Investing in your own business — the basics

You believe in your business. You have a vision for the future. If you start or grow your business with your own capital, you can maintain a great degree of control over your dream – but you’re also taking some real risks.

Here are some ways to create a safety net as you get your new (or revised) business plan off the ground:

Diversify your investments. Have protections in place. You’ll want some accounts that are easily accessible in times of need, and others that are restricted. This ensures that you have both an emergency fund and some degree of security for your future.

Give yourself as large a cash cushion as you can. As a small business owner, it makes sense to have savings to cover three to six months’ expenses in an easily accessible account.

Invest in insurance.Carrying an affordable health insurance plan is crucial—perhaps with a high deductible, for coverage in case of serious illness or accident. Disability insurance is not considered mandatory, but short- or long-term disability coverage can give you peace of mind in case of an unforeseen calamity.

Remember retirement. Why work this hard now and risk having nothing to show for it?  One cost-efficient option is a SIMPLE IRA (Savings Incentive Matching Plan for smaller Employers).  Start now – not only will you be on plan, but you may also lower your yearly tax bill.  Your employees will also appreciate the plan, since this type of account allows you and your employees to save on a tax-preferred basis for retirement.  Consult your tax professional.

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