Adding Your First Additional Stream of Income
Most new wealth builders currently have a full-time job. After realizing that means “Just —-Over Broke” they commit to quitting their job and starting their own business.
Tax Secrets of the Rich Found Here
The concept is good, but let’s turn it around some.
One of the philosophies of the wealthy is to reduce risk. In this scenario, that means keeping your job until your business has been firmly established. That’s because the biggest stress point for new businesses is cash flow. Even if the owner has a viable business strategy, it takes time to get the machine operating smoothly. In the meantime, income can be sporatic. Cash flow shortages, even temporary, can create havoc for the small business owner.
Use your salary as your core business income. In other words, if your job brings in $50,000 a year, treat that in your mind as if you have one client that brings in that much cash flow. Be frugal with it, manage it carefully.
Now use your business to generate a “second” client and a “third” client. Continue to build your business until the business income matches your salary.
At that point, you can make an intelligent decision about timing the move to full time businessperson.
The mistake some people make is to leave their job too soon. Three to six months later, there is a shortfall of cash. Without sufficient cash, bill don’t get paid and the pressure mounts. Creditors start calling and the downhill spiral begins.
While you build your business, keep your job resentment in check. View your job as an opportunity to finance the development of your own business without unnecessary pressure.
Then, as your business grows, avoid the temptation to spend the additional income on fun and games. Instead, invest the additional income back into the business to help it grow. Build the systems that allow you to delegate lower level activity. Add the computers and data base programs to make things run smoother. Focus on marketing your business and attract new customers.
Expect to re-invest at least 50% of the additional income in growing your new business.
Now, as your net business income meets and exceeds your job income, you can transition yourself into a full-time business owner.
Drew Miles, The Tax Saving Attorney