Being a small business owner, you always have too much to do, and sitting down and drawing up a financial plan seems to be the last on your list. You always think that there is plenty of time to sort out your retirement and pay off your debts, but before you know it time has run out and you are in trouble. Or even worse, something happens to you or your business and there is no money coming in and more debt piling up! Planning ahead right from the start will help keep you on track to have a secure and profitable future. Here are a couple of tips to get you started…

Start a budget

The dreaded "b"word. While it does take time initially to set up a budget, once you have got it going and if you stick to it, you will wonder how you ever got by without one. Make sure you aren't spending more than you are bringing in, and make sure that you make adequate allowances for unexpected expenses, such as servicing your car. Don't live beyond your means!

Avoid the debt trap!

While it is so easy to keep buying things on credit, once you have got your budget going make allowances for things that you need to buy. Heavy debt will overshadow everything else you do. If you are forced to buy something on credit, pay it off faster by paying off more than the monthly payments, even if it is only a slight difference. Stick to one credit card instead of a number of charge cards, so that there is only one account to deal with at the end of every month, and pay it off in full! Even better, use your credit card as a debit account - spending money that is already in your account. Avoid getting into trouble with your creditors, as this may affect future loan applications, such as for a house. If you are having financial difficulties, speak to your creditor and come to an arrangement before they start breathing down your neck and sending threatening letters. You will be surprised how helpful they can be if you approach them first!

Invest in your ongoing education

Even if you have a post-graduate degree, you need to keep up to date. Investing in education is always a good bet, particularly in today's climate of the ever-changing computer world. Continued education also keeps your brain and mind active, helping you to maintain those skills of prioritising and absorbing information at a fast pace!

Keep some for yourself

You should aim to save at least 10% of your monthly salary for yourself, in a separate interest-bearing account. Even if this is too steep, don't give up entirely - start off small and try build up to that 10%. Although it may seem that that money could be put to much better use at the present (for example to pay off the instalments on that great new Merc that you have your eye on) you will thank yourself in future years for creating for yourself a nest egg!

Plan for your retirement

It may seem like years before you even think of retiring, but planning ahead for it will certainly make it easier when you get there. The sooner you invest, the greater the interest you will have earned by the time you retire. If you have not invested in a retirement plan through your company, set up a monthly debit order with your bank into an account that will earn you interest, to make sure that the money is safely put away before you spend it! Avoid investing money in volatile stock markets or get rich quick schemes to try make a quick buck - retirement planning is a long-term investment, and risky investments could cost you your life savings and leave you with nothing. Consult a financial advisor if you are uncertain of where or how to invest.

Keep your retirement plan intact!

When changing jobs at age 25, you may think that cashing in the few hundred Rand saved in your plan to buy that new sound-system won't make a difference - you need to remember that each time you cash it in you start from scratch. While you may think that you can't do without that sound system now, can you do without your retirement savings at age 55? Carry your retirement savings over to each new job that you have, so that you keep saving and keep earning interest.

Take out medical insurance

While you might be young, fit and healthy, serious illnesses and injuries happen to the best of us. If you can't afford a general medical aid, consider at least taking out hospital / accident insurance, to cover you if you are involved in an unforeseen accident. Many hospitals refuse to even see patients if they are not covered, and medical expenses can run into the thousands! Insufficient cover can cripple you financially, so make a plan - after all your health is something worth investing in. Some medical aids also specify that members have to have been with them for 2 years before they pay out for maternity expenses, so even if it seems far into the future, make sure you that you will be covered if you are planning a baby in the next few years.

Prepare for the unexpected

Make sure that you are sufficiently insured for theft or damage to property (including your car). If you cannot afford full coverage for your car, take out third party insurance to cover any other vehicle involved in an accident involving you. Draw up a will and appoint a power of attorney and if you have a family, take our life insurance cover to ensure that your family is taken care of in the event of your death. Consider also taking out disability cover in case you are left disabled by an accident and need to equip your house and car to suit your new lifestyle, which can be very costly.

Back to www.bizland.co.za