Everybody wants to secure their financial future, but this is particularly challenging for entrepreneurs, who are trying to balance the present-day economic health of their business at the same time as looking forward. Whether you’re operating a start-up or a legacy business, you do need to ensure that at the same time you’re focusing on revenue, you’re also building a smart foundation for yourself with tools including life insurance, retirement savings, and tax planning.
It can be difficult to divert your attention from your current day-to-day needs, but if you follow these five tips offered by financial advisors, you’ll be able to break the process down into more manageable steps that will put you on the right path.
Educate yourself.
You know that knowledge is power, and that is particularly true when it comes to financial planning. It is easy to feel intimidated by the various terms and legal and tax ramifications of financial instruments, but if you take the time to slowly learn what each of these tools do and how they can benefit you, you will come away feeling much more confident and in control of the decisions that you make.
The internet is full of helpful tutorials and pages that can take you through terms and types of accounts, explaining how stocks and bonds, money-market accounts, IRAS and life insurance policies work and which is best for you. There are classes and books as well as apps that you can download onto your mobile devices to simplify the process, and even to entertain. Finally, forming a professional relationship with a professional financial advisor or accountant will provide you with a partner who will make sure that you are well set on your financial journey.
Have a goal.
This may sound simplistic, but once you understand the tools that are at your disposal, your next step should be to figure out what you want — and then start working towards it.
Do you want to retire by the time that you’re sixty? Fifty? Forty? Each of those goals would require an entirely different plan, so the first thing you need to know is what you are aiming for. Once you’ve made that decision, meeting with a professional will be much more productive, as they will be able to analyze what you currently have, what you will need in the future, and create steps to help you achieve your dreams.
Align spending with your goals.
It’s great to have both goals and a plan, but the only way that you’ll be able to accomplish the goals and stick to your plan is if you determine what your budget is and then stick to it. Budgets may sound joyless, but once you determine what you come up with a reasonable number for what you spend and what you need to save, you’ll find satisfaction in its discipline and in seeing how adhering to it helps you advance your goals.
In order to create a budget that you can stick to, determine what your necessary weekly expenses are, including what you spend on mortgage or rent, food, and utilities. Include what you spend on entertainment as well, then look to see if there are any areas where you can cut back. That doesn’t mean that you need to live a Spartan life: just see if you can reduce a bit in order to increase your savings. There are plenty of tools that can help you build a budget and stick to it, including apps like Mint, Wally, You Need A Budget, and PocketGuard.
Many experts suggest allocating half of your available money to your absolutely necessary expenses, 30 percent to the things you want, and the remaining 20 percent to saving for your future and goals. How you choose to spend and save is entirely personal, but having a budget will prove an invaluable tool.
Choose an investment strategy.
Once you understand the tools available as well as what your expenses are, it’s time to look at how you want to invest. Do you want to be an aggressive risk taker or be more conservative? A lot of how you answer will depend upon where you are in your life and how much risk you can bare based on existing obligations to other family members, to your business, and more.
Even if you’re risk-averse because you’re about to start paying for college or about to start living on a fixed income, this does not mean that you shouldn’t invest: it just means that you should limit yourself to safer opportunities.
Don’t forget about your retirement.
Depending upon your age and goals, retirement may be decades away or may feel like it’s right around the corner. Whichever the case, it is something that you need to include in your planning, as you will eventually stop making money but continue to need it.
The best way to truly enjoy your retirement in the future is to plan for it now. There’s a difference between having a savings account that you can draw from for extra needs and having a retirement plan that you can live on for a significant period of time. Retirement money should be considered separate and off-limits. If you work for an organization that offers a 401(k), that’s a great place to start, as the rules regarding these instruments effectively prevent you from touching it so it can grow unimpeded
Even when you break it down into small steps, having a financial plan for the future can feel like a very big task. Talking to a financial and accounting professional can help ease the anxiety and give you a better understanding and sense of control of this important aspect of your financial planning.
About Martinez & Shanken, PLLC
Martinez & Shanken, PLLC is a Certified Public Accountant (CPA) firm based in Gilbert, Arizona. We provide a full range of accounting, bookkeeping, consulting, outsourcing and business services. Partners Deborah Martinez and Earl Shanken work to ensure your business accounting is done with integrity and to your satisfaction.
