Financial Planning For Your Screen Printing Business
Below is an excerpt from my book, “Made to Make It: A Guide To Screen Printing Success.” Learn helpful tips and tricks on how to run a screen printing business.
As much as I believe you LOVE screen printing, I also believe that you do it, at least in part, to create a better life for yourself, your family, the people you work with, and your community. The reality is, no matter how well your business has done or is doing—all things must come to an end. Ideally, that end is a long way off, and you retire and hand off your successful business to someone else, maybe even a family member. You need to plan for that day. But what if that end comes a lot sooner than expected because you’re unable to work, or a natural disaster puts your business out of operation. You need to plan for that day too. As Allstate advertises, “Life comes at you fast.”
Business and personal insurance, as well as a healthy plan for savings and retirement, are a must for anyone running their operation. In Jim Collins’ book “Great by Choice,” he explains that luck is a very real thing— good or bad, every person and business is at the whim of luck. What sets great companies apart is that they choose to prepare for the day that good or bad luck strikes, allowing them to capitalize on the good and mitigate the bad for a healthy “Return on Luck” (ROL).
So are you ready to choose greatness? To generate a return on the luck coming your way? Here’s how:
Pay Yourself First. This doesn’t mean neglect the people counting on you. But it does mean you should plan for long-term self-sufficiency. Invest in yourself before putting money back into your business. Coined by Cyril Northcote Parkinson in a 1955 edition of The Economist, the “Parkinson’s Law” states that “Work expands so as to fill the time available for its completion.” The same holds true for money. If you don’t pay yourself first, you’ll have nothing to pay yourself with when the time comes. A good benchmark is 10-20% of your income, automatically deducted from your bank account to keep you on track. You’ll soon find yourself adjusting your personal and business spend to your new budget, thus getting smarter with both.
With consistent deposits into a savings plan, and compound interest, you’ll have a nest egg there for “that day,” at which point you’ll hopefully tap into it so you can spend more time with your grandkids! A great exercise is to start using a financial planning calculator to see what impact starting now will have on your long term savings, here is a list of some good ones to check out, financialmentor.com/calculator. I would also recommend checking out the books by author David Bach www. davidbach.com who completely changed our families perception of long term savings 7 years ago!
Here are a few ways you can make an investment in your personal financial security:
Many entrepreneurs start out with a “day job.” If your day job has a 401K or other retirement plan, you should take advantage of it, especially if they offer a match. You’d be a fool to turn down free money! Use the money you make in your screen printing business to live, and max out your 401K while you can. You can often put away up to $18K per year of your money, plus your employer’s contribution. Every dollar you put in will have an exponential impact on your retirement savings—not to mention; it will cut your current tax liability! 401K contributions come out before tax, reducing your taxable income. You don’t pay tax until you withdraw the funds at a much, much later date.
Roth IRA Accounts
If you’re already self-employed, set up a Roth IRA for yourself, and for your spouse if you’re married. You can both put aside $5K per year. This money comes out after tax but, unlike a 401K, none of the growth is taxable when you retire.
Real Estate Investments
Invest in yourself and buy a home or business property. Pay 20-50% more than the payment, and you’ll be amazed how quickly you pay it off and start building equity.
Better Start Now
Don’t delay planning for your retirement. Every year makes a difference, and you’ll never get this year back. Here’s what your golden years could look like if you were to contribute the maximum to a Roth IRA (approximately $13.69/day), starting at the age of 22:
Like what you read? Get more great business tips on running a screen printing business from my book, “Made to Make It: A Guide To Screen Printing Success.”