Money Management: It’s Within Your Control

By: Maddie Russo from our partner, 31 Marketplace podcast team

As entrepreneurs, getting our finances in order can often be overwhelming, in part because much of the equation feels out of our control. From deeply rooted inequities impacting entrepreneurs of color to warning signs suggesting a major recession, there’s no doubt that external circumstances shape our financial success.

Lynnette Khalfani-Cox has approached money management from many different angles. A personal finance expert, speaker, and author with more than 15 published books, Lynnette originally fell into financial planning and education from a media journalism background, previously serving as a financial reporter for The Wall Street Journal and CSNBC.

Lynnette joined Pam to discuss common concerns around money as they relate to entrepreneurs and what entrepreneurs can do to position themselves for financial success regardless of the economic environment.

On Personal Finances

Why is it often so difficult for entrepreneurs to develop a healthy relationship with money? What is it about money, exactly, that makes it such an emotionally charged topic?

“Well, listen, there’s a reason that the first part of the phrase ‘personal finances’ is ‘personal,’” said Lynnette. “Because it really is personal and individualized and unique to every individual.”

Just as we have different personalities in our day-to-day lives, we also have different money personalities. Some of us might view money as a way to secure power and control. Others may see money as a means to fun, adventure, and freedom. Some of us may be savers. Some of us may be more liberal with our spending.

But it’s not just about surface behaviors – truly understanding how you relate to money comes with digging deeper into the values and beliefs that inform these behaviors. Our approach to money often goes all the way back to childhood and how we saw our parents handle it.

“There’s a lot for people to unpack, sometimes from an emotional standpoint, when they think about their money values, their behaviors, the things that they choose to spend money on or not, etc. And a lot of times, it’s not something that’s conscious,” said Lynnette.

Thus, “good” vs. “bad” money management isn’t a universal classification but instead speaks to how well someone is leveraging money to move them forward in their unique goals.

Important Money Lessons for All Entrepreneurs

While money is inherently personal, there are some universal lessons we can all benefit from as we dig deeper into the money management conversation:

We have four choices for what we can do with money: save it, spend it, invest it, or donate it. How we use our money is our primary source of financial agency.
Money is best earned, not inherited or fallen into. When we earn our money, we’re not only contributing something to the world but will have a greater stake in how that money is used.
Healthy money management starts with understanding your financial model. What do you do best? What is your minimum viable product? What do you offer that’s distinctive? How can you differentiate and monetize yourself in the marketplace with your ideal client base?

Finding Financial Agency

Larger social and financial trends only further complicate the entrepreneurial relationship to money. Not only might we have to overcome financially unfavorable circumstances, but it can often feel like our relationship with money is mostly out of our control.

Systemic Inequities

There is no denying that disparate access to wealth, capital, and credit has disproportionately affected entrepreneurs of color – especially Black, Latino/a, and Indigenous entrepreneurs. The data tells this story, but it often misses the psychological toll these deep-seated inequities can have on communities of color.

“When you start thinking about systemic inequities, for a lot of folks of color, it can just feel overwhelming, because it seems like we’re being asked as individuals to solve systemic or structural problems,” said Lynnette. “That’s a burden and an unfair thing to lay on any group or any individual’s shoulders.”

When working with entrepreneurs of color, Lynnette reminds them that while they should continue to speak out against the larger systems of inequity at play, their ultimate focus should be on the ways in which they do have financial control.

“I tell people to focus on the things that are within our control. We can’t control the stock market, we can’t control the Federal Reserve raising interest rates, we can’t control housing prices and the fact that we have runaway inflation,” said Lynnette. “What we can control, though, is our own spending. We can control the way in which we use our money and where we choose to direct our dollars; we can control whether or not we invest; and whether or not we invest in our own businesses and ourselves or in other businesses that are like-minded or that we want to support.”

A Pending Recession

With reports of raging inflation, recent Federal Reserve interest rate hikes, and many major financial services companies ringing alarm bells, the imminent threat of recession is unignorable. What can entrepreneurs do to prepare themselves financially?

“Long story short, we can’t just like act like an ostrich and put our heads in the sand and say that the facts and the reality that we’re seeing, that it ain’t real. Because it is real,” said Lynnette. “I do think we need to be mindful of that as entrepreneurs. However, I don’t think that we need to go into fear mode.”

The reality is that you will be financially impacted by a recession. The many entrepreneurs carrying variable rate loans and lines of credits will shoulder increased borrowing costs.

It’s of course important to take increased costs into account when planning for the future. But we also can’t let unfavorable economic conditions paralyze us. The best approach is to stay abreast of current recession trends while prioritizing a long term plan that will enable your business to scale despite difficult economic circumstances.

Said Lynnette: “Stick to the plan. If your game plan is a well thought out, well-reasoned one, don’t arbitrarily shift it.”

Taking (Thoughtful) Risks

Even amidst times of financial hardship, there will be cases where entrepreneurs should pivot the game plan in order to continue scaling. It’s all about being prudent and weighing the risks with the rewards.

“I do tell people that it’s okay if you feel like you’ve done your homework; and you know that there’s a need; and you know that you have a way to expand, grow, or strengthen your business; and you have the capacity to do so, then go for it. Then do it,” said Lynnette.

In fact, financial downturns can be some of the best times to lean in instead of reflexively leaning out. Having a solid game plan will give you the structure you need to understand whether or not a certain decision will contribute to your business goals.

And if something doesn’t work out, Lynnette reminds us that we can always pivot again: “It’s not a fatal blow if something doesn’t work out, if it’s a mistake. It’s not going to be the death knell for you. You can pivot, you can change course, you can course correct. And you can test a little bit along the way, too.”

—

Connect with Lynnette: