Any entrepreneur knows you need to spend some money to make money. But developing poor spending habits can actually prevent you from being as successful as you hoped. When you’re budgeting poorly, you can stunt the growth of your business.
Many entrepreneurs develop some not-so-great spending habits during their time as business owners. But in order to keep your business afloat, you need to get smart about the money you spend. Identifying poor spending habits early on can help you be a better entrepreneur.
Let’s take a look at eight of the most common bad habits an entrepreneur may make when spending, and what you should do to avoid it.
1. Relying on Borrowed Money
Many entrepreneurs use loans or credit to get themselves started. While using borrowed money is fine from time to time, you shouldn’t need it for typical day-to-day expenses. If you’re constantly low on cash or unable to purchase the low-cost items you need outright, you may need to reevaluate your spending.
2. Making Emotional Purchases
Sometimes you’re at a store, trade show, or browsing the web when you see something that you think you just need to have.
You buy it, but you soon realize that it was just an impulse buy. While you may get some cool items this way, emotional purchases can throw your budget off and hold you back as an entrepreneur.
If you see something you think your business needs, make sure to give the appropriate amount of time to think it through.
3. Not Creating an Accurate Budget
Not having a budget is one of the biggest mistakes entrepreneurs make. When you’re unsure of how much money you’re bringing in and where you’re spending it, you can easily find yourself at the end of each month without any cash – or even in debt.
Creating a budget helps you set limits on how much you can spend in each area, eliminating your risk of accidentally overspending.
4. Not Tracking Your Budget
Creating a budget isn’t enough to get your bad spending habits in check. You also need to track your budget to ensure you’re staying within your defined limits.
Tracking your budget helps you see exactly what you’re spending in each department, whether or not your budget is accurate and what areas you may be able to cut back in.
5. Not Planning for Big Expenses
There are many different expenses an entrepreneur needs to make for their business. The majority of those purchases can be predicted. Whether it’s new equipment or furniture or software and programs to help your day-to-day, you need to properly plan for these big expenses.
Knowing you’re going to need to make a big buy in a few months can help you shift your budget or minimize your spending so you can save enough money in the future.
6. Living Outside Your Means
Entrepreneurs want to appear successful from day one. Unfortunately, not many become an overnight success. Falling into a trap of trying to impress friends, family and competitors means you may actually be setting your business back, making it even more difficult to become successful.
Make sure you’re living within your means with your spending – even if that means you can’t have the latest tech or the coolest office space.
7. Paying for Unused Services
Just about any business these days relies on some software or program service to manage their day-to-day operations. From cloud storage to CRMs, these programs cost money.
If you’re paying for these services, make sure you’re using them to their full advantage. If you’re constantly buying new services but not using them or you’re only using a small piece of them, you’re not getting your money’s worth. Evaluate the services you pay for and see if they’re all necessary.
8. Not Paying Yourself First
As an entrepreneur, you likely rely on the income from your business to live a personal life. While you shouldn’t give yourself a salary that isn’t proportional to the amount of money you’re bringing in, you should be paying yourself. Putting money aside to personal expenses can prevent you from wasting money within your business.
Making smart purchasing decisions is important for any entrepreneur. If you feel like you’re guilty of any of these items, take a moment to reflect on the changes you may need to make. Getting your finances in order can help your business become more successful and eliminate some daily stress from your life.