For many entrepreneurs, the ideas come easy, but the processes are a different story. Your typography skills may be impressive enough to secure endless deals with creative agencies, but without the skills you need to balance the books, no amount of jobs will lead to cash flow – you need a proper strategy to handle it all.
Director and founder of Pivot Wealth Ben Nash certainly knows how to crunch numbers and through his course, Money Business at the Work-shop, Ben coaches entrepreneurs and young professionals on a myriad of money matters: things like getting better cash flow, cutting tax bills and boosting your investments. If you make common money mistakes, explains Ben, it can be difficult “to gain traction when you invest, [and you] end up paying too much tax, and missing out on opportunities to get ahead faster, which can mean your lifestyle will always hold back your income.”
The last thing you need while building a business is to have money rear its ugly head – you want to be making financially smart decisions in order to secure future stability. Here, Ben outlines the biggest, most preventable mistakes people make when thinking about money – and how to avoid making them:
Mistake 1. Not thinking about your targets
Imagine you’re an Olympic archer in the final heat of the gold medal round, you draw your bow and start to line up your arrow… This is the shot that will decide if you take out the gold medal and move into the history books, or bumped to fourth place and possibly forgotten. You look up to aim, and ahead of you… nothing! Without a target, it doesn’t matter what skills you have or how much you’ve prepared – you’re never going to end up where you should. It’s the same with your money strategy; if you don’t know where you’re headed or what you’re aiming for, you can’t expect to make the right decisions. It could be your next big holiday, buying your first property, or even quitting the 9-to-5 – knowing what you’re aiming for is a huge motivator and the first big step to making real progress. Think about what you want today, next month, next year and beyond, because this should drive the decisions you make today.
Mistake 2. Not understanding what’s possible
If you start heading down a path without getting clear on your options, it can mean you miss opportunities, run into roadblocks that slow you down and hold you back, and always have that feeling there’s something more you can be doing to get more out of your situation. When you know what your options are, you’re in a more solid position to make the right money decisions. Take the time to do some research or get good advice to understand what’s possible for you, so you take the very best path based on what’s most important to you.
Mistake 3. Not managing risk
When getting started with your money strategy, building initial momentum is hardest, and if you don’t manage your key risks there will always be gaps. You’ll lack confidence, have doubts, and you run the risk of serious problems that could destroy your momentum and set you back. Manage your risk properly and you’ll be able to get on with getting ahead, knowing your key risks are managed. At Pivot, we think lifestyle risk is the most important risk most young professionals and small business owners face in their strategy. Lifestyle risk is where you make money decisions that have a negative impact on your lifestyle (and money strategy) into the future. Sadly, too many times I’ve seen people make decisions without thinking about what might change in the future and the impact the decisions they’re making today might have on their future money situation. Don’t make this mistake! Take the time to understand and manage key risks before making any big decisions.
Mistake 4. Not making it easy
Let’s face it, we’re all time-poor. This means when setting up your strategy, you need to make it easy for yourself. If you don’t, executing your plan be confusing, complicated, and importantly really time consuming. If you get this right, you can effectively automate your success, everything will flow, and it’ll be simple for you to check on your progress and keep yourself motivated. Take the time at the front end to set yourself up in a way that’s easy to manage and track. Automate savings and investments, outsource where you can, and make sure you can check on your progress easily and quickly.
Mistake 5. Not learning enough
If you don’t understand enough about the areas of your money strategy and how they fit together, you’ll always doubt what you’re doing is the absolute best thing for you. If you get educated around your strategy and the reasons why the direction you’re considering is perfect for you, you’ll get what I think is the most important thing when it comes to your money – a clear path from where you are today to where you want to be in the future, and absolute confidence in your money strategy and financial direction. Now, I don’t mean you need to go and get a degree in economics or taxation, but you should understand the key benefits and risks involved in your strategy and your most relevant alternative options. You can do this by speaking to friends, colleagues, family, researching online, or using a financial adviser that focuses on education as part of their process.
Mistake 6. Trying to do it all yourself
Learning a lot is fine for some, but for others, juggling so much information about a subject they’re not a specialist in can be a little overwhelming, especially if you’re balancing several aspects of your business. And while I get that DIY shows are super popular these days, without the right skills, knowledge and experience, if you try to do the same when it comes to your money strategy, it’s easy to run into serious trouble. Apart from missing out on opportunities and running into problems that will hold you back, you can make decisions that are difficult and expensive to unwind, which can set you back. Also, without using a professional as a sounding board, it’s difficult to get real understanding and confidence in your money strategy and financial direction. The benefit of getting help is that you’ll have someone on hand to help when making big decisions, get more clarity and confidence in what you’re doing, and opportunities will be brought to your attention so you get better money outcomes from your strategy.
Ben Nash is the director and founder of Pivot Wealth.