How Not to Let Debt Deter You from Becoming an E-commerce Entrepreneur

It is not uncommon for people to be carrying a lot of debt for various reasons. These include medical emergencies, student loans, or simply undisciplined personal spending habits. However, even if you have managed to accumulate a mountain of debt, it is not necessary that you abandon your dreams of becoming an e-commerce entrepreneur. In fact, if your business idea is really good, and you nurture and manage it profitably, you can use your business to solve all your debt problems and become debt-free. If this sounds improbable, here are some tips from entrepreneurs who have overcome their own debts and now own successful ventures:

Know the Extent of Your Debt and Generate a Cash Flow Statement

Most people who are in a debt-trap are so depressed and frustrated at their inability to manage their financial problems that they don’t even know how much debt they have, the rates of interest applicable on each, how much they are paying in late fees and penalties, and what is the gap, if any, between their incomes and expenses. If you hope to establish a business of your own, the very first step lies in getting to know how much of debt you are carrying. Make a detailed list of your debt, the principal amounts, the current amounts due, the rates of interest on each, and find out how much they need to pay every month. Also, list down all your sources of income and your monthly expenses on essentials like food, shelter, transport, education, etc. so that you know the surplus of income over expenses that you can allocate to paying off your debt.

Cut Your Costs

If your monthly surplus is not sufficient to pay off your debt, you need to cut your costs substantially. There are various ways of trimming your expenses but only by making a detailed budget and analyzing your current expenses will you know where you are blowing up most of your money. Typically, you can make significant savings by moving house to a smaller place in a lower-cost area in the same city or even move to a different town so that you can adopt a more conservative lifestyle. Moving to a smaller place can in fact not only lower your housing costs but also give you a significant advantage in terms of cost of living and transportation expenses. A smaller place with a more relaxed pace of life can also give you more time to focus on your startup. Even if you do not want to move to a different location, simple steps like taking the public transport instead of buying a car, cooking at home instead of eating out, renting furniture, etc. can free up a lot of your income for tackling debt.

Increase Your Income

Unless you really have been a spendthrift, you may find that just cutting back on your expenses may not be good enough to build a corpus to fund the initial stages of your e-commerce startup. However, with the assurance that your debt servicing is now under control, you can look to supplementing your income with alternative streams of income. How you can add to your income depends on your personal circumstances but by thinking out of the box, you can definitely grow your income. Typical examples that are worth considering are letting a spare room out through Airbnb to driving for Lyft or Uber. If you have certain special skills, you can practice or teach after your daily work. Start out with a specific amount that you want to earn and then work towards it.

Consolidate Personal Loans and Credit Card Debt

One of the biggest reasons why people are unable to escape easily from a debt trap is due to the very high rates of interest that are usually applicable to personal loans and credit card dues. The amount of interest in the monthly dues being paid back is so substantial, that very little of the actual principal amount gets repaid and thus the cycle goes on endlessly. An effective way of saving on the interest outgo is by taking out a debt consolidation loan from a private company like Nationaldebtrelief.com. It is actually another loan that is the aggregate of all your debts, which, you can use to pay off your debts. The advantage of this method is that you are left with only one debt to service and spared of tracking multiple credit card statements and making individual monthly payments. The rate of interest is typically far lower than that of the cards and you can negotiate the repayment period to make it more affordable. If your debt amount is not very large, you can try a credit card balance transfer at zero percent interest rate to save a lot of money, however, this works only if you can repay your debt in full during the introductory period.

Choose Income-Driven Repayment for Your Student Loan

Since a student loan can be a heavy cross to bear, you may end up defaulting on the repayment and accumulating a lot of interest and penalty. If you have a federal student loan and do not have the income to repay it normally, you can find out whether you are eligible for an income-driven repayment plan that caps your payments at a specified percentage of your income and therefore frees up more funds that can be invested in your e-commerce business venture. Also, remember that the interest on student loans can be set off against your business income for tax purposes.

Conclusion

Paying off all your debt is bound to take some time but you should actively plan your e-commerce startup and kick it off as soon as possible without waiting to free yourself completely from debt. It is very easy to look for excuses to wait a bit longer and you may end up never making a start at all. Chalk out your strategy for getting your debt under control and then go hammer and tongs at realizing your entrepreneurial dreams. The sooner you start your business venture, the more time you have to make it a success.

— Article by Marina Thomas, a marketing and communication expert.