Saving for a Rainy Day

Having a Emergency Fund is Essential for Businesses

KELLY NEMITZ, The Hair Specialists, Hudson, OH

There is little doubt that the past few months have increased our levels of anxiety, stress and fear more than any other time in our careers. I mean, how often have we had to plan for an immediate, openended full shut down of our businesses, laying off employees, communicating with clients, and just financially trying to figure it out.

A flood subsides. A storm is cleaned up. Who would have ever thought this is something we would ever have to deal with? Not to mention, combined with balancing, the stresses of home and family.

So. What did you learn? What would you have done differently? Did you have a savings account to get you by? Did you have debt payments and no cash to make those payments? Do you wish the financial aspect of all of this could have been

In fact, the COVID-19 pandemic may prove to be a wake-up call for many.

I personally did not understand proper financial management until well after I launched my business. I grew up not knowing much about budgeting. It was just something my family did not do. Credit cards were treated as a normal, necessary, and regular way to get by month to month. On my 18th birthday, as expected, I applied for as many as I could. And boy, minimized?

the opportunities were everywhere and so easy to open the mail because the companies knew my birthday and sent these wonderful offers! Three new credit cards came almost immediately in the mail!!

Obviously, I totally deserved a shopping trip, and I maxed them all out as fast as my 1992 Chevy S10 could drive to each store. I loved showing off all the new stuff I had, until those much-less-pretty bills and letters started to arrive.

I remember telling myself for years, welcome to “adulting.” This is normal. Everyone has credit card debt, a car payment, mortgage on their house and everyone lives paycheck to paycheck. Right? Every month I would stress about money, hoping I made enough to cover my bills. I was no longer in control. I would focus on paying the minimums on everything. I was so tired of always being broke!

I had a good job, but nothing to show for it. I was running in circles financially trying to maintain. Great solutions like transferring balances to a new credit card just made everything worse.

Many years later, I was listening to financial adviser Dave Ramsey on the radio when he asked, “Are you sick and tired of being sick and tired? Are you living paycheck to paycheck? Do you want to tell your money what to do instead of your money telling you what to do? Do you want to have financial freedom?”

I thought to myself, “yes, yes, and heck yes!”

I began to research Dave, bought his CDs, books, and started listening to his radio show. He said he could teach me to get out of debt. I kept thinking, “but how?” I felt like I was so far in, I did not know where to start. The more I listened, I became more comfortable and less scared of the word “budget.”

Ramsey has seven steps to financial freedom. The steps themselves are not hard. It is hard to change your behavior. The other hard part is not only having patience but trust. Budgets do not magically immediately create financial freedom. It takes time, effort, discipline and even creativity. You fall off the horse, then get back on.

The first several budgets I did were ridiculously terrible. After that I became better. Once you are accountable for every single dollar, it is extremely eye-opening to see where the money is spent. Trust me, you spend more money than you think you do. This journey takes longer than you anticipate, it doesn’t always work out exactly how you plan, but that’s OK. We are creative and entrepreneurs. If there is a will, there is a way ... including our money! And yes, creative people can budget.

At any moment I know how much money is coming in, how much is going out, where I need to hold off on spending. This spills over into my personal life as well. I have yearly, monthly and daily goals. Every dollar has a purpose, and it is our job to tell every single one where to go.

At first, you build an emergency fund for, well, emergencies. A washer breaks. Go buy a new one from the fund, then replace the fund. What I used to call emergencies are not emergencies anymore. I used this fund all up during COVID-19 and that is OK. The fund allowed some breathing room to pay my bills, keep inventory and delay dipping into other accounts. It allowed me time to process the situation. It did not remove my anxiety and stress throughout this shutdown, but it certainly prevented a panic. This gave my staff some calm as well. Debt then becomes the last resort for survival, not the first.

Having financial freedom in your personal life and with your business is a great feeling. And, years later, I am still on that journey. But no longer are you spinning in a circle, but are taking steps forward. I recommend giving yourself the best gift by telling every dollar where to go, building emergency funds and sticking to your plan. Check out Dave if you like at daveramsey.com. But talking to other business leaders, reading a business management book, looking for articles, even hiring business coaches are all great steps too.

Get out of debt now! Your salon, team, and your clients need you!

Debt controls you as long as you let it. It is never too late to start focusing on finances.

If you feel angry, or sad about your finances, maybe it is time to start a journey to feel good.

Working to remove debt from my life has been one of the most wonderful gifts to myself, my family and my business.