Investors, especially business
owners, should regularly take 10% of their net income and invest to help
protect and grow their business.
Unfortunately many fall short of that general guidelines. Here are some reason why investors in general
and business owners in particular should focus on the 10% guideline.
To begin with, taxes are
on the rise. If you can take 10% of your
net income and investment in areas that will help protect your business and
save you monies in taxes, you should take that opportunity. In coming articles, we will be discussing taxation
and your business. For now, however, you
should look for tax-deductible retirement plans. Even if it’s a traditional IRA, it’s wise to
do it. Now one might argue that well my
business is going to be my retirement fund.
In my years doing financial consulting, I’ve met many business owners who
never received what they thought was the fair market value of their enterprise. If you feel that you have, more power to
you. Nevertheless, consider a
tax-deductible retirement account that could let you have perhaps an early
retirement and/or the luxury of scaling down your business as you turn it over
to family member or key employees. True,
when you withdraw the monies from the retirement account, it is all
taxable. If that concerns you, consider
a Roth IRA or Roth 401k plan. Monies in
a Roth account are withdraw tax-free and there is no required minimum
distribution.
In addition to rising taxes
business owners are faced with the rising costs of inflation. On a personal note, I do not believe the
government reports about how low inflation is.
True, gas prices have come down but I also stock my office with different food and beverage items for clients and have to heat and cool the office as well. So imagine the costs you would face as a
business owner when inflation really heats up.
By saving a little today, it will help you in later years to combat the
rising forces of inflation.
It really does not take
much money to get started. Some investment
companies offer plans that you can start with as little as $50 a month. OK I’ll admit to being a saver. But I’ve found that once you get into the
habit of saving, it almost comes naturally.
Here is a quick personal story. I
just recently invested in a new marketing plan on how to save for
retirement. When I looked at the investment
and matched it to my net income I realized that I had just about hit the 10%
threshold. So it does work.
One last item to keep in
mind is that when I speak of 10%, I am not talking about the regular day to day
necessary expenses such as business phone, utilities, postage and staff. The 10% factor involves
things above necessary items that every business needs. Some examles about the necessary expenses would include marketing efforts, retirement
accounts, advertising, joining trade associations, business conferences and educational courses designed to help grow your business.
Hopefully this post will
spark some investment ideas for you. As
a good friend told me recently, “every week spend a little, give a little, and
save a little.” In the end it all adds
up. Even if you can not do 10%, something is far better than nothing at all.