How much savings should you have before you start a business? - Fox 28: South Bend, Elkhart IN News, Weather, Sports

How much personal savings should you have before you start a business?

Updated:
You ultimately have to determine what your own comfort level is by analyzing your level of risk and the flexibility of your expenses. (©iStockphoto.com) You ultimately have to determine what your own comfort level is by analyzing your level of risk and the flexibility of your expenses. (©iStockphoto.com)
 

How much personal savings should you have before you start a business?

Conventional wisdom is that you should have up to 12 months worth of living expenses put away before you start your own business, although the figure depends on the type of business you're starting, your projected income, and your potential expenses. Service businesses, for example, often require less of an investment than retail or wholesale businesses.

It's unrealistic to think that you must have this amount of savings. Many successful businesses have been built on less. You ultimately have to determine what your own comfort level is by analyzing your level of risk and the flexibility of your expenses.

During your planning stages, you might want to sit down with an accountant who is familiar with small business issues as well as the issues in your industry. Ask this advisor how long they expect it will take you to generate income. This will help you come up with realistic projections, since your own projections may be overoptimistic.

You may need to think about alternative ways of earning money in the short term. Is there some kind of part-time work you can do such as consulting, bookkeeping or assistant work? Can you work a few days a week for a family member or associate? Think about how "creative" people like actors make ends meet -- they often take on these types of alternative jobs so they can continue to hone their craft, go on auditions, and pursue their true careers.

Take some time to determine your personal budget. How much do you need to live on? You might want to analyze your personal finances by looking at your various expenses, including (but not limited to) the following:

  • Groceries and food
  • Sundries
  • Car payments
  • Credit card payments
  • Other loan payments and debts
  • Entertainment
  • Home maintenance costs
  • Taxes
  • Insurance
  • Tuition/educational expenses
  • Savings/retirement plan/investments  

Copyright (c) 2010 Studio One Networks. All rights reserved.

INFORMATIONAL DISCLAIMER The information contained on or provided through this site is intended for general consumer understanding and education only and is not intended to be and is not a substitute for professional financial or accounting advice. Always seek the advice of your accountant or other qualified personal finance advisor for answers to any related questions you may have. Use of this site and any information contained on or provided through this site is at your own risk and any information contained on or provided through this site is provided on an "as is" basis without any representations or warranties.
Powered by WorldNow

Fox 28

WSJV-TV FOX 28
58096 County Road 7, South
Elkhart, IN 46517

Switchboard: 574.679.9758
News Phone: 574.679.4545
Station Fax: 574.294.1267
Email: fox28news@fox28.com

All content ©Copyright 2000 - 2014 WorldNow and WSJV. All Rights Reserved.
For more information on this site, please read our Privacy Policy and Terms of Service and Mobile Privacy Policy & Terms of Service.

Persons with disabilities who need assistance with issues relating to the content of this station's public inspection file should contact Administrative Assistant Heather Stewart at (574) 343-5310. Questions or concerns relating to the accessibility of the FCC's online public file system should be directed to the FCC at 888-225-5322, at 888-835-5322 (TTY) or at fccinfo@fcc.gov.