Inventor How-To: Keeping Your Finances in Order
With all the invention-related things on an inventor’s mind, it is easy to overlook another important consideration: keeping your finances in order! The importance of a well-organized and documented financial life cannot be stressed enough. That being the case, it pays to take reasonable precautions and keep your finances in order.
How can this be done? The first step is a change in habits. Whenever you buy things relating to your invention – materials, postage, storage space, whatever the case may be – you need to save all receipts and paperwork that come with them. This is crucial so you can keep tidy books for your own reference, for future investors, and for your accountant. Many of the expenses you incur during the new product development stage may be able to be written off.
Another important step to take is establishing a filing cabinet for your finances. Too often, people stuff their receipts and records into random drawers, folders, and other miscellaneous hiding places. The problem comes down the road when you need to find a certain receipt or notice and have absolutely no idea where you put it. The way around this dilemma is having a small filing cabinet to put these things in. The other benefit of a filing cabinet is that not only are your records in one place, you can keep them in order. Nothing is more frustrating than digging through years and years of records when you need someone from one particular time. Fortunately, with a filing cabinet, this does not have to happen to you.
FinancialPlan.About.com offers some helpful guidance for how to go about doing this. They say that you can divide up your filing system into three categories:
- Bills due
- Important documents to keep
- Items to throw away or shred
It really is that simple. Either you have a bill that needs to be paid, a receipt or document that should be saved, or something that can be discarded. It is up to you how you want to organize these items, but it can be as simple as using three individual folders labeled with the above information.
Then, whenever you get the mail or receive another financial document, take a moment to put it into the correct folder.
Beyond mere organization, you need to make sure you are in good financial standing at all times. The most easy-to-read gauge of this is your credit health. Do you know your credit score? Is it good? Do you even know what a good credit score is? These are all questions that you can and must answer. As an inventor, it is very likely that you will one day seek investors or loans or credit from stores that you are selling your product in. When that day comes, they will look long and hard at your credit health to decide whether you are a trustworthy person that they should be doing business with.
Not familiar with credit scores? Here is a brief description and link to more in-depth information from MyFico.com.
“When you apply for credit – whether for a credit card, a car loan, or a mortgage – lenders want to know what risk they’d take by loaning money to you. FICO® scores are the credit scores most lenders use to determine your credit risk. You have three FICO scores, one for each of the three credit bureaus: Experian, TransUnion, and Equifax. Each score is based on information the credit bureau keeps on file about you. As this information changes, your credit scores tend to change as well. Your 3 FICO scores affect both how much and what loan terms (interest rate, etc.) lenders will offer you at any given time. Taking steps to improve your FICO scores can help you qualify for better rates from lenders.”
If your credit score isn’t perfect, don’t worry. There are steps you can take to improve it, and taking them is the important thing. Do some reading and, if necessary, rehabilitate your credit status! Your career as an inventor may depend on it.
While on the subject of your credit status, you should also aim to eliminate any consumer debt that you have. This will only harm your credit status and make you look risky to business partners you may meet down the road. You want to fit the profile of someone who pays his/her bills on time.
Above all, you should strive to be in control of your financial life. This means having an organized filing system with all important records and being aware of your financial standing. Accomplish these tasks and you will have gotten your finances in order!