Are You Counting 2: Before Quitting Your Job!

Many people want to become entrepreneurs but the journey to full blown entrepreneurship is not for babies. You need financial muscle before taking the leap of faith. You need to take into considerations all financial costs you will have to bare as well as hidden costs. Hidden costs appear in almost every single business especially when starting out. This is why every entrepreneur needs the Business GPS (Business Plan) to ensure that almost all hidden costs are covered. In essence you can never fully cover hidden costs they will always pop up especially if you are starting or growing business. The Business GPS can at least cover about 80 to 90 % of those costs. The other 10 to 20 % can be shown by a full test run of your entity meaning a one to twelve month run of your business after fully laying out the plan. I will explain further as soon as we get to the Business GPS Blog. It gets deeper this is why I thought I would spread out these Blogs in digestible bite sizes.

What I would like to discuss today is the Cost of Running your Well-Being and Living Expenses and whether it will balance when you become a full-blown entrepreneur. They many aspects that a Full-Blown Entrepreneur doesn’t realize, they quickly dive in without recognizing the accident that’s about to happen. Before quitting and shipping out to your entrepreneurship destiny make sure you have the following covered: - Home Rental, Kids and Wife Allowances, Kids Fees, Wife’s Spa and Hair Expenses, Husband’s Expenses (For the Powerful Female Entrepreneur), Household Items, Electricity, Water, Lights, Cleaning utensils, Cooking Supplies, Transport and Fuel Cost, Uber/ Bolt costs covered if your one of those “types” of entrepreneurs and Medical Costs etc. covered. The list above can compound into major losses in your Personal and Business Income Statement. Do you have a set budget for your monthly expenditure? Have you sat down and counted how much you spend on a monthly basis? When adding all these costs together it should give you a rough idea of how much spend you need on a monthly basis. And why would perfectly sane people in a wealthy environment want to do this? Because there’s this Fat Piggy called Credit. When credit comes it comes in the form of an angel ready to lift you to heaven. Only to find out that it is actually a seven headed demon taking to the depths of hell.

Yes, credit is not a good thing if you do not know how to manage it and if you do not know how to calculate the financial consequences of it. You see with credit there’s always an Invisible Bed and Pillow that many people do not see and if you slip up once you may end up seeing you invisible bed deflate like an inflatable mattress. An inflatable mattress is uncomfortable especially if you have to wake up every now and then to fill it up with air. And this is the exact metaphor I am trying to exercise to you.

There’s this deceiving thing called a JOB – Just Over Broke. This is how it all starts, you working at an entity and you suddenly realize the amount of money this entity is rolling in. Then in your mind, yes, I want to do that to! Like all entrepreneurs had “original ideas”. It obviously came from somewhere else. Original Ideas actually create billionaire entrepreneurs as opposed to copycats who become millionaire entrepreneurs…it’s always original ideas that count in entrepreneurship more details on this in my Big Money Series. Why do I call it a “just-over-broke” because this is how they play you, when you earn for 3 months and money is coming in you will suddenly get a call from the bank offering you a line of credit.

The bank is offering you an overdraft facility of 15% of your salary! Run! Run as fast as you can! This is already -15% of your income plus interest of -5% bringing it to a grand total of -20%. And this is just the starting of the hidden costs. You are obviously going to want to get new toys as you have found this new income. The “ADULT TOYS” include Car, Furniture, Fridge, Bed, Speakers, Plasma Screen, Second Cellphone, Clothing…the list is endless. If we sum this up altogether it will

bring it up to a sum of about 115%. And guess what? We have not been counting! Then we wonder why, we are always

broke! Because we do not count!

Counting is important! If you do not do this you are headed straight for Credit Hell! There’s always hell to pay with credit

because the cost of interest alone can kill your pockets when you are paying back the debt. The financing costs in South

Africa are incredible. I will break down Financing Costs in another Blog there is volumes to speak about.

Here’s the thing, in your cushy job you do not earn 115%, you only earn 100%. Got You! Let me break it down with an

example. Let’s say your take home after tax is R10 000.00. You have opened a credit facility of -R1500.00 when the bank

statement comes it is hidden. In essence when your R10 000.00 hits the account it is now R8500.00. It looks like R10 000.00 but

it’s actually not. Let’s not forget we have to pay rent, water and lights etc. So, we now need an extra R1500.00 to cover

those expenses because we have a shortfall of R1500.00 and the bank is happy to give us this facility on which they will

make R250.00 on top of the R1500.00. This R250.00 is broken down into small amounts like withdrawal costs on the overdraft,

interest fees, management fees, bank fees and interest fees just for that R1500.00. We are not finished remember we still

have other things we have to pay for! The system is designed for you to work for the Creditors. So, in essence you are not

working for your well being but for creditors. We as individuals need an extra pocket of income before we take on debt. This

is the very concept of Financial Literacy that we do not get. Wealthy people are financially literate. Look out for my Blog on

Financing Costs.

There’s the hidden cost, the one you are always wondering about as to why I do not have enough at the end of the month.

It is this tiny 15% that you are missing every single time you do not go over your bank statement or recalculate what is

coming in. If you recalculate and see what is going In and Out then you will be able to see if you as an individual are

making Profit or working for the banks or your creditors. Yes, you need to think of yourself as a business and not a human

being because you have chosen the path to entrepreneurship or the path to financial freedom.

The Invisible Bed and Pillow is the Just-Over-Broke you are about to leave to go out on your own. The Just-Over-Broke used

to cover your 100% and help you catch up to 115% that you needed every month. So as entrepreneurs we need to cover

the 115%. How do we overcome this conundrum? We make sure that we have Multiple INCOME on a regular basis. The

keyword is MULTIPLE! Income is the key. Income is the influx of resources to cover your living and well being expenses.

Without it you might as well be a beggar on the street! Unfortunately, money has become a god and we do not even

realize it. So, it is either we keep our job or get 4 Retainer Clients with fixed revenue of 450% if you are in the “Service

Industry” or get “Our Products” sold at 450% continuously on a monthly basis. Why 450%? Because 450% covers your 115%

expenses that you incur every month and leaves you with a profit/revenue of 335%. The aim of doing business is to make

profit! If we are in business, we should be making 335% profit/revenue/sales every month then we are truly making money.

There is no point in continuing a business if you are only making 120%. This is 5% return of your Net Worth. You are better of

getting a promotion in your Just-Over-Broke. If you do get the promotion you will most likely eat that 5% and increase your

appetite for credit to 135%. Why? Because you have not been counting! Counting is very important it keeps you on top of

your money game. Every month you must compare your current bank statement to your previous bank statement!

Compare how much came in! How much went out! Is your Income increasing or decreasing? Are you saving or on a

spending spree? This is what is truly going to separate you from the crowd in terms of building money. As an entrepreneur

you need to cover all costs otherwise you headed for the floor. Money makes money so saving for capital is a good idea

but also come up with a way of covering the 115%. It is either you keep the job and start building towards getting out or get

the income in every month to cover your living and well-being expenses.

It is just always good to account for your expenses and income even if you’re not an entrepreneur. You can safely put

away money into a savings and by the end of year view what you have. These savings can then be reinvested into income

giving resources, if are not a risk averse individual. Income giving resources include the following Stocks, CFD’s, Indexes,

Mutual Funds, Unit Trusts, Exchange Traded Derivatives and Currency Pairs these offer a magnificent return on investment if you play your cards right from start. You can build your very own Investment Portfolio and enjoy the “once in a while or lifetime” rewards on annual or monthly basis. This is dependent on which Banker, Asset Manager, Hedge Fund Manager or Trader sets up your portfolio. These benefits can be enjoyed both by individuals and enterprises (entrepreneurs). Or perhaps you are risk averse and just prefer saving your money in a Fixed Deposit or Retirement Annuity? ? Boring! Take a dive and join the wealthy! You can buy more toys and luxuries without any worry, when you start counting and creating your wealth. If you do not count then you are just living hand to mouth. If you are an entrepreneur and your making 120% then you are not seeing the results of entrepreneurship! In entrepreneurship there’s growth, prosperity and wealth! If you look back 5 years ago and compare it to now and you are still in the same position then you have not grown as an entrepreneur. You keep repeating the same mistakes. These mistakes come from not counting at all! Or not having financial advisor count with you! The type of “Financial Advisor” is not the one that sells you “Expenses i.e. Insurance, Assurance etc.” but the one that sells you Investments! The “financial advisor” should not just sell you Investments! They should show you the Future Value of your investment and when you can take out it. How you can withdraw it? What are the penalties for early withdrawal? They should also discuss, How much you can actually spare? Many financial advisors do not take the time to discuss and break down how much you can actually spare. They are quick to want to pocket a commission. You as the client need to know how much you can actually spare! What if it is out your budget?

When you search the market for a money manager search for an extraordinary one, one that actually cares about your financial well-being. A good money manager will help you set up a budget and build your wealth towards a goal or dream.

By Shingai Mhendurwa

#Financial-Mechanic #Money-Medium #Accountant #Entrepreneurship #LetsTalkMoney #LetsTalkBusiness #Dream-Builder