Money is the root of all evil, right?
It can’t buy you happiness. It isn’t the answer. It’s a problem-magnet.
If you grew up in a “take it easy” kind of society like I did, you’ve likely been exposed to these fluffy ideas.
But here’s a painful truth:
It’s all a pile of horseshit.
Being broke isn’t a virtue and it should never be romanticised.
My problem with these cushy ideas?
They do not fit in the context of our reality
They give many people an excuse to be complacent about their finances.
If you’ve ever been strained for cash, you know what an excruciating battle it can be.
But I have encouraging news.
This is your turf and you are in control.
The bad habits that are blocking your financial successful can be stopped dead in their tracks.
Let’s talk about the 7 most common practices that decimate your business and how to fix them.
Bad Habit #1 Not Diversifying Your Income Streams
At one time, having multiple streams of income was a luxury.
In many ways, it has become a necessity for entrepreneurs to seek other financial nest eggs.
Here’s why that’s important:
Entrepreneurship is extremely risky and volatile.
If the market moves in a direction that you weren’t anticipating, you lose.
If a critical member of your team leaves, you lose.
One mishap and your entire business can come down like a house of cards.
The businesses who remain viable years and decades down the line are those that are:
- Quick to adapt to change
- Have several income streams to absolve the failure of others
The bottom line? Diversify or die.
The Fix: How To Create Multiple Income Streams
- Secure your primary source of income first. Seeking an additional income stream when you do not yet have financial security will increase the risk to your business.
- What is your Unique Value Proposition? In other words, find that one area that you can be counted on to deliver spectacular results.
- Don’t simply seek to gain an audience, build a community around your business. Create a facebook group, start collecting email addresses using an email marketing system, and nurture a relationship with the members of your community.
- Monetize your talents and turn the relationship that you’ve built with your community into sales. Let’s say that you’re a successful photographer. In addition to offering your services as a photographer, you can offer to teach other photographers with ebooks, ecourses, and coaching services. Right away, you’ve established a second income stream. The same goes for other creative professionals and business owners.
Bad Habit #2 Not Having A Savings Buffer
And when life happens, there’s a decent chance you’re going to be on the receiving end of some tough news.
If you don’t have a savings buffer to cushion the fall, you feel it twice as hard.
The Fix: Start Building An Emergency Fund Right Away
A good rule of thumb is to have a savings stash that could sustain you for six months in the event that your financial situation goes south.
You can set up a sub-account within your existing savings account or open a separate account as your emergency fund.
The pick is yours.
Bad Habit #3 Lack of Detailed Financial Records
You need to be downright anal about keeping a very detailed account of where my money is coming from and where it is going.
With precise records, you will:
- Know exactly where you stand financially
- Effectively manage the cash flow of your business
- Meet your tax obligations with no problems
- Claim the tax deductions that many often overlook
The Fix: Invest in an Accountant or a Bookkeeping Software
If you have formally incorporated your business and you have people in your employ, it would be wise to get an Accountant.
If you’re a freelance contractor or Solo-entrepreneur, a bookkeeping subscription service like Freshbooks can do you a world of good.
It’s what I use to create invoices, profit and loss reports, expenditure reports and charts, track the time that I spend on projects, and keep tabs on my clientele.
Bad Habit #4 Paying Only The Minimum On Your Credit Card Balance
This is a terrible practice for so many reasons.
Let me explain.
Typically, your bank will give you two options for credit card payments:
A fixed amount
A minimum percentage of the fixed amount each month
The minimum is attractive – which is the con that the banks pull – but it comes at a steep cost.
Here’s what will happen:
1. You will accrue bigger interest rates
2. Your credit card debt drags on and on and on …
3. Your credit score takes a nosedive (which makes it harder to qualify for a loan)
The Fix: How To Deal With Credit Card Payments
1. Get a credit card with better terms. This could come in the form of smaller interest charges and minimal late fees. If you can qualify for a card with travel reward points or any other reward system, go for it. You can redeem these points to travel and gain other perks.
2. Pay your full monthly balance or at least more than the minimum. This way you don’t rack too many interest charges.
3. If you can only afford the minimum, pay it off before the deadline. Late fees are often very high.
4. Don’t get a credit card if you can’t afford it. Need I say more?
Bad Habit #5 Not Outsourcing Certain Tasks
Here’s a novel idea:
Spending money can save you money.
If you’re a Do-It-Yourself Specialist like I am, you’ll have some trouble coming to terms with outsourcing.
But, here’s why it’s necessary for entrepreneurs to outsource certain tasks:
1. You free up internal resources that can be put to better use
2. You get to focus on the tasks that you love, are dang good at, and will grow your business
3. You invest in the expertise of a specialist who will bring you bigger returns
The Fix: Jump Off The Do-It-Yourself Train
It’s quite simple.
If you’re terrible at something, outsource it.
If it’s going to take time away from a task that will put more money in your pockets, outsource it.
If you’re doing it yourself only to save money temporarily, outsource it.
If one misstep will cost you a ton of money to fix, outsource it.
Some tasks that can be outsourced:
- Web design
- Graphic design
- Payroll management
- Administrative assistance
- Highly specialized tasks
Bad Habit #6 Not Having a Debt Payment Strategy
If you have no debt, Bravo!
Student loans, mortgages, credit card payments – most people have some sort of debt.
And most have no idea how or when they’re going to pay it off.
If you feel like you’re on a never-ceasing treadmill of debt payments, having a strategy is three quarters of the battle.
The Fix: The Two Most Effective Debt Payment Strategies
1. “Racking and stacking” – This is a tactic where you place your debts on a scale of highest to lowest interest rates. You then pay off the debt with the highest interest rate first and slide down the scale until you’re debt free.
2. “The Debt Snowball” – This is a strategy where you pay no attention to interest rates and you prioritize paying the smallest debt first. This is more of a psychological maneuver rather than a fiscal one. If you’ve ever paid off a debt, you know it feels dang good, regardless of how small. That feel-good state of mind will serve as motivation to keep you going.
Bad Habit #7 Not Setting Financial Goals
If you want to become financially fit, financial planning is a must-do.
For many, that’s a troubling thought.
And I get it.
Perhaps, you simply don’t know where to start.
But here’s the deal:
No Goals = No Direction = No Driving Force = No Progress = A Shitty Life.
The Fix: Set Very Precise Yet Flexible Financial Goals
Consider these questions:
- What is your ideal income?
- How large of a savings buffer would you like to have?
- What financial contingency plans do you want to have in place?
- At what age would you like to retire?
- Considering your cost of living, how much money would you need to have saved in order to retire at your ideal age?
If you know the answers to these questions, you’re in business!
If not, I encourage you to start thinking about them.
Your pockets will thank you and your quality of life will be better for it.
A Final Word
Money doesn’t have to be taboo.
You have every right to seek – defiantly and earnestly – financial freedom for yourself and your family.
The first step is to put a stop to all the bad habits that are undermining your progress.
Do you have any bad money habits to add to the list? Share your thoughts in the comments.