2007 is coming! But are you ready for another year of messy finances? As small business owners or independent contractors, we often sink ourselves into our businesses and ways to make more money to make ends meet. But, are we like our sellers who only see the tree not the forest? A lot of times we ignore the future planning & savings. Planning for retirement is important and crucial to ensure we have a sound future when we have decided to retire.
Start Planning for Your Future
Planning for retirement early has a significant impact on your future networth. Two words (and my favorite) "Compound Interest."
Here is a slide show that you can learn more about its concept. As you will see, it's really putting the money to work for you. Even if you are like Dawn who had stopped contributing, her networth was significantly higher than Dave.
(If you cannot see the image above, go here for the slideshow courtesy of vangaurd)
So what kind of retirement plan should I get?
Well, it depends. The best way to figure it out is to talk to your financial advisor when you set up your IRA. I have also enclose a link here published by the Department of Labor: Small Business Retirement Savings Advisor. It puts several different IRA account options (traditional, roth, sep, etc.) in a very clear chart so you can compare advantages and contribution plans.
Here are a few tips to help you save throughout the year:
- Treat your savings like bills: contribute monthly if you can. Even $25 will add onto your funds and add onto your interests.
- Allocate your income: For example, set 5% for your favorite chairty, 5% for your investment account, 5% for your mortgage, etc.
- Establish a emergency fund: This is super important for us who work for ourselves. Things and accidents happen and we need to be prepare for it. Setting up an emergency fund that holds 3-6 months worth of reserve is important. It's preparing for the sudden medical bill or automobile repairs. It will also lessen your stress when faced with a already stressful situation.
Set Your Goals for the New Year to Help You Organize Your Finance, Business & Personal Life
It is also another great time set your goals, whether it is for personal or business. One Harvard study has shown that only 3% of it's incoming freshman sets and writes down their goals. The 3% go on to become the most successful and their networths are more than the other 97% combined.
So let us make a New Year's resolutions together to write down & set our goals.
Mr. hello dollar has broken setting financial goals down in steps which you may find very helpful:
Step 1: Identify major financial goals, with a time frame.
Step 2: Figure out how much money they'll cost.
Step 3: Develop a long-term plan to reach those goals.
Step 4: Develop a short-term plan with more specific steps to get started.
Step 5: Make the necessary changes to implement the plan.
An English Major's Money's post on setting Monetary goals is also quite beneficial:
With money goals, there are two easy ways to make your goals achievable:
1) Work with percentages, instead of absolute numbers. Instead of "I'm going to put $10,000 in my 401(k) this year," try, "I'm going to increase my contribution from 6% to 10%." This builds in the requirement that you pay attention to how much you can really afford to give, and it lets your contribution grow with your income.
2) Work in smaller time increments. Instead of "I'm going to save $5,000 for a house this year," try, "I'm going to put away $100 every week towards a down payment." Every week you get to meet your goal (especially if you automate the transfer!), and if you miss a week, you can be back on the horse the next week, succeeding again. This can help to circumvent the "all or nothing" mentality, where you slip up on a goal and then decide to chuck the whole thing entirely (I do this a fair amount myself)
Other than monetary & financial goals for your personal and business needs, let's not forget ourselves. Set some personal goals, whether it's to lose weight, set aside plan for yourself, it will make your body & soul happy. But instead of just writing down a vague goal, write a specific one. Instead of writing "I am going to be thinner." Write something more specific like "I am going to be thinner by starting to work out 15 minutes a day." Better yet, "I am going to be thinner by starting to work out 15 mintues a day doing runs on my threadmills." Be specific in your goal. Write down quantities and how specifically you are going to achieve those goals.
HAPPY NEW YEAR!
Cheers,
Cindy @ Staged4more
www.staged4more.com
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