During this pandemic, many people have switched to opening businesses because some companies have reduced their employees. If the Healthy Gang wants to open their own business, make sure it is carefully planned, including in their financial planning. One thing that might need to be considered is the importance for business actors to have insurance so that their business can run smoothly. What is the explanation?
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Financial Planning for Beginner Entrepreneurs
Financial Educator and Financial Planner Aulia Akbar from Lifepal explained, there are several important things to be applied in financial planning, namely:
1. Improve cash flow
It is very mandatory that you have a separate account between personal and business accounts. This is to simplify the process of recording your business and financial cash flows. There is nothing wrong with paying yourself for the sake of the financial health of the business. Expenditures on salaries will go into the operating expenses of your business. Meanwhile, the net profit obtained can certainly be used for business expansion needs.
2. Set monthly expenses
Do the calculation of your monthly expenses carefully. Starting from the needs that are mandatory, need, and want. There will be times when your income will be smaller than usual due to unpredictable business cycles. In fact, there are also times when you don’t get any income at all because of business risks.
Therefore, try to keep your monthly expenses for your daily needs fixed. So you can calculate how much emergency funds and insurance coverage are needed.
3. Prepare an emergency fund
Before starting a business, what you must have is an adequate emergency fund. Know that your income as an entrepreneur is not fixed. The risk of reduced or lost income due to business can potentially occur at any time. For new entrepreneurs, there is nothing wrong with preparing an emergency fund equal to 2 years of your expenses.
This emergency fund functions as a fund to mitigate risks when you cannot print a net income from your business. Since an emergency fund is more important before investing, we can start setting it up as soon as possible. Know in advance your fixed and variable expenses, then set aside and save your emergency fund every month.
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Then, what are the factors that determine the amount of emergency funds we need?
1. Number of dependents
If the number of dependents, such as children or other family members is quite a lot, of course the emergency funds needed are very large. Because the high number of dependents automatically means the expenses are also high.
2. Business risk
What are the business risks that can be experienced by business people? Akbar gave an example of a gym business owner who had to close because it was not operating due to the pandemic, so the business risk was very high. “There are times when we will receive less money than usual, or even none at all, when we have greater business risk,” he continued.
3. Total assets
Find out how many assets you own, such as a house or car, that require annual taxes. The greater the number, the greater the emergency fund needed.
4. Amount of debt
Take note of the amount of debt we have, and what the ratio is when compared to our assets. Big debts can hinder a business, especially if the business can’t run, of course without an emergency fund we can’t pay it.
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The importance of having insurance because health costs continue to rise
Based on data from Global Medical Trends Survey Reports published Willis Tower Watson, the increasing trend of medical costs in Indonesia is projected to increase by 12% (gross) in 2021.
That way, without health insurance, you will pay very expensive fees for each treatment and medical treatment. Even so, Akbar emphasized, insurance is not a form of investment, however cost that must be paid for financial security. He also asked business actors to know exactly what the benefits were before deciding which insurance policy to take.
“Do the calculations yourself, lest we pay expensive insurance products but the benefits themselves do not match what is needed,” added Akbar.
Meanwhile, if you don’t have insurance at all and only have a limited budget to pay for health insurance, consider buying inpatient insurance first. Meanwhile, if you have to undergo an outpatient process, take advantage of BPJS Health.
In addition to equipping yourself with health insurance, if you are the main breadwinner, you must protect your family by having life insurance. Also know that the older you are when you buy insurance, the more expensive the premium you have to pay.
That is the important reason for business actors to allocate funds to have insurance and how to improve business by optimizing SEO. SEO is the process of optimizing a website in order to increase its ranking in search results search engine Google. To help make it happen, then you have to maximize it so that it can help business activities.
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This article was written by Financial Educator and Financial Planner Aulia Akbar, CFP®, AEPP® and Andy Tama SEO Specialist Lifepal as part of a collaboration with Lifepal.co.id.