Money Advice for Young CEOs Who Are Trying to Build a Business
Are you starting a business young? The good thing about doing this is that the experience is probably going to come with a strange mix of confidence and constraint. Why? It’s because you will most likely be spending your days making decisions that shape your company’s very future, all the while still dealing with personal finances that might feel very… “up and coming.” (Which is a nice way to say that your personal finances probably aren’t going to be that great yet. Sorry!)
But hey, there’s nothing to be ashamed about, young CEO. As a matter of fact, learning how to save money in your personal life while building a business in your work life can equip you with skills that will separate you from the type of business founder who gives up easily and burns out early. Now we’re not saying that you need to live in an empty apartment with a mattress on the floor and a refrigerator full of condiment packets from fast food restaurants. Although–that might not hurt. At least it will make for great bio copy.
Instead, let’s look at how to give yourself room with your personal finances to handle the pressure as a young CEO.
Business Ambition vs. Personal Spending Habits
As a young CEO still scraping by in your personal life, one of the struggles you may face right away is wanting to live the CEO lifestyle. Don’t fall into the trap of caring so much how your life looks from the outside. You don’t need to travel first-class, wear suits that cost more than your car (or bus fare for the year), or multi-course dinners at fine dining restaurants.
And if your personal spending starts becoming some kind of emotional reaction to business stress-whoa, forget about it. You probably need to build a strict budget. If it makes you feel any better, you can say “it’s not about restriction; it’s about insulation.” But however you want to phrase this, it’s important to keep the highs and lows of your fledgeling business from “hijacking” your personal bank account.
If you know exactly how much money you need to live each month, you can know how much of your own money you can slip into keeping the company afloat–and how much you can’t.
Go Easy on Credit
Credit can be a young CEO’s friend, but only if handled responsibly. As a young founder, you may be targeted by financial institutions of all kinds. Used wisely, you’ll have a better chance of staying out of a deep mire of debt. Here’s an example: Amazon buy now pay later can help you make necessary purchases without draining your liquidity at the wrong moment in time. But be vigilant; be careful how you use credit. You don’t want to end up losing your business just before you “make it” because you wanted to have a really cool office chair.
Living Below Your Means
Contrary to what some of your peers may tell you, there is actually quite a bit of wisdom to be said for living below your means. Don’t give into the pressure to look the part of a successful CEO. And don’t worry that your clients, investors, are partners are going to have less faith in you because you don’t fly first class or put on a good bling show. The truth is, most serious people in business respect restraint far more than they respect flashy spending.
Now, once your business starts to earn, living below your means doesn’t mean hiding your successes. It just means refusing to spend all your money on outward appearances. Stick with an apartment–and an office–with rent that leaves you some breathing room. Get a reliable car that doesn’t scream “flashy CEO” when you start it up every morning. (If the Zuck has been seen driving inexpensive hatchbacks, can you do without a McLaren for now?) Travel, if you want, but do you really need to fly first class to the Amalfi Coast?
You may find this ironic now, but one day you’ll realize: This is the kind of discipline that makes respected business people trust you more, not less.
Personal Savings
How should you handle your personal savings as a young CEO? The traditional financial advice assumes you’re getting a steady paycheck. But as an entrepreneur, focus on building buffers instead of worrying about a percentage of your income. We find ourselves coming back to, “How much do I need to live off of for a month?” Then build your savings, trying to see how many months of personal expenses you can cover without touching the business. Start with one month, then two months, and then three months. Can you stash away enough money into personal savings to last three months without dipping into the business?
Be a Good Leader
There’s an emotional payoff to all of this advice, by the way. When your life starts to feel stable, you’ll find that your decision-making skills improve. You’ll be less reactive with employees, less defensive in meetings, and less tempted to chase opportunities from a place of insecurity.
Being wise with money doesn’t need to make you an ineffective CEO. Instead, it makes you more steady. And hopefully your team will feel that steadiness even if they never see into your personal finances.
