets to pass off to a wealth manager, you can still get some hourly financial advice in the meantime. Not all financial advisors have an asset minimum, so it’s worth exploring your options before you write off the opportunity completely. Even just a couple of hours of dedicated, objective advice can save you years of headaches later on down the line. While some people may be intimidated by the thought of hiring a financial advisor, there’s no harm in at least trying one out to see if they can add any value. Especially when you’re starting your own company, there are numerous decisions you’re going to have to make that are going to have a direct impact on your financial future. Don’t be the entrepreneur who failed simply because they lacked basic financial knowledge.
Tip #3: Separate Your Accounts
In order to keep track of your business expenses (versus your personal expenses), you'll want to get a second checking account that’s purely used for your company. This way, you will have a clear view of how much money is coming in and how much is going out. Once tax time comes around, it will be much easier to identify which expenses you can write off, too. However, be sure not to fall into the trap of signing up for a bunch of credit cards that you won’t be able to pay off in time. Credit card debt can sneak up on you if you’re not careful, so it’s important to stick to buying only the things you can afford. Running a business is expensive as it is, and profit is usually slow to pick up in the beginning. However, as long as you’re smart with your spending, you should be able to stay on track with your projections.
Tip #4: Budget, Budget, Budget
As an entrepreneur, it’s going to be extremely important that you stick to a budget as you never know what kind of expenses may come up. If you’re someone who struggles with putting pen to paper, consider downloading a free budgeting app, such as EveryDollar, that can help organize things for you. Whatever you do, make sure you have a clear view of how much money you’re spending every month so you don’t go off the rails and drown in debt before you even become profitable. While it will take some time to get used to things, over time, you’ll question how you ever managed life without a budget! If you’re someone who struggles with putting everything on your credit card, consider switching to cash. Oftentimes, handing over cash — rather than a card — is going to make you more mindful of what you’re spending, in turn helping you reduce impulse buying decisions.