NEW DELHI: After having worked and gained decades of experience, many professionals dream of becoming their own boss. While going through this transition phase to become an entrepreneur, there are fundamental challenges to overcome.
Therefore, before you decide to move into the field of startups, you should properly check your financial situation and preferably write a financial plan. This article examines how you should plan your finances once you decide to work on your own startup.
Anup Bansal, chief investment officer, Scripbox, said the plan should make conservative estimates on your entries based on your startup’s stage and funding status. “You need to have a noble understanding of the level of financial impact you can take without your normal monthly income. A schedule of high priority goals and the level of tolerance around those goals must be established to achieve, without any compromise. The plan should also clearly document an exit strategy in case your startup does not progress as planned so as not to jeopardize your financial health and goals, ”Bansal said.
Since you are taking a risk with a startup, this means that at some point you are an aggressive investor, you may need to be careful with your investments. This will balance your risk capacity with your risk appetite, in line with your overall risk profile. “It is suggested to have a lower allocation to stocks with acceptable liquidity provisions. If you have a high allocation of stocks, the reduction may occur gradually, taking into account market conditions and tax considerations,” said Bansal.
If possible, write off debts such as credit card debt, home loans, student loans, and car loans. Paying off a loan can take a while, but you need to understand that starting a new business with a healthy track record can make all the difference. Also, shorten your expenses for a few months or years, it will increase your esteem to grow your business.
Likewise, estimate what you expect from your new income in the future and, accordingly, modify your budget. All of these payments should be followed by an estimate of your tax payments. Certain tax deduction benefits may also be available as a result of your transition. Make sure to take note of all these tax breaks.
While building a new career is a big step, it usually has a big financial impact. So, it would be helpful if you were prepared for this by getting a financial plan drawn up by an advisor.
Bansal said, “Startups require more than regular effort and attention. A person transitioning to the startup field may not have time to think about their personal finances and risk management. Emotions will likely play a part. important role when making decisions between startup and personal finance. Therefore, you should ideally go for an independent and trusted advisor who can act as a sounding board, who will hold you accountable for your plan, plan with you and will manage the financial risk for you.
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