How to get the most from your part time home business
This little entry concerns itself with one prevailing issue that I see people falling for time and time again when they take up a part time business to earn some extra money;
-They spend it all without a plan.
So you've run your Avon, Kleeneze, Ebay or other part time money making effort for a little while and notice that you don't seem to have any more cash now than compared to when you started it. You don' t know where the money's gone and you decide to look over your past figures (because you HAVE kept track of your actual income haven't you??) and they show that you've made enough money to pay for a short family holiday somewhere - but where has it gone.
Clearly some of the income may have been spent on replenishing your stock, postage or other incidental costs that you need to incurr in order to continue trading. Let's ignore those for now and if you want to I can come back to those at another time, but let's just say that these are the things that if you stop buying it you will eventually be unable to continue to trade - these are your essential recurring business costs. Clearly you need to keep an eye on these if you are in MLM businesses like Kleneeze and Avon or an arts and craft business because you need to know these to make sure that you are charging enough. If you are a freelancer or do online work with a computer and your home broadband those costs should be minimal and not much of a worry.
So the remaining trading profit - where has it gone? Takeaways, food, shopping, bills and other day to day incidentals or on capital investments (basically the stuff that makes it easier for you to do MORE business; equipment, marketing, software, training etc).
The second one is OK - if you're planning on making your little money earner more than a hobby.
The first one is your passion killer - your inspiration incinerator - because you propably had a dream, goal, or aspiration to do something NICE with all that spare money you were going to make - like take a holiday to Rome. And you feel all the effort you put in isn't doing anything because your holiday fund is not growing.
And maybe it is because you HAVE to put all the spare money into keeping the bills at bay. But a simple budget could fix all that if you have some financial dicipline.
If I had the same exercise and eating dicipline as I have financial dicipline I would be running marathons by now - monthly!
And even though the thought of planning what to do with money is alien to you or even down right scary, it's the best way to ensure you carry on feeling passionate and excited about your little spare money adventure.
The easiest way to do it is a rough and ready list of things in order of importance:
- Trading costs:
- Savings target as a percentage of income:
- household bills:
- Savings towards capital investments:
- treats:
Now all you have to do is work out the numbers and pay them off in order. If you adhere to paying things off in this order you will find that your business generates spare cash (see point 2 on the list!), but the challenge is to be diciplined enough to stick to the list!
It is that simple. It really is. You just have to stick to the order of the list; if you decide to pay off household bills before putting money into your savings account you may not see much spare cash at all.
The way to work out how much to save obviously depends on how much you need to put towards the other items on the list, but you can start as low as 10 percent of your income.
The easiest way to do this is to take 10 percent of every payment you receive and put that same amount into a savings account. Every time.
Try it. It works.
-They spend it all without a plan.
So you've run your Avon, Kleeneze, Ebay or other part time money making effort for a little while and notice that you don't seem to have any more cash now than compared to when you started it. You don' t know where the money's gone and you decide to look over your past figures (because you HAVE kept track of your actual income haven't you??) and they show that you've made enough money to pay for a short family holiday somewhere - but where has it gone.
Clearly some of the income may have been spent on replenishing your stock, postage or other incidental costs that you need to incurr in order to continue trading. Let's ignore those for now and if you want to I can come back to those at another time, but let's just say that these are the things that if you stop buying it you will eventually be unable to continue to trade - these are your essential recurring business costs. Clearly you need to keep an eye on these if you are in MLM businesses like Kleneeze and Avon or an arts and craft business because you need to know these to make sure that you are charging enough. If you are a freelancer or do online work with a computer and your home broadband those costs should be minimal and not much of a worry.
So the remaining trading profit - where has it gone? Takeaways, food, shopping, bills and other day to day incidentals or on capital investments (basically the stuff that makes it easier for you to do MORE business; equipment, marketing, software, training etc).
The second one is OK - if you're planning on making your little money earner more than a hobby.
The first one is your passion killer - your inspiration incinerator - because you propably had a dream, goal, or aspiration to do something NICE with all that spare money you were going to make - like take a holiday to Rome. And you feel all the effort you put in isn't doing anything because your holiday fund is not growing.
And maybe it is because you HAVE to put all the spare money into keeping the bills at bay. But a simple budget could fix all that if you have some financial dicipline.
If I had the same exercise and eating dicipline as I have financial dicipline I would be running marathons by now - monthly!
And even though the thought of planning what to do with money is alien to you or even down right scary, it's the best way to ensure you carry on feeling passionate and excited about your little spare money adventure.
The easiest way to do it is a rough and ready list of things in order of importance:
- Trading costs:
- Savings target as a percentage of income:
- household bills:
- Savings towards capital investments:
- treats:
Now all you have to do is work out the numbers and pay them off in order. If you adhere to paying things off in this order you will find that your business generates spare cash (see point 2 on the list!), but the challenge is to be diciplined enough to stick to the list!
It is that simple. It really is. You just have to stick to the order of the list; if you decide to pay off household bills before putting money into your savings account you may not see much spare cash at all.
The way to work out how much to save obviously depends on how much you need to put towards the other items on the list, but you can start as low as 10 percent of your income.
The easiest way to do this is to take 10 percent of every payment you receive and put that same amount into a savings account. Every time.
Try it. It works.
posted by Jon at 3:21 AM
