The First Steps of Starting a Business

August 26, 2016

Most people go to college with the end goal of landing a job in their field. They may dream of working for a successful business, becoming a teacher in a large school system, or caring for patients in a well-known hospital. These are vastly different careers, but they have one thing in common – they all involve working for someone else. Often, the idea of starting a new business does not occur to college students and young professionals. The notion of being one’s own boss may sound a little far-fetched to students who, due to the recent recession, are aiming for more practical jobs. However, your younger years may be the prime time to start a business. In your early to mid-twenties, you likely have no mortgage, no children, and more free time to dedicate to your blooming business. If starting a business at your age is feasible, and you desire to pursue a great idea and be your own boss, what is stopping you? Follow the steps below to learn how to begin the process of starting your own business:

Come Up with an Idea

The first step in setting up your own business is to determine how you will generate revenue. Is your business built on products or services? Is your idea unique or will you be entering a highly competitive market? If the idea falls into the latter category, what will be your competitive advantage? Having a solid idea is the first step to building a successful and profitable business.

Develop a Business Plan

The next step is creating a business plan. A business plan is essentially a plan for your business, and it outlines your goals for the future of your business and how you plan to achieve those goals. It is comprised of many topics including your basic concept, funding, mission, values, target market, competitor analyses, strategy, and financial projections. A strong business plan is crucial for the next major step in the business development process — receiving funding.

Prepare Yourself Financially

Different businesses have different financial needs, but even the simplest of businesses may be costly to establish. Your business plan will help you assess where you stand financially and figure out an estimate of how much money your business requires. There are two actions you can take to start your business on the right foot — saving money and earning money.

Saving money is an often-overlooked element of setting your business up for success. Many successful entrepreneurs started from scratch and had to make personal financial sacrifices to keep their business afloat. Creating a budget and cutting back on expenses is an effective way to set more money aside for your business. If you are in the process of repaying education loans, consider refinancing and consolidating in order to get a lower interest rate. For more money-saving tips, check out this post. There are so many creative ways to cut back on spending and allocate more money to your business.

Earning money for your business can be difficult and time-consuming, depending on the amount of money you need. If you do not have the required amount at first (and most people do not), there are several ways to earn it. You can work part-time, while developing your business, to yield some extra cash. You can ask for financial support from your friends and family or set up a page on a crowdfunding site such as Kickstarter. Another option is getting in touch with investors that may give you financial support in exchange for stock in the company. You can also take out a loan from a bank or government agencies such as The Small Business Administration, which lends money to help entrepreneurs grow their businesses.

Although these three steps are not the only elements in creating a business, they are the hardest and most important. Along with ideas, business plans, financial and legal factors, marketing, and more, starting a business requires risk-taking, passion, and hard work. It is not easy, but it is exciting, dynamic, and often worth the risk.

Signs your finances are getting derailed by social media

Using Snapchat, Instagram, or TikTok isn’t necessarily a bad thing. It’s all about moderation. But there are some tell-tale signs that your social media use is hurting your bank account:

1. Falling for FOMO

Seeing friends and old classmates’ vacation photos can give you a severe case of FOMO— fear of missing out. Those glamorous photos can cause you to want to book your own expensive trip. However, you should know that few people can really afford those exotic vacations. According to BankRate, the average person spends less than $2,000 per year on vacations. The Federal Reserve reported that 40% of Americans can’t cover a $400 emergency expense, so a pricey vacation — or even a weekend trip to the beach — is out of reach for many. While some people may save for months or years to pay for their vacations, many more turn to credit cards to finance their trips. Chasing their lifestyles could damage your bank account.

2. Believing in the fantasy

With so many people posting beautiful photos of lavish purchases, it’s easy to believe that everyone is living a more luxurious life than you. But what you see on social media isn’t always real life. You have no idea how people are paying for those luxuries. They could be well off, or they could be in extraordinary debt. One well-known influencer racked up $10,000 in credit card debt to keep up her Instagram persona, filling her feed with pictures of dinners out, new outfits, and online purchases. And companies exist that allow users to hold fake private jet photo shoots. Take the photos you see with a grain of salt and don’t compare yourself to others.

3. Purchasing on impulse

Social media ads are incredibly targeted; they’re based on your search history and likes, so you’ll likely see ads for products that will appeal to you. In fact, a 2019 survey from VidMob found that one-third of Instagram bought an item directly from an Instagram ad. With one-click purchases and saved credit card information, it’s easy to make a purchase in an instant before you can really think it through. If you find yourself making purchases while scrolling through your social media feeds, you may be wasting money.

How to stay on track

If your social media use is compromising your finances, use these five tips to get back on track:

1. Limit your screen time

While it may seem difficult during shelter-in-place orders, set limits on how much time you spend on social media. You can use your phone’s screen time settings to see how much time you currently spend on your phone. Use apps like Moment, Freedom, and SelfControl to limit your social media access.

2. Keep visual representations of your goals in front of you

To combat visuals of vacations and other purchases, keep visuals of your goals handy. For example, if you’re paying down student loan debt, keep a visual graph of your progress on your phone or saved to your computer desktop. (Hint: Need help paying down your debt? Consider student loan refinancing. Our customers have reported that they are saving an average of $272 every month and should see an average of $13,940 in total savings after refinancing their student loans with Education Loan Finance. You can get a rate quote without affecting your credit score.*) If you plan on buying a home or a car, keep a picture of your dream purchase saved. You can also create a Pinterest vision board of what your goals are to help keep you focused. After all, taking control of your finances can help you live lavishly once your debt is repaid.

3. Set a waiting period before making any purchases

Institute a waiting period before making any purchases to curb impulse buys. Make yourself wait 72 hours before making a purchase. If you see an item you want, save it. If you still want the product three days later, you can give yourself permission to buy it. You may find that you completely forget about it, or that it’s less appealing after a few days. By making yourself wait, you can ensure that your purchases are things you really want and need.

4. Curate your feeds

Social media can be fun, but it can also make you feel bad about yourself and your life. To combat those problems, spend some time eliminating feeds and unfollowing accounts that make you feel inadequate, and only follow accounts that make you happy. Feeds that feature cute dogs? Follow! Home decor feeds with throw blankets and lamps that cost more than your rent? Unfollow.

5. Practice gratitude

Researchers have found that focusing on things that you are thankful for is proven to make you happier. Every day or at least once a week, set aside some time to jot down things you are grateful for that happened during the week. They don’t have to be big things. Cooking an especially tasty dinner, being able to spend time binging Netflix with a friend or partner, walking your dog, or still having a paycheck during a difficult economic period are all things to be thankful for right now. By focusing on the good things that are already in your life, you’re less likely to be affected by FOMO and social media’s influence.

Managing your money

Using social media can be a great way to connect with friends and family and pass the time, but it can negatively impact your finances. But by using these tips, you can combat its effects and manage your money.

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2020-05-11

Forget the Joneses: Why a Modified HENRY Lifestyle May Be Better

If you have ever been tempted to get the latest phone or newest trendy clothing, you may be familiar with the feeling of needing to keep up with the Joneses. Now, some millennials are feeling the pressure to live up to a new standard. As opposed to the proverbial Joneses, it’s the HENRYs. Although HENRYs have their downfalls, just like the Joneses, with some financial tweaks you can set yourself up for a bright financial future and avoid the pitfalls of being a HENRY. By Caroline Farhat

What Is a HENRY?

HENRY is an acronym that stands for “High Earner, Not Rich Yet.” First used in a Fortune magazine article in 2003, it’s a term that describes millennials who typically earn over $100,000 but feel broke. According to financial experts that help HENRYs with their financial goals, the typical HENRY is:

Earning more than $100,000 a year as an individual or $150,000 as a couple
A millennial, with the average age being 32 years old
Working in any industry, including software engineering, digital marketing, journalism, law, medicine and finance
Usually living in high cost of living areas with the higher-paying jobs, like California, New York and Washington D.C., but can live anywhere
Saving money, but not enough. The typical HENRY may have between $15,000 and $20,000 saved. Although this may seem like a lot compared to the 58% of millennials that have a savings account balance under $5,000, based on the percentage of income earned, the savings are minimal.

Problems HENRYs Face

Many millennials who are considered a HENRY feel like they are living paycheck to paycheck, however, they make it a priority to pay for expensive gym memberships and dream trips. Here are some problems HENRYs face and how to fix them:

Lifestyle Creep

Lifestyle creep refers to the phenomenon in which spending on discretionary items increases when income increases. It can be dangerous to increase spending each time your income increases because it can derail future financial plans. HENRYs often give into lifestyle creep because they have the mentality that they deserve the luxuries they have become accustomed to. The Fix: To fight lifestyle creep, prepare a budget with the goal of trying to save at least 10% of your income a month or 20% or more if you do not have any debt. Keep your budget the same even if your income increases and be sure to save the difference in income. If you are able to lower your expenses, save that difference too. It’s recommended that the savings go to a retirement account and building an emergency fund.

Student Loan Debt

Student loan debt is a major strain for many HENRYs. According to one financial expert, 40% of her clients who are considered HENRYs have student loan debt. HENRYs owe an average of $80,000 in student loans, much higher than the average $33,000 for millennials in 2019. However, for many HENRYs, student loans helped them achieve the education they needed to obtain the high wages. The best way to deal with the student loan debt is to see if you’re missing out on ways you could be saving money on your loans and create a plan to pay them off quickly. The Fix: Student loan refinancing can be extremely beneficial for many student loan borrowers.* Refinancing student loans can save you money on your monthly payment and in interest costs over the life of the loan. This will allow you to build more wealth faster and feel less strapped for cash. So how much can you save? Let’s say you had $35,000 in student loan debt at 7% interest with a 10-year repayment term. By the end of your repayment term, you’d pay a total of $48,766. Interest charges would cause you to pay back $13,766 more than you originally borrowed. If you refinanced your student loans and qualified for a 10-year loan at just 5% interest, you’d repay $44,548. Refinancing your debt would help you save $4,218. Use our student loan refinancing calculator to find out what your potential savings could look like.*

Living for the Now

HENRYs like to focus on the now, and although it is good to live in the present and appreciate what you have, that may not be the best mindset for your finances. HENRYs have to accept that the future will come and they have to prepare for it. But preparing for the future doesn’t mean you have to make a ton of sacrifices! It’s completely possible to enjoy worldly adventures and designer brands now and still save for the future. The Fix: Decide 2-3 future goals you’d like to achieve and examine the type of financial situation you’ll need to make them happen. Do you want to save for a down payment on a house? Plan to start a family soon? Or are you looking to retire early? Once you have your goals, set up automatic transfers to a special savings account so that you’re not tempted to touch the money.

Cost of Living

HENRYs face a higher cost of living because income increases have not kept up with the rising cost of housing and medical expenses. Many also face the added stress of living in high-cost metropolitan areas. The Fix: Try to cut your living expenses by choosing to live in the suburbs where housing costs may be lower. If cutting your living expenses is not an option, decide what discretionary expenses you can lower. For example, if you are used to getting takeout multiple times a week, try swapping easy home-cooked meals for at least half of the time.

Conclusion

If you realize you are a HENRY, this doesn’t mean financial doom for you. Making these small tweaks can help you continue to live the lifestyle you enjoy while working towards a richer future.

Man teaching on zoom. Teaching is an example of a recession-proof job.

2020-05-07

Do Recession-Proof Jobs Exist?

It’s probably safe to say that you have heard the economy is in a recession or headed towards one due to the COVID-19 global pandemic. Hearing about a recession may cause you concern about your job security, but you’re not alone. In these uncertain times, it can feel like no job is truly safe. But, in fact, recession-proof jobs do exist. If you are in college and exploring career paths or if you’re looking to change jobs, keep reading to find out about careers that may lessen your worries during a recession. And if you find yourself currently in a position that may be affected by a recession, there are some actions you can take to make your job a little more recession-proof.

What Is a Recession?

A recession is defined by the National Bureau of Economic Research as a significant decline in economic activity lasting more than a few months. The decline in economic activity is seen in things such as income, employment statistics, and retail sales. Unemployment can increase during a recession because companies are earning less money due to less demand and are unable to pay employees. However, there are some jobs that are considered recession-proof, meaning you are less likely to lose certain jobs during a recession.

Recession-Proof Jobs

If you are trying to decide what career path is right for you and want to find one that is more likely to survive a recession, take a closer look at jobs such as these below. Here are some of the best jobs during a recession:

Healthcare Industry - Most jobs in the healthcare industry are safe during a recession because people will always need medical attention regardless of how the economy is faring. In addition, these jobs can be done in many different settings that allow for more opportunities, such as hospitals and doctor offices. The jobs most in demand are registered nurses, physical therapists, and pharmacists. The only healthcare jobs that may see some decline in a recession are those involved with elective procedures, since people may put those off until more prosperous times.
Teachers and professors - Children will always need education and teachers will always be needed. Whether elementary, middle or high school, teacher positions will need to be filled. Becoming a professor is also a solid career path, although it will require an advanced degree.
Law Enforcement - This can include officers, detectives, and crime scene technicians. These jobs are usually protected from layoffs because the need for public safety is not dependent on the economy.
Public utility services - The jobs in this sector are in electric companies, trash services, recycling, and water services. These services are considered essential and will continue in a down economy.
Funeral director - A funeral director is involved in planning all aspects of a funeral. While it may sound morbid, death is inevitable and, therefore, this is an industry that will not suffer as much economic impact as others.
Firefighters - Similar to law enforcement, firefighters are an essential part of maintaining public safety. Fire inspectors and fire investigators are similar to this job.
Judicial workers - In a recession, the court system will still be needed. Whether civil or criminal cases, jobs in the judicial system will continue. This can include judges, clerks, bailiffs, bail bond agencies, prosecutors and public defenders.

Recession-Proof Your Current Job

Unfortunately, some sectors of employment are more susceptible to job losses during a recession, such as jobs in the construction field, travel industry, auto sales, and retail sector. If you are in a job that is not considered recession-proof here are some ways to increase your chance of not receiving a layoff notice. One important thing we’d like to note: If you have been laid off, it’s extremely likely that it had nothing to do with your talent or likeability. Unfortunately, sometimes companies have to make difficult decisions to layoff people that they normally wouldn’t. These are just merely suggestions for ways you can rock at your job:

Learn new skills - Learning new programs and strategies in your field may help you move up the ranks in your company and show initiative to your bosses. This can translate to being a more valuable contributor to your employer, and thus, more likely to survive a layoff.
Be a team player - A likable co-worker who helps contribute to projects would be an asset to the company rather than someone who just does the minimum required for their position. Become a team player by taking on more responsibilities even if they don’t fit within your position.
Have a positive attitude - When managers have to decide who they have to lay-off they will be more likely to retain the employee who has a positive attitude about their job rather than an employee with a pessimistic outlook who makes the workplace a negative environment.
Network - Build relationships with colleagues in your field. This will help if a layoff is inevitable at your company and you find yourself looking for a new job.

If you are in a job you love but it’s not considered recession-proof, the best thing you can do is take control of your finances. Two things that will make the biggest impact are: creating an emergency fund and reducing your finances. Start saving for an emergency fund and aim to build at least 3-6 months of living expenses. If you are trying to reduce your expenses, one simple option that could save you hundreds of dollars a month is student loan refinancing. Check out the student loan refinancing calculator to see if this may be a good option for you.* A recession is out of your control, however, preparing for it in advance can save you a lot of worries. Whether you choose a new career path, try to recession-proof your current job, or just bulk up your savings, all of these are great options for preparing yourself for a less stressful future.