If you’ve been following this series, then you’ll recall that to date we’ve discussed the definition of a VA and what a VA does. I’ve also given you practical advice and tips on how to begin planning your VA practice.
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If you haven’t been following this series or have missed parts of it, you may go to the navigation bar, click on “Virtual Assisting” and follow the drop-down menu to the “Series”.
Now, we’ll take a look at how to finance your VA practice. While most of us would like to fantasize about winning the lottery or having a rich uncle from Texas die and leave us a fortune, most of us won’t fall into that type of luck.
Also as a rule, banks do not loan to freelance or home businesses. The good news is that there are other options available.
I personally have met several VAs who have financed their VA practices by taking full advantage of their savings accounts, tax returns, 401k plans from a former employer, retirement accounts, home equity lines of credit, small personal loans from relatives, second mortgages, and credit cards.
Hopefully, you will stay away from the last one or at least not max out your credit cards.
I financed my VA practice with six-months’ salary saved from a 401k plan and two clients, which came as a result of moonlighting, while I held down a day job.
Most of the financial planners that I have spoken to suggest having two to five years’ salary saved. However, for most of us that is almost as much of a fantasy as winning the lottery or the rich uncle from Texas story. It would still be wise to talk your banker or a member of your local Small Business Administration office for counsel if you do feel the only option is to borrow money.
The bottom line here is how much risk are you willing to take and how comfortable are you with a lot of debt? Does emptying your savings account cause you to panic? Are you and your spouse willing to borrow against your home with a home equity loan or take out a second mortgage? The home equity loan could be used to renovate a room of the house to use as your office. The interest would also be tax deductible.
The good news is that a VA business, like most freelance businesses, is a low overhead business. This brings us to the next point. A low overhead business can also be financed by your day job. If you still have a full-time day job, then work it and let it finance your VA practice. Keep the VA practice part-time in the evenings or on weekends. As your business grows, you can always switch to a part-time job while you build your VA practice to full-time.
If you’ve already left your regular employment, there are plenty of WAH companies and opportunities listed here on this blog. Go ahead and apply if you need the income.
Then there are additional things that you can do to find “hidden money”. This is money that you are spending for things, which you could probably suspend or sacrifice, while you build your VA practice. Some of the big money savers are cutting back on cable channels, eating out less, and less elaborate vacations.
One of the big savers for me was car insurance. Because I was no longer commuting four hours a day to work, my car insurance dropped substantially. So, look at all of your bills. Keep a record of three-month’s expenses and then decide where to save or eliminate.
Also, because you are working at home, you will save on gas, more car maintenance, dry cleaning, lunches, and daycare. As we discussed in last times’ topic, you WILL save money by working at home. However, SOME (not all) of that money will go towards your newly acquired business expenses such as business cards, software, and web hosting. So, be prepared.
There are also cases of “extreme couponing” and those who have cleaned out their garage and attic and made a hefty sum on eBay. So get creative too.
Then make sure you have your family’s support on your decision to work at home as a VA. Sometimes spouses and children aren’t always happy about eliminating certain expenses or scaling back to a simpler lifestyle. Emphasize that you need their support. Educate them on the positive things, which will result from your working at home, such as more home cooked meals or family time.
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• How much money do I need to make each month to meet my basic expenses?
• Which extra expenses or luxuries am I willing to sacrifice?
• How much additional debt (if any) am I willing to carry?
• Which bills can I eliminate or save on by working from home?
• Am I willing to keep at least part-time employment to finance my VA practice?
• How will this new income structure impact my family?
Now, it’s your turn. What ARE some of the things that you will do to finance your virtual assistant practice?
- Understanding Virtual Assisting – Part 10 – Transitioning into Your Virtual Assistant Practice
- Understanding Virtual Assisting – Part 5 – How Will You Structure Your VA Practice?
- Understanding Virtual Assisting – Part 8 – Exploring the Myths of Working at Home
- Keep Track of Your Business Income and Expenses with Outright
- How to Budget on an Irregular Income
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