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News Now

January 30, 2015

Entrepreneurs: 4 decisions ensure financial success

Consumer
DULLES, Va. (1/27/15)--Entrepreneurship can be rewarding at all life stages, from the young adult years to retirement and beyond. But before you invest your time, energy and resources into the entrepreneurial unknown, make these four money decisions to ensure you reach financial success (Daily Finance Jan. 21).
  • Keep spending down. You'll be tempted to spend whatever it takes to ensure the success of your new business. While investing in the business is key to its growth, when you're starting out find ways to cut back on personal expenses and to save.

    Build up your savings even before you launch, then focus on increasing your business' sustainability and improving cash flow--two things vital to business success;
  • Invest in yourself. Think about your retirement. Start by maxing out a traditional individual retirement account (IRA) if you need the tax break. If you can afford to pay taxes, consider contributing to a Roth IRA while you still qualify--your taxes probably will be lower now than when you retire. Contributing to both is a good hedge against unknown future tax rates.

    Once your business is consistently doing well, look at setting up a SEP-IRA or Solo 401(k), both designed for the self-employed. If you hire employees, consider setting up a SIMPLE (Savings Incentive Match PLan for Employees) IRA;
     
  • Outsource. Weigh your strengths and weaknesses, and outsource the jobs that don't come easy for you. You might hire a bookkeeper, an accountant, a handyperson, someone to answer the phone, or just a freelancer for special projects. Don't waste time and money trying to figure out or do things that someone else can do more efficiently; and
     
  • Stay with the basics. To stay afloat, adopt these basic financial principles:
    • In your business as well as your personal life, spend less than you earn.
    • Build up your savings accounts to help you get through emergencies and lean times.
    • Set money aside to pay taxes throughout the year.
    • Use a bookkeeping system to track expenses and income. Xero and Quickbooks Online are good examples of online accounting software.
 For related information, read "Uneven Income Calls for Proactive Money Strategies" in the Home & Family Finance Resource Center.
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