Books for Financial Freedom

Take the hobby test before putting money in a business!

 

 by Donald Bittar

 

Hurt Piggy Bank

You’re thinking about mortgaging your home to get capital for your business.  The money from the mortgage may not be enough and you’re also considering draining your savings account.  To be on the safe side you may sign for a line of credit at the bank.  Until the money from the mortgage and line of credit are available, you may use your VISA credit card to get over the hump.

 yes-or-No

Take the hobby test

Is the money a gift to the business?

Is it okay if the business does not pay you back every dollar you invested?

Have you given the money to the business without a loan agreement?

Do you work in the business for free without getting a salary?

Based on a 40 hour week, are the revenues from the business less than minimum wage?

 

If you answered ‘yes’ to any of the questions, then you are investing in a hobby and not a business.  Hobbies cost money.  They’re not expected to earn a profit.  They don’t generate income for investor salaries or cash distributions. 

  A friend asks you to mortgage your house, drain your bank accounts, get a line of credit and max out your VISA card.

  • What documentation would you want before investing in your friend’s new business?
  • Would you give your friend all the money without any documentation?
  • Would you want assurance the investment is fabulous and you’ll get your money back?
  • Would you like to read the business plan?

 

Before investing in your business, get the same documentation for yourself you’d expect your friend to give you.

 

 

  Donald Bittar   Donald Bittar is an author, CFO, educator and entrepreneur. Donald’s e-Books are published by Trunity publishing. His full featured, interactive, digital business books have been read by thousands of students and business people.    

   

Another eBook by Donald Bittar

 

 

 

Image Credits: http://www.howtoboilafrog.com/2008_03_01_archive.html http://silveradofinancial.net/2013/02/ http://galleryhip.com/telling-secrets.html

http://www.foxbusiness.com/personal-finance/2013/03/22/five-tips-to-turn-your-little-hobby-into-big-bucks/

http://www.familyfriendlyfrugality.com/wfmw-making-time-for-my-hobbies/

http://pixgood.com/empty-bank-account.html

http://linustechtips.com/main/topic/193276-10-off-any-newegg-purchace/

http://pixgood.com/empty-girl-wallet.html

http://www.qangl.com/consumer/deductadebacle/

https://app.hedgeye.com/insights/33494-gold-loves-the-mother-of-all-doves?type=insight

http://mirealtalk.com/blog/mortgages-put-money-pocket/