Entrepreneurs
typically buck the system. Conventional career and financial
thought seldom encourages this atypical path. We hear: “Get a
good education. Find employment with a stable company. Save as
much as possible so you can retire someday.” Following this
advice limits those thirsting for more from their personal and
professional lives. How many people have a J-O-B that doesn’t
nurture or fulfill them, and live smaller lives as a result?
Sure, they may enjoy more security or better benefits, but what
do they sacrifice in terms of quality of life and
self-satisfaction?
Conventional financial dogma, despite its best intentions,
perpetuates the problem. Many stories in the popular financial
media promote zero debt, saving at all costs and utilizing
traditional investment tools to ensure a secure future. While
inherently good advice, it nevertheless often deters people from
pursuing larger, more fulfilling lives. It also neglects an
important asset class: you and your career.
Pursuing work that nurtures you as a vehicle through which to
express yourself can be a significant investment, providing far
richer returns than traditional investment vehicles. Yet
following this path often involves forsaking the mainstream and
embracing risk. It may require foregoing savings, incurring debt
and temporarily resisting traditional investments.
Entrepreneurship is a very viable choice for some, but its
aphrodisiac effects can cause us to abandon conventional
financial wisdom entirely. While watching your dreams manifest
as you follow that divergent path, you must remember to employ
certain conventional financial tools. You want to enjoy the
benefits of your less traditional vocation while ensuring future
prosperity and financial security.
1.
Have a plan. Just
as you have business and marketing plans, create a financial
plan that indicates where you will allocate and invest your
funds.
2.
Allow for emergencies by developing and maintaining adequate
reserves. Try to
earmark at least six to 12 months worth of expenses to keep your
business afloat and your portfolio, if you have one, intact.
3.
Make sure you are properly insured.
Nothing can derail your business and your finances more quickly
than being sued and/or underinsured in the case of an emergency.
4.
Watch your debt.
Counter to mainstream thought, not all debt is bad. Debt
incurred to develop yourself and your soul’s purpose (education,
your business, etc.) is good. Still, you should limit
high-interest debt as much as possible.
5.
Don’t invest everything in your own company.
Be sure to diversify your existing wealth to mitigate your risk.
6.
Don’t forget about retirement.
Many entrepreneurs are too busy running their companies to
consider retirement. Reduce taxes and save with plans like a
solo-401(k), profit-sharing, or even a defined benefit plan for
older business owners. Develop a succession plan, for your
eventual exit of your company.
It
takes courage to run your own business and follow a different
path, but remember to plan. You don’t want to look back, wishing
you had followed the herd. Money is not meant to keep us trapped
in a rigid life. Rather, it is a vehicle for enriching our
souls. Knowing this, you can succeed as an entrepreneur —
and preserve your future —
by marrying unconventional methods with conventional ones.
Todd
Smith, a Certified Financial Planner™, is a financial
author, speaker, and coach who helps working adults navigate
the complex financial landscape to achieve greater economic
success and prosperity. He is President and owner of
Azmyth Financial, LLC, and Programs Director for the
Phoenix chapter of The Financial Planning Association. todd@azmythfinancial.com
or (602) 485-3896.