Don’t Overextend!
There are a lot of cool stats out there about the difference in generations and how they operate. Research shows us that ‘Gen Z’ is not as inclined to overextend themselves financially as millennials, or older generations. For instance, they’d rather attend a college they can afford than end up in a ton of debt at the end of four years.
True, a tension exists between investing and overextending. If you want to start something new, investing is a must.
Almost certainly, you’ll be investing in time. That’s a given, but you will also have to invest financially - whether it’s your money or your financial backer (which could be the bank). I learned the hard way that investing can turn into overextending with dire consequences.
In 2008, as I was launching my new business having moved away from my role as the PR arm of a branding agency, we hit a big economic downturn. Literally overnight, everything seemed to dry up. My credit card limit went from $50,000 to $5,000 after a perfect record of paying on time, for instance. I also learned that I was overextended in ways that I hadn’t anticipated (partly my doing). Suddenly, the massive lease I had just signed (do not take New York City landlords lightly) was a millstone around my neck. My monthly nut was hundreds of thousands of dollars. Clients were falling like flies as they shut down their marketing campaigns to conserve cash. We were in trouble, big time.
Ah, if only I had kept my overhead tighter. If only I hadn’t seen a beautiful office as a method for attracting clients (it never did). If only I hadn’t kept (sorry!) everyone on payroll as a sign of good faith when I should have downsized my staff.
If only.
What I learned is that tension between overextension and investing is real, and it’s critical to navigate what can be very tricky waters. If I were doing things all over again, here’s what I would do - and I hope this helps you!
I’d keep my overhead as low as possible for as long as possible. (So much easier today with WFH - we went remote years ago!)
I’d try and outsource the help I need rather than hire for it - less expensive and you get more focused expertise
I would watch the books myself for as long as I could given the size of the company (other people will not make the same tough decision you might make)
I’d keep my personal lifestyle modest to strengthen savings (I didn’t need that fancy car)
Starting something new will surely demand investment of some type. But with all the changes we are experiencing out there, it’s wise to keep your overhead low and cash in the bank. Yes, you need to invest, but do it wisely, and if you aren’t sure, absolutely reach out for advice. A very good accountant friend of mine saved my butt and we got back on track. But it took years and a lot of hard work.
If you’ve had the same experience as I’ve had what are some of the tricks you’ve learned over the years? I’m sure you could help all of us!