If you’re a young entrepreneur and reading this, chances are you’ve been told the same old tired advice: “take risks early,” “follow your passion,” and “never give up.” It’s not that these pieces of advice don’t matter; it’s just that they’re not enough. In 2021, it’s important to not only work on your business but diversify and build your assets at the same time. We’ll talk about all the ways you grow your assets and your business at the same time.
Tip 1: Take care of your taxes
As a young and developing entrepreneur chances are you’re using your primary income to support your business. Until your business can support you, it’s important not to go 100% all-in. You’ll want to make sure you tax yourself. Save money for investments and savings. Next, use the rest to grow your business. If you haven’t learned the 50/30/20 rule, you better get real familiar. The bill should receive 50%, assets 30% and your personal expenses 20%. You can modify this rule to fit your particular situation. For example, I pay all my bills but I’ve managed to keep them so low that they’re only 10% of my income. The next step is to invest 30% in stocks and real estate. Then, 60% of my income is available to me to invest in my business. I also have the option to divide that 60% up to 50% and keep 10% for myself. Tax yourself as though you have all of the income.
Tip #2: Maximize Good Debt With Real Estate
You’ll want to take advantage of good debt. Most people think they should only go into debt when it comes to education or a business but that’s not true at all. There are many ways you can make debt work for you, instead of against it. A multifamily or single-family home can be purchased if you have a good credit score. Renting out other units or rooms is a great way to pay your mortgage, and also generate cash flow. This is the offset calculator I love. All savings made by cutting your living expenses can go back into your business.
Tip 3: Habits that are mastered over time will make you successful
It takes a marathon to achieve success. If you’re just getting started it’s okay to take one day at a time or even week by week but eventually, that has to stop if you ever want to see the results of your work. I like using this analogy: when we were kids, did our parents tell us “do today what needs to be done” or “set goals for yourself”? While we had great dreams as children, reality set in. Many people get stuck because they don’t know where they want to go. The same thing happens with business though most entrepreneurs fail because they don’t build the correct habits and stick to them. As James Clear elegantly states, “1% better every day compounds to 37% better in 1 year”. It would be 6% more if you are inconsistent. Massive difference!
Conclusion
Building your assets is key to building your business. It can seem difficult but if you partition your money into relatively passive investments, they’ll compound over time. Keep going and keep working hard every day. We create our habits first, and our habits will make us. Although you might not notice immediate results, the benefits are well worth it.
Entrepreneurship Life’s Top 3 Tips for Young Entrepreneurs 2021 and Beyond originally published this article.
