More business fails from poor money management than any other single issue. No wonder. Many of us grow up learning to talk about money falls into one of those taboo subjects. If you can’t talk about it, you probably didn’t learn to handle it either.
To acquire proper money management skills often happens through much trial and error which can lead to financial disaster.
These same mindset issues and bad habits will wreak havoc in our finances can plague our businesses too if we’re not careful.
Catching Shiny Object Syndrome
I wish somebody would invent a cure for this syndrome. Some things are just hard to resist—especially when your friends and colleagues are all jumping on board! New tools, training, group coaching programs, and even business models can all have a strong pull, and if you aren’t careful, these shiny objects can quickly distract you from your current goals.
If you find yourself catching shiny object syndrome frequently, try this two-step plan instead:If you find yourself catching shiny object syndrome frequently, try this two-step plan instead
Step One: For “too good to refuse” offers, make a plan for achieving a positive ROI before you purchase. If you cannot find a (realistic) way to make the purchase pay for itself, don’t buy it.
Step Two: For exciting new business ideas, create a “someday” list. I created a “brainstorming binder to down jot down ideas and a basic outline. This makes it easier to get back to the task at hand. Now you captured your great idea for the future, but it also won’t join the ranks of half-finished business plans currently littering the internet.
Falling Victim to the Sunk Costs Fallacy
Did If you ever say to yourself, “I’m not using this subscription, but I can’t give it up! I’m still paying the launch price and now it’s much more expensive!” Then you’ve fallen for the sunk costs fallacy. Yes, I’m guilty of this.
This commonly happens when we find ourselves emotionally invested in whatever money, time, or any other resource we committed to in the past
Simply put, the sunk costs fallacy makes us justify investing more money or time in something, even though we don’t see results, because we already spent so much. This type of thinking encourages us to repair the car one more time (after all, you just put new tires on it), eat a meal we don’t enjoy (simply because you already paid for it), and yes, continue to pay for tools and resources you no longer use.
Take a few minutes and examine your current business expenses. What are you paying for month after month that you don’t use? Either create a plan to put them to work for you or cancel them. Stop falling for the sunk costs fallacy.
Too Much Penny Pinching
Did you know spending too little is just as bad for business as overspending?
When you constantly lookout for free and low-cost tools or working 16-hour days because you “can’t afford to outsource,” it will hurt your business.
If you’re not willing to invest in your business, why would your potential clients want to invest with you.
This bootstrapping mentality will only get you so far before you dig yourself into a rut by reinforcing a scarcity mindset. This mindset will plague your business for years if you let it.
When you don’t invest in your business, your scarcity mentality will attract those looking for free and low-cost tools.
Rather than pinching pennies, learn to spend money strategically. Buy what you need, when you need it. Invest in top-quality products and programs rather than settling for the low-ticket, half-baked plans. Just like quality clothes, cars and furniture, quality services and software last longer and work better. And unlike that car, good quality business tools will pay for themselves.