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Money Habits of Entrepreneurs

A successful entrepreneur is aware that they need to have a clear purpose, value, and good return on investment for every rupee they spend. Ask any entrepreneur out there about the one skill that is crucial to their success, and the answer you are most likely to get is Financial Management. 

Being an entrepreneur means handling the finances of your business as well as your personal finance. 

person holding U.S. dollar banknote

All of us might not be entrepreneurs, but we can learn from successful entrepreneurs’ proven money habits to extend the value of our economic resources. We’ve put together some tried and tested strategies and some entrepreneurs’ money habits that you can adopt to realize your business and financial goals. 

  1. Have clarity about your financial goals 

Entrepreneurs are clear about their personal finance’s short- and long-term goals and accordingly work towards it. Get a diary and chart out the financial milestones you want to achieve in the next year, five years and ten years. Develop a plan that is clear and realistic to help you achieve those goals. Lastly, do not forget to continually review your plans and goals and adapt as per the situation.  

  1. Organize your personal finances 

Entrepreneurs love nothing more than to watch their money grow! Set a daily, monthly and yearly budget for yourself. Investment in different funds, pensions and have a retirement plan for yourself. 

  1. Adopt a savings mindset 

An entrepreneur knows that a healthy financial lifestyle is crucial for growth. The best way to achieve this is by adopting a savings mindset. The first step towards sticking to this habit is putting away the amount you want to save first and then planning your expenses around the remaining amount. Most of us make the mistake of doing this the other way round. 

  1. Diversify your revenue streams 

Entrepreneurs are always on the lookout for new opportunities and know better than to invest all their money in one place. Diversification means an opportunity for growth. Educate yourself about the different investment options available to you and create a diverse portfolio of financial products. This will help your money grow and will decrease dependence on one stream. 

  1. Master the use of credit 

If there is a battle that entrepreneurs fight daily, it is not to get swamped by the mountain of interest payments. They know better than to spend more on a card than they can pay off in a single billing cycle. 

Start by paying off your high-interest debts first to manage personal and business credit better. 

  1. Be frugal 

Finances and discipline go hand in hand. Entrepreneurs know they need to be stingy with their money, and they are not ashamed to wear this as a badge of honour. This does not mean that you are living uncomfortably – it just means that you choose to focus on the larger picture rather than give in to instant gratification. 

We hope this has helped you understand entrepreneurs’ money habits and how you can adopt them in your lifestyle. It’s not essential to incorporate everything at once, but it’s important to at least start!

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5 Money Mantras for 2021

2020 might possibly be the most dynamic teacher we have had in our lives. The year really pushed us to take a step back and take a long, hard look at how our lives are built, the foundation of everyday lives and the framework of how we go about doing it. While the importance of health and a clean lifestyle was brought to the fore, so was the discussion around financial health. 2020 was a year filled with challenges; while the market took a hit, we also saw one of the best equity rallies in a long time! Job security, savings, health insurance and more were the talk of the town, and with good reason. Job security, savings, health insurance and more were the talk of the town, and with good reason. 

This is precisely why we’ve come up with 5 simple yet incredibly effective Money Mantras for 2021, to ensure smooth sailing and a strong back-up plan. Read on to know more. 

BUILD A BUDGET

One of the easiest yet effective things you could do for your money right now is starting to build a budget. It’s the ultimate tool to help you control your expenses and channel your finances towards achieving any goals you might have set. Budgets, at their core, exist on a balance—if you want to spend more on something, you’ll have to forfeit or spend less on something else. This simple practice gradually teaches you how to prioritise your earnings and spend them wisely on things that actually matter. Usually a budget is a combination of your household, transport, personal and miscellaneous purchases. Nowadays, there are many budget-calculating apps that you can download to help you track your expenses—or better yet, talk to your financial advisor for a more detailed approach. 

INVEST IN A GOOD HEALTH INSURANCE

As mentioned earlier, health insurance is the topmost priority in today’s time, and should be treated as such. A good health insurance should cover the basics—this includes hospital charges, pre & post hospitalization included. It should also cover not just you, but your family as well, ensuring that should you ever require the help of your insurance, paying the bill will be the last thing going through your mind. One of the biggest blunders we as a customer make, is to simply assume that we will not require health insurance until we are much older. However, on the contrary, being well-prepared when it comes to your health from an early stage in life will only pay off in the long run.  

BUILD AN EMERGENCY FUND 

Out of all the financial years so far, if 2020 has not convinced you to build yourself an emergency fund, we doubt what else will! If you’ve been thinking about starting your emergency fund, there’s no better time to do so than now. This will help you face potential job cuts/salary cuts, household damage repair and any medical emergencies with the reassurance that you have your emergency fund to help you out. 

DIVERSIFY YOUR INVESTMENT PORTFOLIO

It’s never a good idea to put all your eggs in one basket. The same goes for your investments—diversifying your portfolio will help you stay afloat in the event of an unexpected market crash. And the best part is: it’s not that hard to implement. Diversification operates on a simple idea, that an investment portfolio consisting of different investment types will essentially lead to optimizing the risk. A well-diversified portfolio might include- cash, bonds, stocks, mutual funds, exchange-traded funds. To know more you can contact us and find just the right diversification model for you. 

CURB IMPULSE PURCHASES

Our last point ties back to where we started: setting a budget! When you know you have a budget that allows you a certain amount of expenditure, it automatically helps you steer clear of purchases that you really do not need. One of the best ways to figure out whether what you want to buy is something you really need is to give yourself a waiting period: give it 24 hours or sleep on it. If you still feel the need to purchase it, then compare prices online to pick the best one. If not, you’ll realize that what you almost spent your money on was simply a phase. 

Although these Money Mantras look simple, their impact is anything but. Stay consistent with your budgeting, investing & savings, and trust us—you’ll see your bank account flourishing in due time. For more information, get in touch with us at cagrfunds@gmail.com

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How to keep things on track during the pandemic?

A handy checklist for your reference.

DO’s

  • Increase liquidity – Enhance your emergency funds to double the amount
  • Reduce extra expenses – the lockdown is making us online shopaholics. The general tendency is such that the need for gratification is finding solace in spending online.
  • Use surplus time to build a financial plan
  • Take calculated risks
  • Take a health insurance and a term plan

DON’Ts

  • Take your job for granted
  • Break your emergency fund to trade in the stock markets for short term returns
  • Assume that endowment plans / LIC policies are sufficient life insurance
  • Think that all risks are bad and that one should not take any risk whatsoever
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The 50/30/20 Formula

The path to achieving financial wellness starts by inverting the equation of ‘income minus expenses’ into ‘ income minus savings’.

Does moulding your money habits seem too overwhelming? Does thinking of how to build a road towards the future and get started makes you feel at the end of your wit? You don’t need to grasp at the straws anymore with this budgeting trick! 

The 50/30/20 Formula

The 50-30-20 budgeting rule suggests the division of income after taxes into obligations, goals and splurges.

50% of your income – “Must-Haves”

Warren Buffet calls the Must-haves, “ the heart of your Balanced Money plan”. This section of your income is dedicated to fulfilling all your basic needs which are crucial for your survival. These are the expenditures you need to incur on a day-to-day basis. It also includes minimum payments you need to make on your debts. Such payments may include groceries, utilities, housing, car payments, etc.

30% of your income – “Wants”

Expenditure on items that fall in this category is a choice. The main aim of such expenses is up-gradation of your lifestyle. For instance, buying a Mercedes instead of a more economical Honda. 

This 30% bucket includes vacations, entertainment, gym fees, hobbies, pets, eating out, cell-phone plans, and cable packages. These are things you don’t really need to get by.  A want for some people might be a need for others. For example, some might have photography as a hobby and some might want to pursue it as a career. So such people might spend more on photographic equipment and lessons.

20% of your income – “Savings” 

The remaining 20% of your savings goes to an often overlooked part of your income: your financial goals. This includes debt savings and investments.

Save 20% of my income? That’s impossible! 

Getting your expenditures into the right bracket and balancing your income in these exact proportions might not be possible for you immediately. There might be a real circumstance preventing you from hitting the right equation. 
If yes, then hold on to this key: If you can’t get your money in the exact balance, get as close as you can!
If not 20% of savings, then can you save 15% of your savings? If you can’t bring down your obligatory expenditures to 50%, then can you bring it down to 55%? A 55-30-15 plan is better than a 60-40-0 plan. 

Make Adjustments where Needed.

Granted, the 50/30/20 plan isn’t the only percentage-based budget. All percentage-oriented budgets are entirely customizable.
The percentages you set are adjustable based on your fluctuating income. Perhaps a 60/20/20 or 40/20/40 works best for you. If you just got a raise, for instance, you might be able to focus more on paying off your debt. But, if your rent rates have risen, it could mean cutting back on the amount you set aside for your “wants”. 
Hence, look at your existing finances to set a plan for the long term! You can tweak and revise your spending/saving categories according to your current earnings and lifestyle, allowing your budget to do justice to your current financial situation.