5 Personal Finance Habits That Successful Entrepreneurs Are Using

Posted by Mary Hilard on January 21st, 2021

Almost every aspiring entrepreneur wants their business to become the next Airbnb or Uber in the future. Despite the fact that the success of a startup largely depends on excellent marketing and delivery of the necessary product or service, these are not necessarily the main indicators for the bank accounts of the richest entrepreneurs in the world.

In fact, the accumulation and maintenance of wealth are based on smart personal finance habits. Your startup doesn't have to turn into a billion-dollar business in order for you to achieve your desired financial well-being. By adopting the same personal finance habits that many successful entrepreneurs have, you can significantly improve your financial situation. Here are five to get you started.

1. Make a list of your financial goals

The most successful entrepreneurs differ from the rest of the mass of people by having clear monetary goals.

By making a list of financial goals and reviewing them every day, you will receive clear guidance on the actions that you need to take to improve your personal well-being and increase the profits of your business.

2. Develop an action plan for spending and saving

The lack of a plan for spending and saving is one of the biggest mistakes that prevent entrepreneurs and others from achieving their financial goals.

According to Cash Advance Depot, “the problem is that many people simply don't keep track of what their money is spent on, which in turn can undermine our financial goals. Clearly budgeting means planning ahead how you will spend and save your money, and then keeping track of all your expenses. When you become aware of your spending habits, it will be much easier to control them and take the necessary steps to save your money."

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ith a new source of income

According to Tom Corley's book “Rich Habits: The Daily Habits of Successful People”, 65% of all self-made millionaires have at least three sources of income, and 29% have five or more sources of income. The significance of these numbers is not just that these people make money through multiple businesses, interest income, rent, or capital gains. The point is that by creating multiple sources of income, these entrepreneurs diversify and reduce financial risks.

The idea is similar to creating multiple sources of income in your business. By selling through new channels or introducing new products, you create additional opportunities for sales growth. Even if one channel or product starts to perform worse, your business remains profitable because of the stability provided by other revenue streams. Diversifying your personal finances can lead to similar results.

4. Invest to create passive income

Where does the remaining money go after you have paid all the necessary monthly expenses? For business owners, finding ways to invest profits back into the company is key to continued growth. The same applies to your personal finances.

Many investment experts recommend using a buy-and-hold strategy to generate passive income over time. According to Investopedia, a long-term study of this strategy, covering the period from 1926 to 2010, revealed an average annual return of 12.1% for small stocks and an annual return of 9.9% for large stocks.

Regularly adding money to a savings or investment account helps you grow over time. This passive income serves as a great addition to the money you take home from your entrepreneurial endeavors.

5. Stay informed about the market for goods and services

According to a study conducted by CB Insights, 42% of startup failures are due to the lack of market demand for their product or service. A lack of market awareness can directly affect the success of your business and your finances. Wealthy entrepreneurs try to keep abreast of general trends that may affect their business and personal finances. For example, changes in interest rates can significantly affect your long-term costs of obtaining a loan for a new business venture. It can also affect the consumer habits of customers that affect the market for your products.

With knowledge of market developments, you will be able to learn about trends or events that may affect your business and other investments, which in turn will allow you to take timely measures to protect your assets. Even such a simple thing as adjusting prices in anticipation of changes in the market can help you avoid large losses.

For many people, achieving financial security requires changing habits or inveterate thinking. It may seem like a daunting task, but the end result is worth it. By gaining full control over how you use your money, you can increase your wealth while increasing your startup's chances of long-term success.