Financial literacy is the ability to understand and use financial skills. The chance of your business failing goes up dramatically if you lack these skills. With that in mind, here are five financial literacy mistakes to avoid when you’re running a business.
1. Overspending On Your Hiring Campaign
Contrary to popular belief, hiring doesn’t have to be hard or expensive. There is a way you can guarantee you find the right team without overspending on your hiring campaign.
- Use a company that employs strategic recruitment marketing to find the brightest talent for your business right away.
- This allows you to skip posting ads on all those job boards and searching through countless replies.
- They bring you the talent, you pick your people, and you start making money.
Stop waiting for the perfect candidate and let someone else bring them to you.
2. Underestimating An Emergency
If your business had to shut down for a week right now, what would happen? Do you have a plan in place for disaster? It’s time to make one.
- Create an emergency fund with money in it to keep your company going for a short time in the event of a disaster.
- Add to this money at least once a month.
- Don’t borrow from the account for non-emergency spending.
- Keep enough money in the account to cover the business’s bills and payroll for at least a few months. That sounds like a lot, but if we’ve learned anything in the past year it’s to prepare for the unexpected.
Making an emergency fund now can save you from financial ruin later.
3. Forgetting The Importance Of Self-Control
The financial literacy mistakes we make in business are often the same ones we make in our personal lives. Forgetting to practice self-control is usually the biggest culprit. Here’s what to ask yourself before you make that purchase.
- Is it necessary?
- Is it adding value to your company?
- Will it pay off in financial revenue or time saved?
- Does this purchase need to happen right now?
- Is this the best deal?
- Do you know what you’re getting?
Self-control is an important financial literacy topic to master when you’re running a business. Without it, you’ll find yourself surrounded by items that brought no value to your company.
4. Working For Free
It can be tempting to take on free work for the promise of exposure or promotions, but often it isn’t worth it. Here’s why you shouldn’t work for free, and the two exceptions to that rule.
- Working for free can look unprofessional. It’s a move usually reserved for those just starting out and in need of experience. If that’s not you, don’t send that message.
- Working for free takes up time and effort that could have been making your business money.
- There are two exceptions. Number one is if you’re doing volunteer or charity work.
- Exception number two is if the person or company asking you to work for free has a significant following who might be interested in your work, and plans to actively promote you to them.
Ask yourself if you have the spare time and energy to work for free and if it will benefit your company. If not, you’re just being robbed of effort that could’ve gone to making financial gains at your own business.
5. Forgetting About Uncle Sam
You may forget about that small sale you made in February, but the IRS won’t. Tax season will come and you need to be prepared.
- Financial literacy requires knowing where your money came from and where it went.
- Keep a detailed income and expenditure account, complete with transaction records and receipts.
- Set aside money for taxes you’ll have to pay for self-employment income.
- Have a financial advisor help you with all of these steps to keep things accurate and legal.
Taxes can be tricky, don’t hesitate to get professional help to make sure you’re staying on track.
Avoiding these five financial literacy mistakes can save your business. Take some time to consider them as you make your financial decisions.