3 Wealth Principles For Entrepreneurs to Grow Their Money

Entrepreneurship is a grind.

Burning the midnight oil is a requirement for making your dream happen.

It’s also why entrepreneurs often neglect their finances, as building a business requires all of your time and attention.

After making plenty of mistakes of my own, and learning from other successful entrepreneurs, here are some key investment principles to remember.

Note that this is not financial advice, and you should make your own decision with research.

Pay yourself first

In the early days, you’ll likely be reinvesting every dollar you earn back into building your business. But over time, the grind of living paycheck to paycheck can hurt you.

Think of paying yourself first as investing in the success of your business. After all, your health and well-being will affect the quality of decisions you make.

Without these basic necessities, such as an emergency saving cover, you’re more likely to make decisions based on fear mode. Since everything is on the line with your business, you may be afraid to make the bold decisions required to move your company forward.

Everyone will have different requirements of what they need to live off, so figure that out for yourself.

Focus on your circle of competence

When figuring out what to invest in, like Warren Buffet shares: focus on your circle of competence. These are companies that you understand well, whether it’s an industry you already work in or one you’ve researched deeply.

Buffett often references the baseball legend Ted Williams’ book, The Science of Hitting. Buffett shares that if he waited for the pitch that was in his sweet spot, he would bat .400. But if he swung at something slightly outside, he would bat closer to .235.

The last thing you want is to be spending more time managing your investments than your business.

Time is your greatest ally when it comes to growing your investments, and your greatest enemy when it comes to building your business.

Play the game to your favorite by investing in assets that you feel comfortable holding over the long run. More importantly, investments that will allow you to remain laser-focused on building your business and sleep soundly at night.

If you managed to focus on your circle of competence, this should mitigate a lot of your worries.

Diversify outside your industry

This may seem counterintuitive to the previous principle. But the best investment portfolios will always have a healthy amount of diversification. As an experienced investor, Patrick Tsang, Chairman of Tsangs Group shares: investing outside your related industry can reduce your downside, without reducing your upside.

For most entrepreneurs starting out, a large part of their time and money will be sunk into their company. Logically speaking, startups are a risky bet. You may objectively decide to invest any savings you may have in safe assets to diversify the risk in your portfolio.

At the end of the day, you’ll be the best person to know your risk tolerance.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.

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