Simple Ways To Cut Down On Your Personal Expenses

Expenses in the world of business are a fact of life, but sometimes they can creep up on us, eating into our profits and damaging the growth of our business. As a solo-preneur or small business owner, you may not be able to cut down on your key business expenses but you can control your own spending. So here are some simple ways that you can cut back on your personal expenses. 

Recognize where you’re spending

Before you can effectively cut down on your expenses, you’ll need to first recognize where it is you are spending your money. You should be keeping a record of all business expenses for tax purposes, so take a look at where your expenses are adding up, and make a note of regular expenses that you could cut back on. If you haven’t been keeping proper records or your expenses, or want to cut down on some personal expenses that may not be entirely business-related, then spend as normal for one month but write down everything you spend during the month, whether it be $1 on a chocolate bar or $500 on a hotel room. Write everything down and then use this as a basis from which to form your analysis. 

It’s often easier to see large expenses and to focus on cutting back in those areas, but more often than not it’s actually the smaller expenses that tend to add up over the course of the year and cutting out a small, simple expense such as your morning coffee can make as much difference over the course of the year as changing your travel plans or downgrading your gym membership. 

Top tip Many banking apps now let you filter your statement by transaction, why not type in some of the names of the places you think you visit frequently, such as Starbucks and you may be shocked by how much you spend there on a monthly basis. 

Work out what’s a luxury and what’s a necessity 

So you need to travel to Paris for a business convention, ok, but do you really need to book a first-class ticket? There will be times during the year that a little luxury may be called for, after all, we all deserve a treat every now and then, but if you keep opting for luxury options when a more cost appropriate option would have sufficed, then you’re just eating into your business profits and ultimately harming the growth of your business. We’re not saying you should always take the cheapest option available as sometimes a little upgrade to business class can provide you with better wifi, a chance to work in the lounge, and will leave you more refreshed for your business convention ahead, but unnecessary luxuries should be cut out. Some luxury things to consider swapping include:

• Expensive hotel rooms for AirBnB’s 

• First Class tickets for Business or Economy alternatives

• Taxis for public transport 

Top tip Before booking a trip or upgrading your travel, look at what you could save by choosing a cheaper option and then allow yourself to visualize what that money could do to help you grow your business.

Look at your direct debits and subscriptions

It’s easier to recognize where we are overspending when we physically hand over cash or a card, which makes direct debits and subscription services difficult to keep track of. Take a look at the payments that come out of your account regularly; are there any you no longer use? Have some of them increased in price without you even realizing it? Don’t let direct debits and subscription charges run away with you, challenge price increases, cancel services you no longer use and make sure you’re always getting the best deal. 

One business service that many business owners continually overpay for is their business mobile phone. We tend to be more aware of price changes in our personal lives, but for some reason allow our business contracts to continue unchallenged. Be sure to assess whether you are using your entire business phone allowance and if you’re not, then consider changing supplier or tariff. Use a network review site to help you compare all of the different UK mobile networks side-by-side; if you could save your company money elsewhere.

Top tip: Put a reminder in your diary to look into your direct debits and subscription services once every quarter. This will remind you to screen them for any changes and to cancel any you no longer use before they rack up too much. 

Change your habits 

Quite often, many of the expenses that we need to cut down on involves a change in our habits. For example, making a coffee at home rather than buying one on-route to work, or making your own lunch at home rather than buying one every day. These are just two examples of small daily habits that soon add up to become costly annual expenses. If you were to eat lunch out of the office every day costing you just $5 per day, that makes $25 a week and $1300 over the course of a year. So take a look at your daily habits, have you become lazy? Could you change your habits to save yourself some money? 

Top tip Don’t try breaking all of your habits at once as this is a recipe for relapse. Instead, focus on breaking one habit at a time and build up the habits you are breaking slowly. Try breaking one per week. 

Try a no spending week

Of course, there will be certain business expenses that simply must happen to keep your business running but to help you evaluate your overall spending, try to have a no spending week for personal expenses such as eating out, shopping, transportation, and leisure. By trying a no-spending week, you will begin to notice just how often you reach for your credit card and how often you justify spending to yourself.

Over the course of the week, try to evaluate the areas where not-spending money has been positive and where it has been negative, this will help you to prioritize your spending and you may even end up cutting back some of the less important expenses altogether when you realize how little you miss them.

Top tip: It’s harder to spend money if you leave your wallet at home. Leave your cards at home and just take out some emergency cash in case you find yourself in an emergency situation.  

Pay for things with cash only

Have you ever wondered why it seems to be so much easier to overspend on a card than it is with cash? Well, the answer lies in our psychology.

When we pay for something using cash money our brain recognizes the transaction, sees the money handed over, and notices that we now have less cash in our possession than we did before. Using a card, on the other hand, does not spark this recognition but instead hides the transaction, in essence hiding the fact that we have spent money from ourselves.

Banking apps have gotten better at updating our balances more frequently and some even provide push-notifications after every transaction, but the most effective way to remain conscious of our spending and to ensure that our brain recognizes each spending transaction is to pay using cash money. So why not try taking out a set amount of cash for the week and sticking to that as your budget? You may find it much easier to keep track of your expenses.

Top tip: After every cash transaction, make yourself count the money you have left - this may seem childish but it will help you to realize what you have left to spend for the week and will stop you from unexpectedly running out of money.

Keep profit at the forefront of your mind

Let’s face it, cutting back on expenses can be hard, especially when some of them such as your morning coffee, your takeout lunches, and your little luxuries maybe things that bring you a lot of joy. For some people, removing these things from their life isn’t going to be easy, which is why you need to keep your business at the forefront of your mind.

Write down exactly why it is you want to cut back on your expenses - are you struggling to make a profit? Do you think it’s your spending habits that are hindering your business? Or are you worried about a tax investigation? Whatever your reason is, write it down and then keep it at the forefront of your mind. Any time you’re struggling or are thinking of throwing in the towel, then return to the reason why you wanted to cut back on your expenses in the first place. 

Top tip: Some people find that placing a sticker or little note to themselves on their credit or debit card can help to prompt them to think of their reason why every time they use them. Why not try this technique or pop a note to yourself in your purse? 

Can Self-Funding Boost Your Business Skills?

When you’re in the process of launching your own business, financing options can be sparse. For solo entrepreneurs, independent experts, or even freelancers, applying for a commercial loan is not an alternative. Money-lending institutions are more likely to consider established companies that have shown they can successfully generate an income. Newcomers who don’t have the backing of an investor or an income-generating history are not going to be lucky in their loan applications. Therefore, self-funding strategies are the way forward to finance your first business. 

Unfortunately, self-funding can also be the quickest way to build up debts and put yourself in an uncomfortable financial position. Ultimately, when there is no commercial lending available, you will need to apply for a personal loan or additional credit. What this means is that you are forced to use your own finances to support your business, which can be risky. But there are some simple tricks you can use to ensure self-funding strategies don’t drag your credit score in the red.

Pexels - CC0 License 

Self-funding through credit

While funding your business through personal finances and credit can put you at risk, it is also a valuable lesson in strategic awareness. Indeed, you know that you need to design a simple but effective growth strategy to build up momentum in a short period. From a business perspective, self-funding makes you more focused and determined to succeed. While it doesn’t mean your company will hit the ground running, it puts you in a stronger position to make better decisions and work harder. Additionally, it forces you to prioritize money-making tasks over design and culture development – which need to evolve organically in the business. 

Streamline your expenses

There’s no secret: If you’re going to pay for your business from your pocket, you need to make sure you’ve got your expenses under control. Things couldn’t be simpler when it comes to budgeting for your ins and outs. Firstly, you want to make sure you can address all the necessary expenses, from monthly rent to energy bills. Secondly, you need to focus on how you can cut down on those mandatory costs WITHOUT losing your comfort. While it may not seem much, something as simple as switching for a cheaper car insurance contract could free up some money and let you repay your self-funding credits more easily. In short, keep your eyes open for grocery vouchers, new energy providers, insurers, etc. that let you pay less for the same thing. 

Reduce unnecessary costs

Once you’ve tackled the necessary expenses, it’s time to focus the next chapter of your budget on unnecessary costs. From buying a cup of coffee every day at your local coffee shop to investing in new fashion items, learning to save money on coffee, fashion, or anything else forces you to think creatively. You may not be able to accumulate huge savings. But you will tap into your unused creativity and self-reliance, which you can repurpose to build momentum in your business. 

Self-funding is no guarantee that you can become a successful entrepreneur overnight. However, it gives you the key to unlocking your talents as a creative thinker, a strategist, and a budget ninja. You have to learn fast when you can only count on yourself!

The Truth About IRS Debt Forgiveness

Tax time is an important time for many to collect documents and review expenses. If you end up owing money and you feel it is more than you can afford, there are options available to find a resolution and protect yourself without outside agencies. 

IRS Debt Forgiveness

Debt forgiveness is the Internal Revenue Service method of offering options to taxpayers who owe money but are unable to pay, or unable to pay all at once. Some of these options drastically reduce the amount of debt owed while others offer payment arrangement options to meet your needs but still fulfill your tax obligations and settle a debt. To best benefit from any of these options, it is best to work directly with the IRS rather than going through other agencies to protect your information, safeguard your identity, and avoid possible scams. 

What Is Debt Forgiveness Used for? 

The IRS debt forgiveness and debt relief options are intended to assist taxpayers during times of hardship to settle debts and resume their status as eligible taxpayers. The options seek to find a comfortable and manageable way for taxpayers to complete payments and maintain a quality life. 

Who Qualifies for Debt Forgiveness? 

To qualify for debt forgiveness, you need to be in good standing with the IRS and be willing to provide any requested documentation. The nearest form to debt forgiveness is called an "Offer in Compromise." An offer in compromise allows you to settle your obligation for pennies on the dollar and accruing any penalty fees. An important key to focus on is to quickly act before payments are due or fees begin to collect. There is a calculation tool available through the IRS website to help you determine your eligibility as well as a detailed booklet released by the IRS. 

This option, often the most desired, allows you to work with the IRS to settle your debt for less than you owe. You can do this by negotiating based on your ability to pay, by challenging the amount of actual debt, or by proving that paying the owed debt would place you in financial hardship in the future. 

Alternatives to Debt Forgiveness

IRS Forgiveness offered through tax agencies sound enticing, but full forgiveness and dissolving of your debt obligations is often not a reality. The IRS offers options to help you meet your obligations and maintain good standing while maintaining your quality of life and caring for your family and needs. Additionally, there are certain conditions that qualify you for assistance. If you are unemployed or underemployed, you can request to be listed under a specific status designated as "uncollectible." 

This delays any collection efforts and accrued interest as well as provides relief in the form of a type of freeze on your account. Other programs offer assistance to those filing for bankruptcy or starting the process. 

It is important to consider all your options when seeking to settle a debt owed and when trying to find a resolution in order to protect you and your family from potential fraud. Many who have worked with the IRS to find resolution find the process much friendlier than anticipated, and are able to harmoniously find a solution. 

Sources of Personal Financing for a Business

Personal financing for business is a form of financial planning and self-funding through established personal and familial connections in addition to individual contributions. According to research conducted by fundable, the majority of startups are self-funded, either through family, friends, personal savings, and lines of credit.

Self-funding, also known as bootstrapping, is synonymous with maximizing human capital first before utilizing the self-generated funds. This is meant to reduce dependency on external financing and improving the efficiency and resourcefulness of the business. Besides promoting self-reliance, self-funding is also strategic for maintaining ownership and control in a business. Below are sources of personal financing.

Personal Savings

Using personal savings to finance a business venture is a cost-effective method that comes with no interest or other added costs. In most cases, personal savings only cover part of the funding required, but there is reduced risk.

Funding a business with personal savings eliminates any form of repayment schedules associated with other methods, allowing you to develop your business without financial strain. Personal savings are available in different forms, such as; cash, checks, bonds, and liquid assets. This financing method is suitable for funding small businesses with manageable costs and risk factors.

Personal Credits

This source of self-funding refers to taking a personal line of credit to finance a business. There are several different avenues of acquiring credit, ranging from family and friends to various financial institutions. Some of the available credit options include; borrowing from peers, personal loans, a home equity line of credit, mortgage and borrowing against life insurance, and investments.

Credit funds issued to entrepreneurs are limited based on their creditworthiness and security or collateral. Weighing the risk factors, some financial institutions offer home equity loans and second mortgages to add to cash flow. Another credit option that’s also available to some entrepreneurs is special business loans offered to specific target groups.

Self-funding through credit does carry risk, especially with collateral requirements and periodic repayments. To qualify for a line of credit, you are required to have a decent credit score and a clear business plan outlining the payment plan.

One of the critical factors in choosing personal financing is the vastness of untapped resources that won't burden the business. These funds are essential for acquiring new investments, purchasing inventory, and consolidating debt. One of the main advantages of self-funding is the self-awareness imposed on you towards managing finances and putting in place contingencies. Bootstrapping is an effective way of funding your business venture if you're not prepared to take on unnecessary business liabilities.

Take Steps to Look After Company's Money Better in 2020

Money is so important in the modern world, and sensible money management needs to be at the top of your list of things to sort out for the new year. There are so many financial obligations and responsibilities to think about this year, and you need to have some kind of system in place that allows you to deal with this as much as possible. You have lots you can do to help you make the most of this right now.

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So, you need to do as much as you can to make the most of your financial situation. As a modern business owner, it is imperative that you keep a handle on your money, and do as much as possible to find the right way to manage funds. Strong finances are crucial for helping you to progress and improve as a business, and achieve the success you need in the future. 

Hire an Accountant

One of the most important things you should look to do is to hire an accountant for your business. There are so many great benefits to this, and it is something that can play a really big role in taking the company forward financially. With the right accountant on board, it is significantly easier to take charge of your money. What’s more, they will be able to provide you with tips and expertise when it comes to making the best financial decisions and helping your money go further. 

Save More Money

Saving money as a business is one of the most important things you can do, and this is certainly something that you need to make sure you work on. There are a lot of things that play a part in the process of saving more money as a business, and one of the key things you need to work on is looking at how to free up cash so you have more to save. This can be tricky and you need as much help as you can get when you look to do this. But things, like reducing spending and making your business leaner, can really go a long way toward helping with this as a business owner.

Remember That There is No Quick Fix

One of the most important things to keep in mind is the fact that there is no real financial quick fix. A lot of entrepreneurs these days like to try to find some of the best ways of making or saving money quickly in order to get to the financial situation they want to be in. This often involves thinking to yourself about things like why my 401k isn’t growing, or how I can increase my business profits. The best thing you can do is to understand that there is no quick fix when it comes to any sort of finances, business included, and this is something to keep in mind. 

Watch Your Overhead

When you run a business, one of the most important things you want to keep in mind is that you are going to have a lot of business overhead. When it comes to overhead, these items refer to any of the key costs that are going to play a part in helping you run your business successfully. Make sure you focus on understanding the different overhead costs that are going to play a role in helping your company grow and improve. Then you can prioritize the different costs that you might be looking at, and be more organized as a business.

Finance the Business

There are a lot of things you are going to need to look at when it comes to financing your business. Try to make sure you think about the best ways of funding and financing your business, and the different ways you are able to achieve this. There are a lot of things you need to think about when it comes to financing your business, and there are a lot of options to consider here, such as approaching investors and applying for business loans. Getting the right funding for your business is really important, and this is something you need to get right moving forward right now. 

Draw Up a Budget

One of the best ways of being able to improve your business finances is to think about the steps you need to take to manage your money better. The best way of being able to do this is to draw up a budget so that you can see clearly where you are spending money, as well as what you are going to need to do to cover these costs every month. Making sure you draw up a budget and keep a record of everything gives you better focus, and makes it much easier for you to work out where your money is going, as well as how you can make it go that little bit further as a modern business. 

Try to Go Green

Going green as a business is one of the best things you can do if you are serious about looking after your money better. There are so many ways in which being more eco-friendly can help you as a business. There are a lot of things you have to make sure you focus on to make your company greener, and things like solar power, eco-friendly lighting, recycling, and digitizing the company can all help you to save money in the process.  

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When you are taking charge of your business finances, you have to make sure you do as much as possible to find the right way of doing things. There are so many considerations you are going to need to make as a business owner, and you have plenty of things that will allow you to improve your financial situation. Make the most of this and you are going to go a long way toward helping your business grow and improve in 2020.

How to Manage and Keep Your Small Business Finances in Order

By: Barbara Davidson

Being the boss of your own company is a milestone, but it also entails being vigilant as you manage all the moving parts of your enterprise. As a small business owner, it pays to be smart about your finances. Before you become stable in a competitive landscape, you’ll first have to map out the road ahead and secure your financial standing.

Small business budgeting is one part of the equation. Successful entrepreneurs know when to cut back on expenses and invest in others, when to negotiate, and when to sit back and watch the money grow. Whatever venture (or adventure) you find yourself in, it’s bound to be a learning experience. 

Are you ready to embark on your journey as an entrepreneur? Here are 12 tips on how to manage and keep your small business finances in order. 

1. Set clear financial and strategic goals

It’s one thing to plan the day-to-day operations of your business; it’s another to set a clear vision of what you want out of your investment in the long run. Don’t lose sight of your future success simply because you’re caught up in present-day hustles. 

Be sure to identify growth targets and the metrics that will define your success. Set a goal and timeline. For example: becoming a half-a-million-dollar company within three years. This will also help you create a strategy for seeking additional funding, building out your product line, or marketing extensively.

2. Plan for expenses and keep costs to a minimum

Knowing the nature of your industry and the demands of your business right from the start will lead you to better financial decisions. Identify production, operational, payroll, and marketing costs, as well as some contingencies, and plan for them at least a year in advance.

Learn to keep costs to a minimum by spending only on essentials and negotiating the terms of your contract with suppliers, partners, and affiliates. Develop a budget that accommodates these expenses even in lean months. It also helps to make financial forecasts by factoring in possible challenges ahead.

Look at certain expenses and what you could bring down. For example, you might want to look at the cost of your business phone or phone and get a better smartphone deal. Paying too much on your phone contracts is burning money.

3. Separate business and personal finances

A rookie mistake that small business owners tend to make is to mix up their personal and business finances. Failing to open a separate business bank account can prove disastrous if the cost of doing business begins to strain one’s personal finances. This typically happens among sole proprietors who invest their own money into a business without accounting for how much the venture is actually eating into their personal savings.

4. Get an accountant and an accounting software

Getting help from an accountant is an essential part of your business strategy. You wouldn’t want to lose time and be stuck doing invoices and calculating taxes instead of growing your client base or product line.

But if you prefer to do things in-house (and have a bit of leeway, too), then getting an accounting software is another option for your team. Automated features in these software solutions reduce the incidence of human error.

5. Monitor your finances closely

Be vigilant about where your financial resources go. Keep tabs on important factors such as gross revenue, expenses, net profit, and cash flow. Even the most lucrative businesses can run into trouble if they overlook loopholes in their financial management.

Using apps and software programs to help you keep an eye on your finances is important, especially if you are not an experienced accountant. An online percentage decrease calculator, tax software, and other help are available online and can benefit a business of any size. 

6. Be wise about applying for credit or loans

Don’t wait until the rainy days to secure funding through credit lines. You are more likely to get approved while you are in good financial standing. Applying for a loan or credit should always be a strategic move: remember to use the additional resources as leverage for the business to grow.

7. Be strategic in your spending

When resources are tight, small business owners are often forced to cut back spending on non-essential items and redirect funds to cover more urgent expenses. Most entrepreneurs will choose to part with their dime if the cost will directly or indirectly lead to the business becoming more profitable because of it. For example, spending on top-of-the-line technology that will outlast cheaper options and deliver the best use value in the long run.

8. Negotiate the terms of your contracts

Being a small business owner requires you to be able to strike good deals with a host of suppliers, partners, and affiliates. Before negotiating a contract, decide on the terms and conditions, such as lease terms, payment options and schedule, handling costs, and possible penalties for late payments. Find out if you can also get a bargain on exclusive partnerships and promotional deals with suppliers. Aim to keep costs low and get the best value for your money.

9. Get insurance

Small businesses can benefit from having insurance if they ever run into misfortune or tragedy. A good policy will cover the costs associated with property damage and the legal claims made against the company. Disasters can leave tremendous financial consequences on a business, so entrepreneurs need to know the type of insurance their business needs. It’s all a matter of preparing for the worst since, in the absence of coverage, business owners might end up paying for costs out of pocket.  

10. Invest in cybersecurity

Hackers and fraudsters are hungry for customer and financial data—and they’re eager to exploit any business regardless of their industry and size. Companies must set up their protocols and ensure digital security even before an incident occurs. Investing in firewalls, anti-malware, and threat detection tools should be part of the business plan right from the start since the financial and reputational costs of a data breach can cripple a small business.

11. Set up an emergency fund

Apart from raising capital and ensuring revolving funds cover operational costs, small business owners should set up a separate emergency fund that will help them stay afloat even during lean months. Companies that rely on seasonal sales will often prepare for the off-season by putting aside a percentage of their income in months when the business is booming.  

12. Pay down your debt

Make it a point to reduce the size of your debt by allocating a percentage of your earnings toward debt repayment. Falling behind on your payments can leave you with a bad credit score and lock you out of additional sources of funding, which may be crucial to your business. Being financially responsible entails keeping a good credit score and ensuring bad debt doesn’t carry over to the next fiscal year.

Taking charge of your finances is the first step to ensuring the future of your small business and paving the way for its eventual growth.

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Barbara is a Senior Content Writer at Enova International and a contributing writer to various business and finance blogs.