Now that your are newly unemployed (or not so newly unemployed) or underemployed in a job that isn’t fitting the bill we need to start finding a way to get you back on your feet.
Now since you have gotten this far into this blog I would assume that you are throwing around the idea of starting a small business. That is a great idea no matter what your situation is. Even if your working now a Micro-business can be just the thing to make things financially solid. If you are financially solid now this will make you much better off because if you follow my steps and look out for the problems I bring up there is no risk.
Even if your retired a Micro-business can be just the thing to stretch a retirement account into a real money-making venture.
Getting your financial house in order. You are going to have to cut through your expenses and lean down your debts no matter how profitable your new business will be. Stop wasting money on frivolous things that do not matter.
THE FIRST AND LAST RULE OF BUSINESS IS BE PROFITABLE ALL THE TIME.
What is profit and how much money are we talking about? How much money are we going to have to cut from our household expenses to make this work? Well the math is pretty easy. Take whatever you spent on everything for the last three months from your bank statement. Now divide that number by three for your average quarterly expenses. That is your monthly expenses in a rough average. Now take whatever amount of money you have and divide that by your monthly expenses. If you have six months worth of income (like you should at a minimum) then your wealth is #6.
Wealth = amount of time in months you can live at your chosen quality of life not counting on any more money coming in.
If you have 16,000 in liquid assets and your expenses are 3800 a month then you are 4.21 months wealthy.
Some people have enough in assets (and in how they are growing) that they are infinitely wealthy. Which means they are spending equal to or less than the amount they are bringing in each month without touching the principle. That is your goal and according to Mr. Money Mustache it’s around 4% of your total assets historically. I cant confirm it but it sounds both logical and a damn fine place to start.
So in the big picture view if you have a set income (savings, unemployment checks, severance package, whatever) is it easier to increase the amount your bringing in or the amount that is flowing out. If your an average American it’s the amount your spending. This is not a blog about reducing your personal financial consumption its about starting a business but the two go hand in hand.
I recommend the Blog Mr Money Mustache as a great way to start.
Unless you control your personal spending you don’t have a chance of controlling your business spending. Owning a business will be a huge burden on you even following the steps I am laying out. This will not be easy but it will be fun and challenging. The ideas of limiting your household spending to the bare bones will make your burden much lighter. A simple rule to follow is that beyond groceries and your mortgage every purchase over 10 dollars needs to be approved by both you and your spouse as a real necessity. Then you need to sit on it overnight at first to limit any impulse buying. This one practice could reduce your expenditures dramatically.