When I was 22, I formally started my business with $100,000 in debt.
I knew that I was going to be an successful entrepreneur, but I didn't know that they were some costs that I had to pay. As I began my journey to starting a business, I've learned a lot along the way.
Since many young entrepreneurs have asked me for advice on starting a successful business, this is mostly geared toward millennials. However, even if you aren't under the age of 35, this can still benefit you. Here are some costs you should consider before starting a business:
1. College Loans
Cons: Assuming you owe $50,000 in college debt with a 5% interest rate, you would essentially be paying nearly $1,000 per month for five consecutive years. This is a high price to pay and could prevent you from having the money to capitalize your business.
Pros: Most college graduates do not know that they can defer their college loans for 2 years or more. Because of this, you can take the extra money and invest in yourself or your business. When you start making more money, it will be easier to pay off your college loans. Most people can make a healthy profit by their 3rd year.
2. Cost of Living
Cons: Depending on where you live, your cost of living can affect what you do in your business. Most people spend around $3,000-$5,000 per month. Since many young adults have credit card debt and college loans, they stay with their parents for most of their 20's.
Pros: Assuming that you don't want to live by yourself or with your parents, there are alternatives. Many millennials find themselves with their significant others, friends, or family members. By doing this, you can cut your rent costs in half and gain the flexibility to operate your business.
Cons: Happy wife, happy life right? For the men out there, your beautiful wife will want a wedding and diamond ring. If you're planning to propose to her before age 35, you better find a way to make more money. Thankfully, many parents help out in this area--if you're lucky.
Pros: This can be one of the biggest motivators for millennial entrepreneurs. If you're with someone you really love, your romantic desires can help you reach achieve your desires faster than you can imagine. Because love makes you do the impossible, the price of marriage usually takes care of itself.
4. Business Expenses
Cons: If you have a business, there will be business expenses. Whether you're paying for flight tickets, books, or office supplies, these expenses will cut into your first few years of profit. My first year business costs exceeded $20,000. I put most of it on credit cards, which incurred heavy monthly payments.
Pros: You can write off a lot of these expenses when it's time to pay your taxes. This will lower your income taxes substantially. If you're smart, you can also get things done in more affordable ways. However, you'll have to do plenty of research and connect with the right people.
5. Credit Cards
Cons: As a start-up, you might need a credit card to fund your business. If you don't have money, these credit cards can help you out enormously. However, since many millennials don't have established credit, they might not even qualify for a credit card.
Pros: For every $1,000 you borrow, you'll be making approximately $20 payments. That means that if you borrow $5,000, you be paying nearly $100 per month. This is easy to pay if you can obtain a big income within the first three years. If your credit card bills seem unmanageable, you can discharged them by filing Chapter 7 bankruptcy as a last resort.
Cons: When you're a business owner, you're forced to save money for taxes. Even though you can write off many expenses, you'll still have to pay thousands of dollars around April. For the person who is barely earning a profit, this could be a hassle. Also, we cannot forget about property taxes and other fees around tax season.
Pros: If you're wise, you'll pay quarterly taxes. Because the IRS is generous, they'll give you a break and return the money if you've overpaid. Paying taxes can also make you more ambitious so that you'll never be in financial despair again. Plus, you've should be privileged to pay taxes since your country allows you to successfully run your business.
Cons: Since you've chosen to be an entrepreneur, you'll have to find your own insurance. Whether it's health, dental, life, or any other insurance, you better be prepared. The right service providers will be able to help you find the right insurance. You'll also have to pay a significantly higher premium on car insurance if you're under the age of 25.
Pros: You can always find insurance at the right price. In just a few calls, you can set up automated systems that allow you to put your insurance bills on auto pilot. It also gives you the choice to select your own insurance, unlike the majority of employees who accept any insurance thrown to them.
Cons: If retirement is a priority, you'll also add a few hundred of dollars in your retirement fund. If you have a 401k, be sure to acknowledge the fact that there are heavy penalties for breaking into it. Conventional retirement plans can also be a burden since it's not a high priority as a millennial.
Pros: Most millennial entrepreneurs should aim to make a fortune before the age of 40 years old. If you're really slow at becoming wealthy, then you should be able to reach your million-dollar mark by either 50 or 60. Either way, you should depend on your wealth to take care of you in old age.
Cons: If you have any money left over, you'll want to start saving some. There will be emergencies that you'll need to take care of along the way. However, don't worry about this since the Universe will see to it that your business continues to operate. Worrying is just a waste of your imagination. Instead, use your imagination to make more money!
Pros: I don't recommend saving at all when you're in your first 3-5 years of business. In fact, you should have full faith that all the money that you re-invest into your business will help you to generate more wealth. When you invest all that you have, you'll be able to have more of what you wanted!
Cons: Many of your peers may give you a hard time for not splurging your money with them. As they enjoy themselves at a cookout or party, you might be tweaking your website or finishing a book. Either way, you must solemnly decide to forge ahead. Eventually, you'll be able to allocate time and money to enjoy yourself, even if you have to face severe criticism before you do.
Pros: The best time to enjoy yourself is when you are young. Even if you're always working to build your business, you'll have time to enjoy the great joys that life has to offer. Since many of your memories are free, you don't have to pay a fortune to enjoy them. Also, be sure you have some money to celebrate your
'wins' in business!
Now that you know the price of starting a business, you can decide whether or not you want to do it. If you count the costs and determine that you're willing to pay the cost to be the boss, I highly commend you for the decision. I'm here for you every step of the way!