How Business Owners Should Spend Their First Paycheck
After months or even years of hard work, your company is finally making a profit. Instead of paying yourself the bare minimum, you can afford to give yourself a proper paycheck. It’s a glorious moment for all business owners and there is a temptation to go out and start spending frivolously, but that’s never the best move. That success isn’t guaranteed to continue and even though you’re turning a profit now, that doesn’t mean you’re going to be in a financially stable position forever. If you waste that money and don’t handle it sensibly, you won’t have the protection you need should things take a turn for the worse in the future. To stop yourself from getting into a sticky situation, you should do these 3 things with that first paycheck.
Put Some Back Into The Company
You’re probably tempted to pay yourself a big salary now that the company is performing well, you deserve it for all of your hard work after all. But that’s not the most sensible thing to do at this stage. Just because you’ve been turning a profit for a month or two, that doesn’t mean the business is completely stable. You should still be taking steps to improve the company and help it grow, so consider paying yourself less than you would like to and put the rest back into the company. By taking less money for yourself now, you’ll be able to capitalise on the success of the business and help it to grow further. It’ll pay off in the long run because increased investment means more profits and therefore a higher salary for you in future.
Invest Some Of It
The business world is always a dangerous one and even if you’re doing everything right, your business can still hit hard times. When that happens, you may have to sacrifice your own salary to keep the company going. That’s why it’s so important that you’re securing your finances for the future so you’ve got a buffer to fall back on until the business is doing better. The best way to secure your finances is to invest some of that first paycheck. People are often worried about investing because it can be pretty complicated and there are risks involved. However, it is one of the best ways to put yourself in a strong financial position if you get it right. There are plenty of high stakes investment options which you should steer clear of but there are also some lower risk options that are perfect for you. Trading CFDs on the CMC Markets is a great choice because it’s low risk. A CFD (contract for difference) isn’t like traditional stock trading because you don’t buy the actual stock itself. Instead, you bet on the value of that stock; if it goes up you make a profit, if it goes down you lose money. The major benefit is that you only have to invest a small fraction of the value of the stock. That allows you to spread your investments out which gives you a lot of protection and reduces the chance of you losing all of your money.
Investing is great but regardless of how sensible you are, there is always a risk involved. Don’t put all of your money into investments, keep some aside and put it into a savings account. Shop around and find a savings account that has a high interest rate and put a chunk of your money in there. You won’t make as much as you will from investing but you don’t have the same risks to contend with. The only thing to watch out for is inflation. If the level of inflation is higher than the interest rate that you’re getting on that money, it’s real value (the amount of goods and services you can buy with it) will actually go down. If that happens, try finding a different savings account with a higher interest rate or put more of your cash into investments.
As well as a standard savings account, you need to start thinking about your retirement fund. Even if it seems like a long way off, you should start preparing now. The earlier you start saving, the more financially stable you’ll be when it finally comes time to retire.
While it might be tempting to start splashing your cash around when you get that first proper paycheck but you’ve got to be sensible. If you don’t manage your money properly, you can really land yourself in trouble if the business hits hard times.