Starting a Business Series: Cash Flow

When you start a business cash flow can quickly bring about anxiety, then euphoria, then anxiety, then euphoria….you get the point.  Cash flow can be tough to manage when you start a new business.  I encourage taking the emotion out of the cash flow situation for the first year or two by being strategic.  You will ideally begin your business with cash savings.  You will also likely a financial plan that includes a budget.  This will enable you to keep a steady handy when cash goes in and out when you are in the initial stages of your business.

Ideally, you will maintain a separate Financial Independence Fund at all times during your life.  When starting a business this will likely be a larger balance to provide you cushion personally (let’s say 6 months or more).  Once you are a business owner you should also start to build a larger balance in your Financial Independence Fund to cover your minimum mandatory business expenses as well.  As you are building this additional amount in the fund, you are going to use any cash inflow you earn to pay your business and personal expenses and nothing else.  Once you have built your combined personal and business Financial Independence Fund you can loosen things up and begin once again to spend and invest in ways that align with where you are within the Financial Stages.

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