How to Manage Your Money While Starting a Business
Amanda Steinberg, serial entrepreneur and founder of DailyWorth, shares what she’s learned.
Amanda Steinberg, who’s started multiple businesses, including the super-popular career and finance site DailyWorth, is no stranger to the financial ups and downs that entrepreneurs face. After learning computer programming in college, she joined a small consulting firm. By the time she was 24, she was the head of their New York office and oversaw 15 people, all of whom were older than her. “It was 1999, in the heart of the dot com boom,” she recalls. “There was a stunning amount of money to be made.” She went on to build two multi-million-dollar agencies focused on creating online fundraising software for nonprofits and startups. “I got to be the chief tech officer at dozens and dozens of startups that were going to market,” she says. “It exposed me to the world of venture capitalism. I learned what types of scale and revenue models attract funding and why. I learned what works and what doesn’t, and finally, I thought, ‘I’m going to do that.’”
In the years that followed, she launched a handful of companies (including a web consultancy called Soapbox) to no small amount of success. “In 2008, I was 29 and, because my ego was so big relative to how successful I’d become, I bought this ridiculous house in Philly,” Amanda remembers. “I thought someone of my level of success should have a certain car, a certain house and so on.” She recalls earning more money than her peers, but not being able to create any kind of stability. She was spending all of it. First, it was expensive repairs on her house. Then, it was a $90,000 tax bill because her business had grown so quickly that she hadn’t paid the correct taxes. “I was raised by a single mom who always stressed the importance of being able to take care of myself,” says Amanda. “But, in spite of my relative success, I couldn’t.”
Fed up, she attended a workshop her friends were offering on financial management for women. When she walked out, she knew she had to share what she’d learned, and DailyWorth was born. On the site, Amanda gives her million-plus subscribers access to the financial and career expertise she wished she'd had when she was first starting out. She’s also launching a savings and investing platform called WorthFM. “We realized that most of our DailyWorth audience doesn't know how to invest—where to go, how much to invest, what to invest in,” she explains. “We’ve formed an actual bank and registered investment advisory to manage our customers’ savings, investment and retirement accounts.” In conjunction with the launch of WorthFM, she’s released Money Type, an assessment that the WorthFM team developed with a psychologist to help women learn how they think about their money. The assessment is meant to empower women to manage their money in a way that works for them.
Needless to say, Amanda and entrepreneurs face a unique amount of uncertainty when it comes to their personal finances. “For most of my career, I never had a paycheck that someone else was giving me,” she says. “I always had to bring in the revenue myself. I’ve dealt with the ups and downs—big checks coming in one month followed by dry spells for months on end.” Amanda shares what she’s learned about managing your finances, even in the throes of early-stage entrepreneurship.
1. Save before you self-fund your business
Not many entrepreneurs are able to save before they launch a business unless they live at home with their parents to wipe out their living expenses. I’ve been able to do it twice, both times due to the fact that I had another job. I worked a full-time job in order to fund my startup Soapbox. You can even have a part-time job that doesn’t require a lot of energy, so you can focus your efforts on your business. Having that consistent income when you’re getting started is critical, because startups often don’t make money in the first couple of years. It really might take that long to plant all the seeds and see them pop.
2. Be scrappy
If you really want to start something, learn to do things for yourself. This is especially helpful if it’s digital—it’s not that hard to learn HTML if you’re willing to commit the time. It’s best to become as independent as possible, because if you have to pay someone every time you need something done, you’re never going to get there.
3. Separate your personal and business accounts
People don’t do that. Money comes into their business and they drop it right into their personal checking account, and then when it comes time for taxes and deductions and understanding what your income is, it’s really hard to discern. It’s important for clarity between personal and business. Businesses get really expensive and you have to spend money on a business, but if you get confused about the distinction, you’ll never be able to manage the money effectively.
4. Give yourself a simulated “salary”
When you do get paid into your business, you have to put yourself on some sort of consistent monthly draw. You’re the head of the company, so it’s not a salary technically, but you need to get into a rhythm of knowing how much you have. The economic patterns of any business look like an EKG chart—constantly up and down. If you spend everything on the up, you won’t have anything on the down. Giving yourself a “salary” helps you avoid treating your business income like personal income.
5. Separate your flexible and fixed expenses into different checking accounts
In addition to my general checking account, I have one for flexible spending (non-essential things like shopping and entertainment). I pay for bills and other fixed monthly expenses from my general account. I take a set amount of money—let’s just say $1,000—out of my paycheck and move that into my flexible spending account, which has its own debit card. That way, I can look up on my phone the balance of that account, so I’m never in a position where I’m spending money that should be allocated to something essential, like paying bills, on something non-essential, like new clothes.
6. Set up accounts for unexpected costs
I have four accounts in total. In addition to the two spending accounts, I have one that I call my “curveball” account and one for my emergency fund. It’s kind of like hiding cash from yourself so that it’s there when you need it. I put $200 a month into my curveball account, until it gets to at least $500. That’s for the little stuff that happens, like my kids needing their school lunch plan renewed, for example. It's the things you don’t think about and that don’t fit into the monthly expenses you’ve planned for. I spend it when I need it, and then build it back up. The other account holds my emergency fund, which is for bigger unexpected things like medical emergencies. I’ve had to wipe it out before, which can feel really demoralizing, but thank goodness it was there.
7. Know what you’re signing up for
I think back to the first year of DailyWorth. I had a newborn and five full-time employees at my engineering company, Soapbox, and I was publishing content on DailyWorth every day. I lost my mind. There were so many nights of tears. It feels crazy-impossible sometimes. If you really want to be an entrepreneur and run your own show, you can, but it’s really painful for a long time. There’s beauty in getting a paycheck—all the wealthiest people I know have full-time jobs—but becoming successful as an entrepreneur can be done. It’s just harder, and that’s okay.
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