Alex Sion is President of Moven, an app and debit card that provides real-time behavioral feedback and instant receipts.
While there is much talk of how to manage the financial stressors of running a startup, the time rarely is taken to address the toll it specifically takes on one’s personal finances. Even the most experienced entrepreneurs are at risk of dedicating so much of their time and resources to the immediate needs of their business, that individual expenses become out of control.
Once they do finally take a step back from the demands of their employees, stakeholders or customers, the idea of how to regain that control is often an unknown. The immediate reaction is typically to set up an orderly personal budget and try to track expenses month-to-month.
However, given the unpredictable life of an entrepreneur, this may not help identify the underlying financial decisions that got them into trouble to begin with. There are several personal financial challenges every entrepreneur is bound to face.
By focusing on behavior, not budgeting, entrepreneurs can overcome the issues and be successful both in business and in life.
Challenge #1: Understanding your financial wellness
Entrepreneurs know they need to be prepared for the worst when it comes to their business, but often lack the same attitude when it comes to their own finances. If an investor is offering money for a million dollar party, an entrepreneur is certainly going to need know where every dollar is coming from, where it is going and the impact of their spending decisions.
Unfortunately, the same care is not always taken in our personal lives. Creating a budget is just not going to cut it and the hours spent developing Excel spreadsheets is often a lesson in the depressing. Month-after-month, it acts as nothing but a scolding tool, reporting that once again the strict rules set for yourself have been broken.
Regularly take the time to know the ins and outs of exactly what is happening with your money before you spend outside your means, not after.
Challenge #2: Figuring out where to cut back
After you gain a better overview of the current financial situation, you can begin tackling another challenge: figuring out where to cut back.
After sacrificing so much for the sake of the business, this can be just as difficult mentally as it is financially. After all, after working so hard indulging in an expensive dinner or cab rides home seems only fair.
Truthfully, there is no reason to give up everything that makes you happy for the next few years, but if cutting back on morning lattes or takeout every day means worrying less about paying the rent and more about enjoying life, then that’s when you want to consider if it’s actually worth it.
Many online banking services or apps can help entrepreneurs take the broad view of their finances one step further and actually categorize their spending and start offering solutions. This will help them figure out which major items need to stay and which make sense to cut back on.
Challenge #3: Not being mindful about their spending long-term
Once the first two challenges have been dealt with, the real struggle often becomes keeping up with this behavior continually. At this point, the only actual solution to your personal finance woes is making a long-term commitment to mindful and responsible spending.
Again, budgets are restricting and adapting them so they are of value more than a month at a time is difficult and frankly, impossible. It’s much more effective to adapt a fluid framework, one that matches the flexibility running a startup’s demands.
The lesson here is not to ignore your monthly expenses, but to rethink the way you spend beyond the standard budgets we’ve all been taught. Given the tendency for an entrepreneur’s life to go from one extreme to another, budgeting is actually an insufficient method for developing financially healthy behavior.
We’re entrepreneurs, bringing the most innovative and efficient technology to consumers every day, we should be bringing that thinking to our own lives and seeking out methods and tools that match our demanding and unusual lifestyles.