8 Tips to start managing better your finances as a young architect

 

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1. Keep Financial Records 

It would be best if you focused on keeping your financial records. These records might be beneficial to retrieve information when needed. You might be dealing with issues in the future that require referencing the paperwork.

For example, You need records for tax filing; if you don’t have them, it might lead you to face penalties. Additionally, your financial records are essential to understand the progress of your Company. Without your financial records, it may be tough to make changes to help your business reach the top. 

Please go through the following pro tips to learn why keeping financial records is essential for young architects to grow their business. 

  • Measure your progress:

Good financial records help you know which products are selling better and from where you’re getting most of your revenue. In this way, you might be able to boost the progress of your business. 

  • Filing taxes:

IRS (International Revenue Service) requires your financial records for filing taxes and supporting the filing. 

  • Record of your deductible expenses:

Track each expense you’ve invested in your business to avoid problems while filing the tax return. 

  • Keep a record of receipts:

You might be receiving incomes, such as property transactions, sales, or interest. Keep records of these incomes to report on your tax return.

2. Plan for Budgeting

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The budgeting process is the most efficient way to keep business and its finances on track. It allows you to know in advance whether you’ll have a sufficient amount of money to do things you need.

Budgeting is balancing expenses with your income; if you spend more than you earn, you’ll face problems. According to Info Entrepreneurs, “Budgeting control your cash flow, it allows you to invest in new opportunities at the right time” Your budget needs to include: 

  • Costs:

Your architectural business might have three types of costs.

● Fixed costs: It includes salaries and rents

● Variable costs: It includes overtime and raw materials

● One-off capital costs: Buying equipment 

  • Revenues:

The revenue forecast combines your scale history and how significant your efforts would be in the future. You might be able to prepare a projected profile for the next year. It allows you to determine your margins and your return on investment.

Additionally, it’s imperative to stay up-to-date with industry news and economic forecasting to know the work you might be getting in the future. In this way, you’ll have the ability to guess how the architectural industry might be working in the upcoming months and plan accordingly.

3. Avoid Unnecessary Expenses 

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Avoiding unnecessary expenses has to be the interest of any young architect because nobody wants to pay more than necessary. Here are some tips on avoiding hidden costs from the project budget to keep your cost under control.

  • Let your client decide on a budget from the start:

Discuss the project’s budget with your client as soon as possible and make a plan for investing money on the project.

  • Select a simple design:

Prefer simple shapes to build, because creating complex designs might cost your client more in the long run.

  • Stick to the plan:

Avoid changing plans midway through because these changes might cost money and time. The best advice is to stick to your original plan.

According to Architecture Lab, “Think before making a huge purchase to avoid wasting the money you earned by working hard.”

4. Avoid Debt

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It would help if you stayed away from Debt because it might easily disrupt your mental peace and ability to create. However, staying out of Debt is possible by going over the following strategies.

  • Don’t buy if you can’t afford it:

Being a young architect, you have to take yourself from the illusion that you can afford things and have money to afford them. Try to spend money on things you need instead of the items you want.

  • Have an Emergency Savings:

Save money for situations where you need it the most; when you start your career as an architect, you need to save at least 6-months of your salary. It might help cover your expenses if you have an injury that prevents you from working, or sometimes you need cash for an unexpected but essential cost.

  • Everything’s better with budget:

Budgeting your monthly expenses helps you track where your money went and where you can afford to buy things. Track how much you can put in savings each month. So when the time comes you think you need Debt, please take out your savings and spend it on your needs.

Achieving your goal requires sacrifices, and that’s your time to pay for it. The more you restrict yourself to spend only on your needs, the better your finances would be.

5. Manage Your Cash Flow

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It’s vital to understand and manage cash flow as a young architect. You need to compare the amount you spend on your architectural skills and business to the amount of money you’re earning. If you’re spending more than your income, there might be something that has to be changed.

According to Ron Pac, a financial planner at Barnum Financial Group, “Cash flow management means to know upcoming expenses and to compare them against your earnings.” 

  • Get control of your cash flow:

You need to ask two questions from yourself to determine whether you’ve control over your cash flow situation.

  • What is my account balance right now?

  • What do I expect my account balance would be after six months from now?

If you don’t know the answers to these two questions, That isn’t very comforting. You don’t have control over your cash flow. However, there is a simple way to keep things under control, track your cash flow results every month to know whether you’re creating the kind of cash flow your architectural business needs.

Additionally, it’s crucial to determine the amount of cash coming in and going out of your business. Be aware of the date and time of your project completion.

6. Be clear with your payment terms

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One of the common issues many architects face is having unpaid invoices sitting for months, and you might have the idea that the longer an invoice goes without payment, the more chances of it not being paid. However, some ways help you paid faster.

  • Being polite:

 Write your invoice payment terms politely; it will maintain a good relationship with your client and get you paid. A recent study found that the invoices, including phrases like “Thank you” and “Please,” are more likely to be delivered faster.

  • Being clear with a deadline:

Being clear with your deadline helps you receive your payment faster. Try not to confuse your customers with complicated deadlines. Be specific. For example: List the exact due date as in payment (7 October 2020).

  • Enforce Late fees:

Including late fees such as late fees of 2% interest per month might guide your client to pay their invoice on time. Be polite but firm when enforcing the penalties. 

  • Offer a discount on early payments:

Rewarding your clients for early payments increases the possibility to be paid faster. A standard reward offers 2% of the total invoice only if it’s paid within ten days.

7. Avoid overspending on your rent 

You may have heard about the 30 percent rule, which says you shouldn’t spend more than 30% of your gross income. However, this may vary depending upon various factors, including location, transportation, and offered amenities. Here are a few things you need to consider as a young architect before spending on your rent.

  • Look into your Lifestyle:  

Examine your lifestyle; if you love to spend most of your time at your apartment, you may invest more in your rent but don’t exceed the limit of 30% of your income. If you spend more time going out with friends and traveling, spending 15%-20% would be sufficient.

  • Look for affordable cities: 

Some cities are more affordable; on average, you may be spending 11%-13% of your income on rent. For example, Cities like Jefferson and IL are very much affordable as compare to New york.

  • Find a way to reduce expenses: 

It would help if you reduced expenses to increase your rent budget. For example: get a roommate or find a place near public transportation to save money.

8. Invest in yourself

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A young architect needs to invest in his creative side to develop skills and creativity. It is the most profitable investment you’ve ever made.

  • Skill development:

Developing your skill doesn’t mean only investing in higher education. Investing in your skill takes many forms.

  • Take extra classes and certificates related to your field, either in person or online.

  • Buy books, read articles, whitepaper, and anything relevant to the architectural industry.

  • Participate in webinars and enroll in workshops.

  • Explore your creativity:

Creativity helps us grow professionally and see problems differently by utilizing our minds to solve it. It would be best if you tried new things to explore your creative side. You may write a book, poetry, or anything. Try gardening or bird watching and listening to music. Select any activity you’ve never done or haven’t practiced in years. 

“You can’t use up creativity. The more you use, the more you have ” -Maya Angelou.

Successful financial management can improve your life in many ways and may provide new opportunities. The above tips may have a significant impact on your financial health in the long run.

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