December 27, 2018 | By Peyton Sawyer
Saving money can be challenging no matter where you are in your personal or professional life. As a business owner or an individual planning to open a new business, it may take more than some clever maneuvering to gain the capital needed to open or expand. Forget saving money on making your morning coffee instead of stopping at the local coffee shop or even cutting your cell phone plan down to the bare minimum; it'll certainly take more than that to save the amount of business cash you need.
A Little Financial Planning Goes a Long Way
Like any business owner, you should be sure to start a relationship with a banking institution that can assist in all your business needs. Whether those needs are opening a business account, a business credit card, or a business line of credit. These are all things that will be required to start and keep a business operational. That means making sure that your credit history is up to par. Without a good to excellent credit score you will not get far with any traditional banking institution.
Hitting a Snag in Your Financial Planning?
If it's already too late for that and your credit has been damaged to some degree, all is not lost: you have other options to consider. Adjustments may need to be made to your financial planning, like the way you go about getting money for your business and the interest rate and amount of money that you are approved for, but there are several alternative funding solutions that can work in your favor.
But, let’s not get ahead of ourselves. First, let’s talk about reaching the huge financial goals you've set for yourself as a business owner or potential business owner. Saving large amounts of money usually means making some big sacrifices. So, what changes can you make that will provide big rewards in your bank account and in your wallet?
Creating a Plan That Can Catapult Your Savings
Creating a business plan will help you determine what funds are needed to start or grow your business. It's important to do your research, and knowing what's required of you in the industry you are working in should be the first step. Once you're done crunching those numbers, it's time to start saving the capital needed to get started or at least to create a cushion. You always want to be prepared so that you never fall short.
Are you employed and earning an income? Are you taking a portion of your salary to save for your business or even for your retirement? Many business owners, especially small business owners, need to consider retirement if a 401K plan is not in effect. Salary (plus any other income you receive monthly or yearly) should be taken into consideration when planning a savings schedule. Whether those savings are intended for business or retirement, setting aside at least 25 to 50% of your income is ideal, but you should also know how to make that money grow.
Understanding the Difference Between an IRA and a Roth IRA
Understanding the different money making options that are available to you is essential when trying to hit big money goals. First, you'll need to understand your money and how you can make the most of it.
When it comes to saving your money, a traditional IRA is usually better if you expect to be in a lower tax bracket when you retire. By deducting your contributions now, you lower your current tax bill. When you retire and start withdrawing money, you'll be in a lower tax bracket, meaning you will giving less money overall to the tax man.
If you expect to be in the same or higher tax bracket when you retire, you may want to consider contributing to a Roth IRA, which allows you to get your tax bill settled now rather than when you retire. With a Roth IRA you will have more flexibility with the option to withdraw your contributions (but not the earnings) without a penalty. That means having more access to your money. If you're years from retirement, a Roth will probably work best.
Big business aspirations will require big money. You can certainly try and save a penny here and there with small adjustments in your daily routine, saving large amounts of cash will require a more aggressive money-saving plan. Hopefully this guide has give you some food for thought when it comes to making your business goals a reality. Think big when it comes to your small business, take the time to make your financial planning solid and secure, and back your business ambitions up with the money to match! You could reach your business goals a lot faster than you might think.