I don’t want to panic you… but something might happen in the year ahead that totally trips you up and you’re going to need to tap into an emergency fund to help fund you and your business through it.
What? Don’t have an emergency fund? Don’t worry, I’m not going to suggest you sign yourself up for a long, expensive business degree! The simple solution is to learn from those who’ve already been through it like our CEO and host of our podcast- Mary Baird-Wilcock and she’s going to help us learn how to create an emergency fund for your business.
So, let’s keep it simple and look at the what, why, and how to create an emergency fund for your business.
What exactly is an emergency fund for your business?
It’s your rainy day fund that hopefully you’ll never need to tap in to. Heaven forbid you, these funds will help you keep your business financially afloat. How much? You should aim to have the equivalent of 6 months worth of overhead costs in the bank.
Think about how much you need to keep operating for that amount of time. Rent, utilities, equipment or supplies, marketing, payroll, insurance… you should be keeping track of these monthly costs in your bookkeeping. So, take that monthly number and multiply it by six.
That might sound like a lot and you might be tempted to bring the amount down or just let the idea of an emergency fund slide by, but let me explain why that’s not a good idea.
Why you shouldn’t risk it
Sometimes, particularly in the early days of your business, maybe when it’s still a side hustle, you might not be taking your finances that seriously. But it you want to grow, make it a reliable source of income that is sustainable, you need to build that emergency fund.
Think about it. What happens if you get sick? What if your computer or other equipment all of sudden, breaks down. Even good news could cause problems! What if you get offered a great opportunity but you can’t deliver because it’s a big project and you don’t have the money to hire on other people or add on resources that you might need.
The buck stops with you.
It takes a lot of work and time to build up a business, but not much to make it fall apart. Do you really want to risk losing it all?
Don’t panic if you’re starting from scratch. Future you will be so grateful! Start by saving 5% of your paycheck in a business savings fund and chip away at it, bit by bit.
Don’t talk yourself out of it or procrastinate. There are plenty of stories about people who did just that and lost what they worked for.
Did you not see me say don’t procrastinate?! NOW! TODAY! ASAP! The sooner you start, the sooner you begin to protect your business and the sooner you can remove one element of stress from your life!
Resources we recommend:
- BOOK: You Are a Badass at Making Money: Master the Mindset of Wealth by Jen Sincero
- BOOK: Women with Money by Jean Chatzky
- APP: Monzo online banking app – for UK residents, earn £5 for free when you sign up for an account
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