Being a startup founder is an interesting experience- one day you are nibbling down your dream, and the next day you are pitching to venture capitalists, scaling fast, and getting close to becoming a millionaire.
But, one harsh truth that startup founders have to deal with is their money habits. Getting to the millionaires club isn’t just about “luck” but making smart, intentional financial moves that set them apart from broke founders.
If you look at the wealthy startup founders around you, you might notice a consistent pattern in how they manage their money. Besides their flashy lifestyle, they also make smart money moves every day.
Let’s break down the money habits that separate broke founders from wealthy founders.
They set clear budget objectives
Budgeting is not just about managing personal finances- it is also a powerful business tool. Wealthy founders understand how to manage their money starting with the first dollar.
They plan everything- from $5 software subscriptions, marketing expenses, salaries, personal expenses, to unexpected costs. Plus, their budgets are not rigid; they are flexible enough to evolve as the business grows.
On the flip side, broke founders often fall into the trap of spending everything, and figuring it out later on. The lack of a budget risks burning through the business capital, and may end up making panic decisions as they struggle with unstable cash flows.
And because wealthy founders understand that every dollar counts, they create budgets that allocate resources where they matter most, setting themselves up for long-term success.
They track their expenses
Tracking expenses may sound like a lot of work, and wealthy founders keep tabs on every dollar going out of the business.
Whether it is a $5 software subscription, $100 flight, or a $10,000 consultancy bill, they are keen to monitor where their money is going to. They use simple tools like excel spreadsheets and fresh books to tracking their spending, and identify unnecessary expenses.
In comparison, founders who don’t track their expenses have no idea how much expenses they have, or how much is going out of the business every month. Uncontrolled spending often leads to waste and a false sense of profitability.
Tracking every dollar allows wealthy founders to spot trends early, cut down on wasteful spending, and understand what actually drives revenue.
They build a diversified income stream
Smart founders know too well the risk of putting all their eggs in one basket. As they work on growing their primary startup, wealthy founders create diversified income streams that bring extra revenue.
Whether it is consulting for other startups, building digital assets, or investing in other startups, creating multiple income streams gives them breathing room to make long-term investment decisions.
Meanwhile, broke founders focus all their efforts on their startup, which can be risky, especially if the business is still struggling. If the startup fails, they will be left dead broke and unable to meet their basic needs.
Creating a diversified income provides a financial cushion so that, if one income stream dries up, they still have several other sources to keep them afloat.
They invest wisely
Wealthy founders don’t let their money sit idle- they have organized investment plans comprising mutual funds, stocks, bonds, precious metals, cryptocurrencies, and real estate.
Before putting their money into any investment, successful entrepreneurs take time to understand where to put their money to spread out their risk and grow their portfolio.
On the other hand, broke founders ignore investing altogether or rush into hype-driven pyramid schemes like meme stock. Setting up automatic transfers of cash from your checking account into an investment fund can help you invest consistently and create sustainable compounding returns.
They take advantage of tax deductions
Wealthy founders understand that taxes can take a huge chunk of profits, and they know how to legally minimize their tax bill. Apart from keeping clean business records and writing off eligible business expenses, smart founders work with tax professionals to help them take advantage of tax deductions.
Meanwhile, broke founders often ignore the importance of taking advantage of tax credits to minimum their tax bill. Instead, they wait until the last minute to keep their records in order, and end up paying taxes than they should. Plus, they end up getting into trouble with the tax authorities.
As a startup founder, you should understand what business expenses qualify for deductions and take every available opportunity to reduce your tax bill.
They are patient and consistent
Building wealth is not a viral moment- it is the result of small but consistent steps taken over time, even when resources are limited. Wealth founders understand the importance of consistency, and they are patient with growth and keep their eyes on the prize.
Broke founders are too focused on overnight success that they get discouraged when things don’t work out. They rush to upgrade their lifestyle after a small win, without saving or reinvesting for future growth.
Build wealth takes time, and you should be patient and consistent to watch your investment compound over the years.
They seek professional advice
Wealthy founders understand that they don’t have all the issues they face in running their startups, and they turn to professionals such as attorneys and accountants to guide them. Whether they are setting up legal structures, planning investments, or hiring employees, they understand the importance of expert help.
Broke founders often attempt to DIY everything, from bookkeeping, hiring employees, to investing just to save money. While they may succeed in saving money in the short-term, it can lead to costly mistakes and missed opportunities in the long-term.
Bottom line
If you want to build wealth as a founder, you don’t have to wait until you have millions in your bank account to start- start now in your broke phase. Start by creating budgets, tracking spending, building multiple income streams, and seeking professional help from the right experts.
Start running your startup with intentionality, discipline, and vision, and your bank will thank you later.
