This is an age old question. I was reading Marci Alboher’s new blog on Yahoo Shine: Working the New Economy and she interviewed Pamela Slim. Pamela’s new book, Escape from Cubicle Nation, is a book I have wanted to read. Marci asked her a question about financial responsibilities for entrepreneurs that resonated with me:
So many would-be entrepreneurs are put off by their financial responsibilities. What to you say to people who say they’d work for themselves if only they could figure out how to pay the mortgage?
“You need to look at your financial situation with open eyes. And it’s all about your own your tolerance for risk and your financial planning. On the risk side, people have told me that they have hundreds of thousands of dollars in savings yet they still felt anxiety around starting a business. I’ve also talked to people with a thousand dollars in the bank who felt very little anxiety. As for the financial planning, if you are the only income earner or have dependents, then you absolutely need to know how much money is required to maintain your household. As enthusiastic as you are about your business idea, if you haven’t planned for cash flow, you can be crushed by anxiety if you can’t pay your bills. All the experts say to have a six month cushion at minimum, but again, it’s really about knowing yourself. Some people feel really motivated if they don’t have money in the bank because they know they have to make things happen quickly.”