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Don’t Gamble with Your Business Finances - Common Money Mistakes
Even the most money-savvy folk will have made a few errors when it comes to spending at some point in their lives. Yet they are successful in saving and have plenty of cash in the business account as they have learned from their past mistakes and taken a different financial approach. Unfortunately, for many businesses struggling to make ends meet, it can be a result of making the same financial errors over and over again. Perhaps it’s overspending on stock, and supplies or even playing online slots at your desk during your lunch hour; after all, we all have our weaknesses.
Making a mistake that brings a short-term high can develop into a habit; plunging individuals into further debt and bringing anxiety into their lives as they worry about the future. Yet the same financial error may be made time and time again, for that short-term high that spending on your favourite product or pastime often brings.
Understanding where the problem stems from is key to a more secure financial future. It takes time, but there are small steps you can take to get you back on track to a healthy bank balance and a happy mind.
Not Setting a Budget
If your business earns a healthy income and you still struggle, chances are you are not setting – or sticking to – a pre-planned budget. Budgets are important for all of us, yet it’s a common mistake that buseness make regularly. If you haven’t budgeted, you haven’t got full control over your finances.
Set up a main budget, and do a smaller one for each month. This will help highlight where your main outgoings are, and will shed light on how much is incoming vs how much is outgoing. You can make appropriate changes and plan according to your budget. Have a large expense, such as a VAT bill one month? Then if this month’s budget doesn’t quite stretch to those comfy new office chairs you’ve been eyeing up also, save them for next month.
Paying Bills Late
It’s the start of a vicious cycle which can be hard to break. You’re charged for late payments, which puts your further into debt and makes it more difficult to make next month’s payment on time, too. Try to nip this in the bud early on, before it spirals out of control. Use your budget to see where you can make cutbacks and ensure the bills are paid on time. This might be choosing to put buying that new tech for the office off until the following quarter or putting that impulse buy on hold.
Borrowing from Family & Friends
Asking to borrow money from loved ones may seem like a good idea, but it can actually put strain on important relationships. Not receiving money back on time can cause conflict, especially if the lender begins to question your financial choices. Try to make other sacrifices to cover any urgent payments, if you can, and only ask to borrow if you have no other choice. If you do need to borrow, only borrow what you need and make it a priority to pay the loan back as soon as possible, and especially before any unnecessary purchases.
Using a Credit Card for Daily Expenses
This is a huge risk factor in running up unwanted debt. You’re using cash that you might not have with a credit card; they are convenient and can encourage impulse purchases. If you don’t have the self-discipline, cut up your credit card and focus on paying off the balance. If you feel you need your credit card for emergencies, could you keep it at home so that it isn’t in your purse or wallet every time you are shopping? Credit cards can be useful if you are sensible with them, but the temptation to overspend can seriously damage your financial situation if you are not careful.
Highlighting and understanding your money mistakes is the first step in finding a solution and turning your financial situation around. Taking small steps and sticking with them will help you achieve your business goals and maintain financial security in the future.
This article does not necessarily reflect the opinions of the editors or management of EconoTimes