One major cause of business failure has been poor money management.
Unfortunately, money management skills are not something we are born with and a lot of persons don’t have the privilege of learning how to do it in a classroom. It is something we tend to figure out on our own, through trial and error. Our lack of knowledge can lead to poor money-saving habits which can be damaging to any business. In this article, we’ll explore some money management tips to help you and your virtual assistant business thrive.
But first, let’s explore what money management actually is.
Money management basics
Money management is a process which involves the following:
- Expense tracking
It doesn’t end there. You could probably find other elements of money management as well. Think about your own business and try to come up with three other things that you think could be added to this list based on how you manage your money.
What is important to note from the money management definition above is that it is a process. It is not something that can be accomplished with a single action. Money management requires a set of actions. It is also not something you do once and never again. Money management is constant and ongoing.
Now, let’s dive into some of the money mistakes you should be avoiding and explore tips that can help you overcome those mistakes.
1. Avoid Financial Distractions
Have you ever come across something that is hard to resist?
It could be a new tool, a training course, or even a new model you want to explore for your virtual assistant business. These are all good, but if you are not careful these enticing things can become a distraction that removes your focus from what your financial priorities should be.
While these things might be useful, there is probably something else that is far more pressing that you should be spending your money on.
Money management tips to avoid financial distractions
If you find yourself being lost in this kind of distraction, try this:
- If you realize that this purchase won’t pay for itself in some way, then don’t buy it. Ensure that you can achieve a positive return on investment (ROI) before you purchase.
- Create a ‘someday’ list. If it makes no sense to purchase it now then make a note of your idea, create a basic outline, and save it somewhere. Then get back to your priorities. When the time is right you can go back to this list.
Don’t be a victim of financial distractions!
2. Avoid the Sunk Cost Fallacy
Does this sound like you?
“I’m not using this subscription, but I can’t give it up!”
“The service price is much more expensive here, but I’m still paying and staying even though there are better and cheaper options elsewhere!”
If this sounds like you then you are a victim of what is called the sunk cost fallacy. What is this? Let’s pull these words apart and figure it out:
- Sunk cost – this is a cost you have incurred but cannot recover e.g. your subscription fee or service price.
- Fallacy – this is a belief or idea that is mistaken, wrong, or incorrect.
This kind of mistake is a well-known issue for economists, and it is a common issue that plagues business owners from time to time. So as you seek to start or continue your business providing your own virtual assistant services in the Caribbean, this is something you should be aware of.
Here are some ways the sunk cost fallacy can manifest itself in your everyday life:
- You find yourself justifying investing more money, effort, or time in something.
- You are not seeing any results from your efforts, but you continue because you’ve already spent so much.
- Once again, you are spending money to repair your car! You defend the spending because, after all, you just put new tires on or just got a paint job.
- You find yourself continuing to pay for tools and resources you’re not using in your business.
Now, let’s stop thinking about hypotheticals. It is time to look at it from the perspective of your actual virtual assistant business.
What are your current business expenses? Is there something that you keep paying for time after time but you’re not using it?
Money management tips to avoid the sunk cost fallacy
Here are your options:
- Find a way to make what is wasting work for you. Make a plan!
- If it cannot work, then you don’t need it. Let it go and move on!
Do not continue being a victim of the sunk cost fallacy!
3. Avoid Underspending
There’s overspending, then there’s underspending. Yes, even that’s a problem too. Are
you spending too little? Guess what! That is equally bad for business.
Is this you?
- You’re always looking for free or low-cost resources and tools.
- You’re working 12 hours a day because you don’t want to spend the money to hire staff or outsource.
Here’s something important to consider. If you are doing this, then you’re not doing
your business any favours.
- In your own defence, you might be thinking:
- I’m just being resourceful.
- I’m just working really hard to make something from nothing.
But here’s what you’re really doing. You are actively digging yourself into a hole that will be nearly impossible to climb out of in the long run.
This attitude today might become a habit tomorrow. If you let it, this scarcity mindset could continue for years, and that will definitely not help your efforts to build a strong and lasting virtual assistant business.
Money management tips to avoid underspending
- Don’t put your focus on spending less, instead focus on spending money strategically.
- Don’t be afraid to buy the things you need, but only when you need them.
- Remember to always think about the potential for a return on investment. Will it be worth it?
- Focus on quality. Don’t settle for less. High-quality products and services last longer and work better. It pays for itself in the long run. On the other hand, low-quality products get damaged faster. Low-quality services lessen the quality and value of your product. Make good investments!
Avoid being a victim of underspending!
As you start or continue to provide virtual assistant services, it is important to learn how to manage money better. Having basic money management skills is an essential requirement for any business owner.
If you don’t know how to manage your finances effectively, I encourage you to take the time to start learning money management techniques that can help you take your virtual assistant business to the next level.