When you are young with big entrepreneurial dreams in your eyes then taking risks seems to be fun. But, as you grow up into a mature entrepreneur it is also important to secure your future and make retirement plans. Every business owner must secure their families and themselves by making personal investments and saving money for bad times.
To face financially trying times, your business will need an emergency fund to draw from. There are a few things that you need to do for establishing your life and business on strong financial ground. Read the following ideas to know more.
You should never land up in debt due to over use of credit cards
Building a profitable business has got some perks too. You will get access to more than one credit card. Banks will love to offer credit cards to you. That does not necessarily mean you have got the right to splurge unnecessarily and run into debt.
Your total debit including bank loans, car loans, home mortgage and others should not surpass 20% of your neat income. If the total debt amount has already surpassed the 20% mark then do not buy new credit cards. Always pay your credit card bills on time and clear the debt payments on time. Check the credit report regularly and strive to achieve higher scores.
If you are in the habit of using your credit cards online, please be careful. Always check if a payment gateway is safe or not. Only buy things from highly reputed ecommerce sites. In case of credit card take immediate steps and report the theft at your bank. Make sure that no one gets to know your credit card details.
Try to get a credit card that offers cash rewards back to the user on being used too often. Always making due payments on time enhances your image in the eyes of the banks. With a good credit score you will be eligible for future loans.
Create an emergency pool for your business
You can start protecting your income by getting business insurance. If due to unprecedented circumstances your business gets closed down then you will get money from this insurance to cover your expenses. But such insurance policies do not cover natural calamities like earthquake or flood. You can buy a special Federal or State insurance policy that covers such incidents and pays if your organization is damaged due to them.
Calculating the risks is necessary for an entrepreneur as this helps them in deciding how big the emergency fund has got to be. The risk will depend on the industry that you are in. some industries like food do well even during financially unstable times. Also try to calculate how much you can set aside every month for the emergency fund.
It is advisable that you create a no touch savings account in which money for emergency circumstances can be kept. Always keep your business and personal accounts separate or else you will not be able to save money for personal needs.
Think about old age
A time will come when you will feel weary of taking risks and cringe at going to work. That’s old age or rather the right time for retirement. After retiring you may like to lead an active life or travel. The expenditures will increase. You will need regular healthcare and take care of your spouse.
Not having sufficient money at that stage of life can be a huge crisis. You should have your own Individual Retirement Account or IRA and also avail benefits of 401(k) plans. Talk to a financial consultant for getting expert advice on personal investments and retirement plans.
A business owner must find stable financial ground by making personal investments, separating business and personal bank accounts and creating a contingency fund for emergencies.