Where should all my money be?

[Frügal]

It was pretty difficult to come up with a title for this that was descript enough to convey what I am trying to ask. My apologies.

Over at my blog, I have learned a few things from comments, so this is my attempt to get everything in order, for you all to review and let me know if I am missing anything.

Where My Money Should Be
- 3 months-worth of income in Emergency Fund (this counts for home, auto, health emergencies?)
- 1 month-worth of income in checking, in order that you are not living paycheck-to-paycheck (correct?)
- Contributing to retirement, 509(b), misc. savings. (we are not doing this yet)

Seeing as how we are still living paycheck-to-paycheck, I would really like to get on-track here. As some of you know, we have been working on this for some time. Some also know that we moved to a less-expensive apartment a couple months ago. We may be moving again, to a less-expensive place, and a higher-paying position. Not set in stone yet, however.

Where we stand
- Currently only at half-month in EF
- Paycheck-to-paycheck
- Want to start saving for our business we want to open once above two are taken care of.

Does that all sound about right?

[kaleida]

I think that sounds like a great goal.

[disneysteve]

I haven't read the related blog posts but just based on this, I'd work on getting that one month worth of spending (not income) into the checking account first. That really is the first part of your emergency fund.

You are not living paycheck to paycheck if you are actively adding to your savings.

You recently moved to a less expensive apartment so whatever you are saving in rent should be going directly to that buffer in your account. Make sure you don't end up spending that extra money on something else.

I'd want to know a lot more about your current situation and the prospects for the new business before giving any advice about that. As I'm sure you know, most new businesses fail within the first couple of years. You want to make sure you have a solid business plan and the financial resources to support yourselves without taking on any debt during the time that the business is getting going and in case it fails to take off. That will require a lot more than a 3 month emergency fund.

[Frügal]

You recently moved to a less expensive apartment so whatever you are saving in rent should be going directly to that buffer in your account. Make sure you don't end up spending that extra money on something else.

We first used it to pay back the savings account that we had to dive into in order to replace the carpet in our last unit. We are up-to-speed now, however, and I have begun making payments to savings that aren't for catching up.

I'd want to know a lot more about your current situation and the prospects for the new business before giving any advice about that. As I'm sure you know, most new businesses fail within the first couple of years. You want to make sure you have a solid business plan and the financial resources to support yourselves without taking on any debt during the time that the business is getting going and in case it fails to take off. That will require a lot more than a 3 month emergency fund.

We are in the very first infant stages of planning our business. We are reading books, doing research, and starting our business plan (which, if you didn't know, will go through MANY drafts before being completed). The business will be in the food retail industry. We have not yet decided if we will start with a brick and mortar store (ultimate goal) or with a food truck. A food truck has much lower overhead, would require no loans to be taken out (considering we save enough), and is not as permanent. We could start one here, say, and then take it with us when we move to Portland (as we plan to do within five to ten years). There is definitely a lot to think about!

With the ultimate goal being a brick and mortar store, it is worth noting that it would require quite a lot of money. The most important piece of equipment needed would cost around $14,000 by itself. The same can be said about the food truck, unless we get one that handles less volume, which could be around $5,000.

[disneysteve]

We are in the very first infant stages of planning our business. We are reading books, doing research, and starting our business plan (which, if you didn't know, will go through MANY drafts before being completed). The business will be in the food retail industry. We have not yet decided if we will start with a brick and mortar store (ultimate goal) or with a food truck. A food truck has much lower overhead, would require no loans to be taken out (considering we save enough), and is not as permanent. We could start one here, say, and then take it with us when we move to Portland (as we plan to do within five to ten years). There is definitely a lot to think about!

With the ultimate goal being a brick and mortar store, it is worth noting that it would require quite a lot of money. The most important piece of equipment needed would cost around $14,000 by itself. The same can be said about the food truck, unless we get one that handles less volume, which could be around $5,000.

Restaurants (the bricks and mortar kind) have a very high failure rate, as I'm sure you know. Upscale food trucks are very popular today. They are popping up all over the place and can often be found at festivals, parades, private parties, etc. I don't know much about them from a business standpoint but they certainly seem to be a better investment than a physical restaurant space. If you aren't getting good business in one spot, pack up and drive somewhere else. And especially if you intend to relocate in a few years, opening a bricks and mortar restaurant wouldn't make any sense at all. Having a business that can travel with you would be great.

[Frügal]

Restaurants (the bricks and mortar kind) have a very high failure rate, as I'm sure you know. Upscale food trucks are very popular today. They are popping up all over the place and can often be found at festivals, parades, private parties, etc. I don't know much about them from a business standpoint but they certainly seem to be a better investment than a physical restaurant space. If you aren't getting good business in one spot, pack up and drive somewhere else. And especially if you intend to relocate in a few years, opening a bricks and mortar restaurant wouldn't make any sense at all. Having a business that can travel with you would be great.

Yes, they do have a high failure rate. It seems that the niche we want to be in, however, does well in Portland. We still have to do market research and what-not, though.

[siggy_freud]

Not to mention that having a successful food cart/truck is a GREAT way to build a following should it be successful enough to open a brick and mortar location. Nothing better than opening a restaurant and already having a set of dedicated customers who know your food and will continue to support you.

[jpg7n16]

Yes, they do have a high failure rate. It seems that the niche we want to be in, however, does well in Portland. We still have to do market research and what-not, though.

One thing I'd add, just because the niche does well in general does not mean you'd succeed. BBQ joints do pretty well down here in Texas. I've seen several come and go.

Also, as an example, apps for the iPhone are doing very well right now. But I have no experience designing apps, even though I'm experienced using apps. If I started an app business, even though the niche is popular, I'd probably be a disastrous failure.

My point is, maybe you have experience working in the food industry -- but that is like me working with apps. Building and running a profitable food franchise is a completely different animal, than just working for one.

I also have a friend who was considering starting a food truck. Check out the fees for licensing, food preparation, truck renovatoin, gas/utilities hookups, sanitary licenses, etc. -- there's a lot of start up costs even for a lower key food truck.

If you haven't done so, please check out: The U.S. Small Business Administration | SBA.gov

Opening and Running a Restaurant

The Fundamentals Of Running A Restaurant - Forbes.com

Other things I'd 2nd from the posts above:
-3 months is the min EF. If you're looking to be self-employed, I fully agree with DS that you'd need more than the min. You'd also need start up capital, and funds to last until your company starts breaking even. That should be above and beyond the EF.

[Frügal]

Not to mention that having a successful food cart/truck is a GREAT way to build a following should it be successful enough to open a brick and mortar location. Nothing better than opening a restaurant and already having a set of dedicated customers who know your food and will continue to support you.

Just what we were thinking.

One thing I'd add, just because the niche does well in general does not mean you'd succeed. BBQ joints do pretty well down here in Texas. I've seen several come and go.

Also, as an example, apps for the iPhone are doing very well right now. But I have no experience designing apps, even though I'm experienced using apps. If I started an app business, even though the niche is popular, I'd probably be a disastrous failure.

My point is, maybe you have experience working in the food industry -- but that is like me working with apps. Building and running a profitable food franchise is a completely different animal, than just working for one.

I also have a friend who was considering starting a food truck. Check out the fees for licensing, food preparation, truck renovatoin, gas/utilities hookups, sanitary licenses, etc. -- there's a lot of start up costs even for a lower key food truck.

If you haven't done so, please check out: The U.S. Small Business Administration | SBA.gov

Opening and Running a Restaurant

The Fundamentals Of Running A Restaurant - Forbes.com

Other things I'd 2nd from the posts above:
-3 months is the min EF. If you're looking to be self-employed, I fully agree with DS that you'd need more than the min. You'd also need start up capital, and funds to last until your company starts breaking even. That should be above and beyond the EF.

Believe me when I say this: We are not approaching this with the mindset of rainbows and fairytales. Currently, my favourite book is Small Business For Dummies (3rd Edition). It's a great read.