How to Keep Your Debt Down When You Work on Your Own

When you work on your own, it’s hard to ignore the financial challenges that come along with it- especially when you’re just starting out. There are currently millions of Americans who work for themselves, and many of them find themselves in debt without a safety net. Not only is this an uncomfortable situation, but it can significantly impair your ability to do the kind of work you want to do.

You don't have to let debt get in the way of your dream of striking it out on your own. Here are three things you can do to keep your debt to a minimum as you go about building your income stream:

1. Pay attention to your cash flow. You need to be very clear about the flow of money coming in and going out of your business. This is particularly important if you are bootstrapping your activities. Consider purchasing an accounting suite, such as Quickbooks, or if your budget is limited, you can also check out the free opensource option GnuCash. These programs generally offer a full range of features, such as financial reporting and billing- all of which will help you to stay on top of your cash flow. Once you are in touch with your income and expenses, you can make financial decisions that stay within your means.

2. Know when and how to hire. As a self-employed professional, you'll likely reach a point where outsourcing some of your responsibilities will make sense. But when you do, here's a rule you want to stick to: never bring anyone on board unless by doing so you can anticipate gaining twice that person's wages in new revenue- whether directly or indirectly. For example, you may hire a freelance virtual assistant or social-media expert who can free up your time for more direct revenue generation. One way to ensure that your hired help will deliver on the additional revenue is to be very clear about this person's goals and job summary.

3. Use credit and financing responsibly. Even if you are a conscientious boostrapper, there will likely be moments when you will need to tap into outside financing- whether it is in the form of a business or person credit card or even a small loan from friends, family, or peers. Deciding if and how much to take in financing is similar to the decision of whether or not to hire above. You want to be as certain as you can that the financing you receive will either be paid back quickly or will be used to expand your business in a way that very likely will lead to an increase in revenues.

In short, working on your own doesn't have to leave you drowning in debt. With a little forethought and discipline, you can turn your self-employed work into a lean, mean operation.

Susan Brown

Growing Your Biz- Helping new small and home-based business owners survive and thrive in the first years of operation.

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