Question: I have been in the business for five years now but I don’t seem to have enough personal savings. Although the business is doing well, most of the income I earned from the business is just enough to take care of my monthly household expenses. What is the best way to prepare for my retirement? – Chris G by email
Answer: Many entrepreneurs use business plans when they need to guide their company into the future, but very few make plans about their personal finances when they need to create a roadmap for their financial security. Entrepreneurs need to find ways to invest their income and grow their personal wealth in the future.
Achieving personal financial security is more than building a successful business. Taking care of the income that you earn from the business is just the first step.
Here are the five steps you can take to plan your retirement:
1. Identify your retirement goals
How do you see yourself in the future when you have stopped working in the business? What kind of lifestyle do you wish to be enjoying when you retire? How much monthly income do you need to have a comfortable retirement?
Every goal has a price. You need to determine if you have the capability and resources to achieve it. Knowing your goal helps you set your expectations. Sometimes, it also motivates you to work harder. You can align your personal retirement goal to your business. The more profitable your business becomes, the more income you will earn to build your retirement wealth.
2. Establish your personal financial budget
Once you have identified your goal, you need to review your personal financial situation. How is your current lifestyle and spending pattern? How much money do you save regularly from your monthly income and how do you intend to increase it?
Setting up a budget to monitor your income and expenses can make you more discipline in saving. Avoid the temptation to use your business bank account to pay for your personal expenses. When you put up your personal budget, it should be separated from the business for proper accountability.
3. Automate your savings
Your budget will tell you if you need to cut down on your expenses or increase your income. Sometimes, you simply have to do both. When you have your budget to guide you, you can also set up your system where you can save automatically.
Credits: Henry Ong