Having the right mindset about money can help a founder stay lean with his or her spending -- even when revenue starts rolling in. It's not about being miserly with money. A money mindset involves being smarter about spending, saving, and investing.
In order to develop a money mindset, it helps to know what that involves. A mindset is a belief system and accompanying attitude about something. It can be about intelligence, success, skills and talents. And, it can be about money.
No money mindset, no money.
None of us are born with a fully-formed money mindset. It develops over time and is influenced by external factors and internal effort. Could the lack of a money mindset be behind some startup failures? It's certainly possible.
After studying why 101 startups fail to thrive, CB Insights compiled a list of reasons for startup failure. The second most cited reason on the list was "ran out of cash." Startup founders of these failed businesses said they weren't sure how to spend money. This can lead companies to burn quickly through millions of dollars in funding.
Business owners would be best served by building a healthy money mindset before launching a venture. Here are some actions to take to develop a financially fit frame of mind:
Start with a course in financial education.
Research from the last few years compiled by Brookings Institute indicates that financial literacy is made up of core concepts about money and finances with foundational skills and psychological factors. It results in financial behavior or "experiential learning" that builds a money mindset.
Taking a financial education course can help with this development. Whether the course is online or live at a seminar, it can help make future money decisions much more well-informed. When looking for a course, know that financial literacy is complex and probably requires a comprehensive lesson plan.
The FDIC offers a Money Smart online education course focused on personal financial management. These lessons can help a startup founder look at money differently in all aspects of life. Additionally, Smart About Money is a set of courses offered by the National Endowment for Financial Education. The non-profit focuses on improving the financial literacy of Americans and provides courses on subjects like earning money, planning for financial well-being, handling life events, and implementing a retirement strategy. There's no shortage of courses just like these to help expand your understanding of how to make money work for you and your business.
Consult with a mentor.
Mentors can guide the development of your money mindset because they've been through a wide range of financial experiences. Their first-hand understanding of various implications for using or spending money a certain way can stop you from making the same mistakes or guide you in the right direction.
To find a money mentor, you can look as closely as your circle of friends, relatives, and acquaintances. Focus on someone you know who is always doing well with his or her own finances. Their advice can be an ideal place to start for specific advice and best practices. Not only do you already trust them, but they can share real-world, authentic examples.
From there, you can venture further by looking through mentoring sites and social media platforms. Non-profit organizations that focus on financial education may also offer mentoring assistance.
Read as much as possible.
Focus on financial strategies and planning to understand the risks and benefits as you make decisions. These resources can be found in online sources, books, and research material. Sites like Amazon regularly feature lists of new money and finance books that can provide a wide range of ideas about what today's financial experts see. Also start following some good podcasts, an ideal platform to listen to while exercising or traveling.
Numerous online sites, especially Inc., offer daily financial news and analysis. This includes sections devoted specifically to small business and startup operations. The articles and video content provide comprehensive analysis and valuable tips that can give you a more educated perspective.
Find ways to practice the money mindset and assess the results.
The process of practicing and assessing provides necessary lessons to shape how you look at money. By putting what you are reading and learning to work, you'll be able to see what works for you and what you may need to keep tweaking as your money mindset changes.
Just remember, a money mindset will take time to develop and evolve. The more effort you put into it, the more return you'll get, especially around why certain decisions about money lead to certain results. Finally, you may see that your growing financial acumen is starting to improve your company's financial position.