As you are setting up your finances for your business, you are probably also thinking about your personal finances. As a business owner, you’ll be responsible for your own retirement planning, as you won’t be able to contribute to an employer’s plan. It might seem like extra work, but the truth is, not planning for retirement means that you for sure will have a terrible retirement - or you won’t ever be able to retire.
A lot of people who own online businesses claim that they will never retire; don’t be one of those people. Even if you don’t want to retire when the time comes, you really cannot speak to how you’re going to feel down the line. Most people do want to retire, but a lot of people are woefully unprepared, even those with jobs that have retirement plans.
Set Your Financial Goals Based on the Lifestyle You Want to Live
Your first job is to think ahead to how you want to live when you retire. Also briefly consider if things don’t go the way you want. What if you die? What if your spouse dies? What if you become incapacitated? There are many things that can happen over the years that may not even be on your mind that need to be considered, so that you can get the right insurance to protect your future lifestyle.
Figure Out the Options You Can Take Advantage Of
Some options you may already be familiar with are great options such as Roth IRAs, 401(K)s, SEP IRAs, SIMPLE IRAs, and more. As a business owner, you have some options that individuals may not have, especially if you are incorporated and pay yourself a salary plus benefits. One benefit that can be added is a defined benefit plan.
Set Up a Budget That Enables You to Reach your Goals
Once you know how you want to live, start a budget that you stick to. Even if you don’t know what to do with the funds you save right now, just keep them in a savings account until you have about a year of basic living expenses saved. According to the 50-20-30 budget rule, you should be saving 20 percent of your income in various accounts - from retirement to normal savings - based on your goals.
Determine Your Potential Exit Strategy
Will you be able to sell your business when you are ready to retire, or will it just be dissolved? This is something to consider because it’s always best if you can build a business that you can sell. Then you’re more likely to get money for your retirement. One option is to figure out if your kids might want the business or if a partner might buy you out when you are ready to retire.
Get a Will Now
Don’t put off having a will. At least get an “I love you” will. This is a simple will that can be one page for spouses. It simply says something like, “…if I die, I leave everything to you and if you die, you leave everything to me.” You may not think you need this, but if you have a blended family, aren’t legally married, or other issues arise, you may end up in trouble. For example, in some cases, a partner keeps the entire business, and the family doesn’t. It depends on your state.
Speak to a Certified Personal Financial Planner
It will always help to speak to a CPF. Like other professionals, get recommendations and do your due diligence researching them. Choose a planner who charges an hourly fee instead of earns only on commission. That way you’ll get the best possible advice not based on what they can sell you, since many financial planners also sell financial products too.
There are many ways to do things right. You don’t have to go with one approach over the other. As you do your research, figure out what works best for your needs. If one financial plan isn’t working for you, try another system. As long as you are saving 20 percent, staying out of debt, and working toward growing your business, it will all work out.
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