Why can't I afford more on my Enterpreneur's income?

Why can't I afford more on my entrepreneur's income?

By Mike Aquino for Yahoo! Southeast Asia | BDO Money Matters – Thu, Jun 13, 2013 5:08 PM PHT

Question: “I own a business, but compared to my entrepreneur friends, we can’t afford to travel even once a year. What am I doing wrong in my business? How can I correct this?”

There's a certain fly-by-the-seat-of-your-pants mystique to entrepreneurship, but it's incredibly easy to overestimate your own earning abilities if nobody's keeping track.

When you're always suspiciously low on disposable income, the problem may not be in your business, but in how you spend your income. The experts suggest it may be time to do a reality check.

Look at where your money's actually going. "The point where someone asks 'Why can't I afford X?' can possibly be due to undirected spending habits," explains April Amba, a registered financial planner with RFP Philippines. "Without a plan, people tend to make purchase decisions on a per transaction basis, deciding that they CAN afford something for as long as they see cash in their wallet, or for as long as their credit card limit would allow."

The first step to correcting the situation, April suggests, involves a cold, hard look at your spending. "I would prepare an income statement, and look into your spending habits to objectively verify what you really can and cannot afford," she says.

Reformat your priorities. 
What you find through that first step will guide you through the next: creating a spending plan "that ensures you afford the things you need first, then schedule purchasing the things you wanted when you can eventually afford it," April advises. Expenses like travel, for instance, become something you save up for instead of buying on impulse.

"It's good to tie specific goals to your budget, like: 'I want to raise a P100, 000 down payment for the car I will buy in eight months'," says April. "Concretely, this means that I will budget savings of P12, 500 per month for the next eight months. Clear, measurable, time bound objectives motivate people to stick with a budget."

If your income still falls short of even the most down-to-earth goals, then it might be time to take a different tack.

Also read: How to expand your small business

Increase your inflow. Assuming you're not in danger of going out of business yet (if you were, looking for spending money for that family trip would be the least of your worries), you should explore ways of increasing your inflow.

"One way of generating more income is for you to control your expenses," explains Jayson Lo, entrepreneurship-focused author and keynote speaker (www.jaysonlo.com). Jayson is mindful that much of business success can boil down to happenstance—so "you should focus on things you can control, like expenses. The small things will beat you, not the big things."

If you want to take income generation head-on, then Jayson suggests you look at new ways of marketing your business. "These days, it's not really how good your idea is; networking is important," Jayson says. "You don't really need to advertise—you have word of mouth, you have social media, you have PR."



Then again, do you really need that family trip? "There's a good book out there, it's called the Millionaire Next Door," Jayson tells us. "In the book, they had a survey among the real millionaires—they found out that among the top reasons they became rich, the first and second are tied: honesty and hard work."

Far from enjoying the fruits of their wealth to the fullest, real millionaires "are not ostentatious—they buy second-hand cars, they buy simple houses," explains Jayson. "To them, reinvesting their income into their business is what's important. Ikot lang ng ikot, with patience and perseverance."

If you have your own money-related question, share it with us in the comments section below!