Living Like a pauper, or a poor man, will prepare you for self-employment. Why? Well you have to do all of these three things to get in to self-employment. You have to:
To achieve all of these three things require you to live like a pauper.
1.Minimise your fixed costs of living
The most important factor in business is cash. The less cash drains you have the more likely you are to succeed. The biggest cash drain anyone has is their cost of living. If we can control that and minimise it to the bear minimum then the easier it is to survive in the initial stages of self-employment.
There are really only two core ways of minimising your fixed costs of living:
A Going without i.e. not spending!
B Cutting costs i.e. spending less!
1.A) Not Spending
I’m not going to bore you about how you should stop smoking, drinking, eating or just simply indulging. What you should do is when you get paid put a certain amount aside so you cant get at it. Put it in a separate deposit account, give it to a family member or put it under your mattress – what ever you do, don’t spend it! What will happen is that you’ll adjust to the new level of spending that you have at your disposal.
Always ask yourself – do I really need this item that I’m buying now or do I just want it? Is it a need or a want? If it’s a luxury item then its probably a want. When I was setting up my business I went without. Here a some of the things that I used to buy when I was at work but went without when I was starting self-employment:
It was easy for me to go without. In the back of my mind I knew that if I went without now I would have in the future. This is now the case and I have a lifestyle that most will envy. I hope this inspires you. Remember, saving for a route out can be very rewarding. When you do actually save enough and start your own business the results are very immediate i.e. the labours of your scrimping and saving will result in you having enough time for your family, friends and yourself!
1.B) Spending Less
There are really only five things you can spend your money on:
Here are some tips on how to cut back on spending on each of these categories:
2.Raise Your Initial Investment
Apart from saving your income that you currently earn now there are other quick ways of raising the initial investment required to start your business. How much you need to raise will depend on the business you decide to run but below is a list of inventive ways of raising cash fast. The following list ranks in order the ‘cost’ to you starting with the cheapest first, the cost being the effective interest rate being paid on the initial investment. BOE means current Bank Of England base rate in the list below.
This is not an exhaustive list. You may have other good ideas for raising finance but if you can’t raise the finance the project can’t go ahead. It’s as simple as that. I raised my initial investment by saving as much of my salary as I could. While my colleagues were spending everything they earned on high rents on apartments, expensive holidays and designer clothes I saved my money by living in one room in a shared house, holidaying in the UK and wearing unbranded clothes. After five years I live in a large detached house with swimming pool, holiday abroad three times a year and wear only designer clothes. You need patience and a medium to long-term vision if you truly desire to have enough wealth to live the lifestyle you want.
3.Maintain your fixed costs of living
In an ideal world as soon as you go in to business it will make a profit and these profits will maintain your fixed costs of living. However, we live in a less than ideal world and it is likely that you will make a loss in the first year - but your fixed costs of living still have to be met! So how do we raise this short term cash requirement? Well it can come from three sources, in the order from which to seek from:
Lets look at this in more detail.
As you can see from above you have to mature in the way you handle cash, be active in raising cash and be inventive when it comes to raising cash fast. This is crucial to running a business and ensuring that it survives. Many business gurus will tell you this one phrase: CASH IS KING! It doesn’t really matter where the cash comes from just as long as you can pay your debts when they fall due then you remain in business. The definition of insolvency, or in other words bankruptcy, is when the debtor is unable to pay his or her debts in full and on time. So to remain in the black you always have to have access to cash – fast!
So you’ve learnt how to preserve, earn and raise cash – what are you going to do with it? Well you need to invest it! You need to identify what business you are going to do. Step 3 helps you to do just this.
