By Pratik Dholakiya
Many young entrepreneurs these days spend years and years paying their professional dues, pulling themselves out of debt, and living paycheck to paycheck. In fact, studies have found that the majority of today’s college graduates don’t expect to pay off their student loans until their 40’s!
Once that frugal time period is over, getting to the point in life where your business ventures actually begin to accrue wealth can be very exciting. However, this is also a time when you need to be very, very careful. It’s easy to get caught up in the Silicon Valley mindset and overstep your bounds in the pursuit of “making it big.”
Wealth can open up a lot of doors. It can also create a lot of problems. Here are three major things all young entrepreneurs should consider as they create wealth.
Don’t forget about yourself
If you’ve spent a long time working and living on a tight budget, seeing a bump in income is an undoubtedly liberating feeling. As an entrepreneur, it can be extremely tempting to make hasty expansions to your business or take uncalculated risks without considering the big picture. When this happens, it’s tough to draw the line between personal and business budgeting.
One of the worst things young entrepreneurs can do is attach their livelihood to the success of their business. If the business goes south, your life can end up in shambles. Remember, YOU come first. Once you are at the point when you can cut yourself a salary, you need to start setting yourself up for the future.
Tools like EveryDollar are perfect for young entrepreneurs to create a personal savings plan. Users are able to create a customized monthly budget within minutes.
From here, you can set up your plan to track spending, pay bills, save for retirement, set up emergency funds, and much more.
Properly planning for the long-term is something ALL young entrepreneurs need to be doing. The most important thing to remember about business is there are no guarantees. If disaster strikes, you need to have yourself covered.
Learn how to invest properly
As you begin to accumulate wealth, knowing how to invest your money properly is critical for becoming financially secure. Younger entrepreneurs are at an advantage – as they have a long to time to reap the benefits.
As a business owner, investing your earnings may seem obvious. But, there are plenty of wrong ways to do it. For one, putting a huge chunk of your money into something without a firm understanding of its entirety is perhaps the biggest investment sin one can make.
Secondly, you do not want to put your assets at risk. You need to make sure to structure your business and investments in a way that creditors won’t have access to them should anything go wrong.
Third, investing too much at once can be troublesome. As a general rule of thumb, it’s recommended to stick to the 80/20 rule. As an entrepreneur, this means to dedicate 80% of your resources to core business opportunities and 20% to new ones. Sinking a huge amount into new opportunities can make it difficult to maintain the practices that led to your business’s current state of success.
Lastly, be sure to diversify your investments. This is to reduce risk and expand your portfolio.
Knowing how to properly invest your money is a lifelong necessity. Do your research and get in touch with a financial advisor to get started on the right track.
Start planning your will
Now, the concept of planning a will might sound like something to put on the backburner until you start seeing gray hairs. Many young people tend to avoid this process because it’s a morbid topic. However, when you start creating significant wealth, it’s never too early to have an idea of where your money and assets will go should anything happen to you (God forbid).
Failing to do so can put your relatives in a tough situation in having to make those difficult choices for you. Keep in mind, your will doesn’t have to be permanent. You can always make alterations while you’re still alive. Once you start a family and have people who depend on you, writing up a will becomes even more important.
Fortunately, this task isn’t as difficult as it may seem. Apps like After allow you to create an electronic will and desired testament to transfer everything from bank accounts, pension funds, and insurances, all the way to funeral preferences, personal feelings, and final messages to loved ones. Upon signing up, you can start with as few as three trustees.
You can then create your final messages via text, photo, or video, and distribute them as you please.
While this is not a replacement to a legal will or statutory rights and obligations, it can serve as the basis for how your assets are divided by beneficiaries.
Although the thought of creating a will may be the very last thing on the mind of a millennial entrepreneur, getting the ball rolling early on will be helpful for everyone in the case of a tragic event.
Millennial entrepreneurs are coming up in an interesting business climate, to put it lightly. Wealth can be a very dangerous thing. If you let it, money can come with all kinds of nastiness like arrogance, poor judgment, and a general lack of understanding. There is no shortage of cautionary tales in this regard.
If you’re a young entrepreneur currently seeing the substantial fruits of your labor, always keep these three points of advice in mind. Good luck!
Featured Image Credits: Pexels
Pratik Dholakiya is the Founder of The 20 Media, a content marketing agency specializing in content & data-driven SEO and PRmention, a digital PR agency. He regularly speaks at various conferences about SEO, Content Marketing, Entrepreneurship, and Digital PR.
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