A Wallet Plan for those taking on Risk and Wealth Creation
I can go without earnings until my venture makes it to revenue.
Have you ever had this thought cross your mind? This morning I woke up to an unfortunate fever and an email from a colleague asking me about how she can get better at planning her financial future. She’s in her early twenties and is getting ready to go back to college. Whatever she’d saved up from her professional life was gone, she lamented. “What can I do now that I’m ready to wake up?” We’ve all been there. After writing to her, the question stayed with me and I knew I had writing left to do. What was I missing in my own plan given my experience with the nature of startups and fevers?
Our eco-system today encourages the image of startup founders who’ve quit everything to startup. Going this way gives you an edge, but it also increases your reliance on sources that are outside of the production focus of your venture; especially if you consider the average timelines and success rates of ventures. As you can imagine, not everyone gets invested in and many need to get by themselves until they hit revenue.
How do you plan for this? Life shouldn’t have to stop at this time, and with life comes needs for nourishment and therefore expenses. How do you resolve the tension between your need to be production and marketing for your home and the need to follow your aspirations that aren’t fulfilled on the job?
Here’s four wise rules that won’t let you down.
Save before you spend. After you’ve put aside your startup working capital, stay smart from there on. If you’re drawing expenses from another active or passive business, from consulting work, or with the help of a spouse, these are all good places to be and will keep you going as long as you follow the simple rule save first, spend later. Geting in to this habit requires that you track your expenses efficiently and that effort won’t go waste. Spending includes any debt installments, scheduled, unscheduled investments that you make into your startup and elsewhere.
Have caution money at hand. The amount depends on the needs and size of your family. Invest where it will not depreciate under any circumstances. Or, you can take on the trader habit and watch it regularly to ensure that the capital does not erode away. Know the withdrawal terms, time to withdrawal and minimum period during which penalties are applicable.
Cover you and your family against the uncertain. When you quit your job, your medical coverage for you and your family goes with the job. Be ready and purchase healthy medical cover before going out on your own. If you haven’t done so already, go in for adequate partial disability, accident cover, and term insurance. Getting these done while you’re still on the job ensures that you’re eligible for coverage within proportion to your existing income.
Hedge Meaningfully. Founders today are in some way inspired by those ahead who’ve already started. There will always be others around you who will eventually succeed. Some may even have gotten to a public market. Who in your opinion are the Apple’s, Infosys’ and Google’s of your time? You’ll know who they are as you share the industry and can experience the change they bring. Set aside some money to invest in them. Look for the same success indicators that you look for in yourself. For instance, is where they’re going compelling to you? Are they showing traction?
And finally, simply don’t fail until and unless you must.
This post should be useful for you no matter where you are in life, and in your plans. Don’t put them off for later. Take time out to get through them, I know that I would do so. Apart from my circle of influence, here’s some inspirations that helped me pen my thoughts down. If you know of someone who’s starting up, share it with them and do let me know what they think.
- AcuMoney Financial Planning blog.
- Get Rich Slowly.
- Is a Well-Lived Life Worth Anything?
- One Idiot – An IDFC foundation initiative to right our collective attitudes to wealth.
- Before I started my online business – Patt Flynn.