Poor money management is the reason for more business failures than any other single issue.
And it’s no wonder! You weren’t born knowing how to manage money.
Most of us aren’t taught how to handle it either. We figure it out along the way, through much trial and error.
Those same mindset issues and bad habits that wreak havoc in your personal finances can plague your businesses as well if you’re not careful.
Catching Shiny Object Syndrome
Some things are just hard to resist – especially when your friends and colleagues are all jumping on board!
New tools, training, group coaching programs and even business models can all have a strong pull.
If you aren’t careful, these shiny objects can quickly distract you from your current goals.
If you find yourself catching shiny object syndrome frequently, try this two-step plan instead:
- For “too good to refuse” offers, make a plan for achieving a positive ROI before you purchase.
If you cannot find a (realistic) way to make the purchase pay for itself, don’t buy it.
- For exciting new business ideas, create a “someday” list. Jot down your idea and a basic outline, then get back to the task at hand.
Now that great idea won’t be lost, but it also won’t join the ranks of half-finished business plans that clutter your files.
Falling for the Sunk Cost Fallacy
If you’ve ever said to yourself, “I’m not using this subscription, but I can’t give up! I’m still paying the launch price and now it’s much more expensive!”
Then you’ve fallen for the sunk cost fallacy.
This common mistake is famous among economist. We all fall victim to it from time-to-time.
Simply put, the sunk cost fallacy is what makes you justify investing more money or time in something.
Because even though you’re not seeing results, you’ve already spent so much money and you want a return on your investment.
It’s what encourages you to repair the car one more time (after all, you just put new tires on it), eat a meal you don’t enjoy (simply because you’ve paid for it), and yes, continue to pay for tools and resources you’re not using.
Take a few minutes and examine your current business expenses.
What are you paying for month after month that you’re not using? Either make a plan to put them to work for you, or cancel them.
Stop falling for the sunk cost fallacy!
Too much penny pinching
You thought this was all going to be about overspending, didn’t you?
Here’s the kicker: Spending too little is just as bad for business.
When you’re constantly on the lookout for free and low-cost tools or working 16-hour days because you “can’t afford to outsource,” you’re not doing your business any favors.
Sure, it looks like you’re bootstrapping and working really hard to make something from nothing, but what you’re really doing is digging yourself a rut it will be nearly impossible to climb out of.
Not only that, but you’re reinforcing a scarcity mindset that will continue to plague you for years to come.
Rather than pinching pennies, learn to spend money strategically.
Buy what you need, when you need it. Invest in top-quality producers and programs rather than settling for the low-ticket, half-baked plans.
Just like quality clothes, cars and furniture, quality services and software last longer and work better.
And unlike that car, good quality business tools will pay for themselves and maybe even make you money!
What a complimentary financial game plan for your business or personal finances? Click here to start your financial freedom blueprint today!