Female Service-Based Business - Investing In The Woman In Charge
Investing In The Woman In Charge
First steps for female business owners to start investing
I don’t have to tell you that powerhouse business women are the future. The number of women-owned businesses rises every year. The National Association of Women Business Owners cited that more than 11.6 million businesses are owned by women, that’s about 51% of US businesses altogether. These powerhouse companies employ nearly 9 million people and are consistently growing.
Us women are taking over the small business world, and let me tell you, I am here for it. Visa’s 2019 State of Female Entrepreneurship report found that 79% percent of women entrepreneurs feel more empowered today than they did over the past five years. The more confident we’re feeling in our lives the more likely we’ll take the chance on ourselves and start a business. Seeing women step up and take their lives into their own hands lights a fire in my heart. We are stronger now than ever before.
However, we are still behind the curve when it comes to managing our finances. Merrill Lynch’s Women & Financial Wellness: Beyond The Bottom Line report stated that only 52% percent of women are confident when it comes to investing. Yet 41% wish they had invested more of their money, in fact, the #1 regret women state is their lack of investing. With low financial knowledge, women business owners are in danger of finding themselves without the resources to grow their business, retire, or pay the high medical bills that come with aging.
It’s high time we take investing seriously, and here’s how:
Start Saving Small Amounts Each Pay Period
This might sound so overly obvious, but you would all cringe to know how many women I talk to that say they spend every penny that comes into their business. They say they’re so broke they can’t spare any of the money they make on a business savings account.
Ladies!! If you don’t already have a savings account dedicated to your business, call up your bank (or hop on their website) first thing after reading this blog. You can’t invest if you have no money to put back into your business or the market.
Next, take a part of your next month’s profit and place it in your business savings. Make sure you leave enough in your checking account to pay recurring expenses like payroll, automated softwares, marketing, etc. The goal is not to touch this money until you’ve accumulated enough to make a small investment. And don’t forget to set aside 20-30% of your profits for taxes, not a set dollar amount! This percentage guarantees that you’ll have enough money come tax season, but an estimated dollar amount often leaves business owners paying large sums out of pocket.
If you’re running an LLC, don’t pay yourself out in full on your next draw, instead, move a set amount of money into your business savings account. Next pay period do it again, and again, and again. Remember to always have a separate business account and personal account, even if you have an LLC. I come across this mistake WAY too often with new female business owners who keep their profits within their personal checking.
Invest In Your Business Growth
Before you can start using surplus profits from your business to invest or boost your income, you’ll need to actually be making a surplus. It might sound frustrating to immediately put your small profits back into your business, but you can’t grow without nourishment.
Set aside a reasonable amount of money and start improving in places that are lacking. It can look like anything from rebranding your company to better identify with your target market, hiring a financial advisor, or launching a new product. If you can think of one or two key aspects of your business that would benefit greatly from an investment, girl, do it! Don’t wait so long that you look back and think, ‘if I would have just put money into launching that new service I would have made substantially more money this quarter’.
Create A Finance Foundation
You’re investing because you want long-term sustainability in your business and in life, not just temporary supplements to your income. This means taking some time to lay a financial foundation you can build off of, not to mention find security knowing that you have all your bases covered. The finance foundation structure goes like this:
Life Insurance
Buying life insurance is a crucial pillar in your financial structure, even if it’s a little scary to think about. As a wife, mother, or business owner, life insurance is especially important because you want to know who will assume your debt, take care of your children, or be responsible for your business if you die tomorrow. Without life insurance, you’re leaving your family and business vulnerable and unprotected. When you buy into life insurance, you pay an annual amount to the insurer so that if an untimely death strikes the company will pay a tax-free sum to your beneficiaries.
2. Emergency Funds
An emergency fund helps shield you against life’s unexpected twists and turns. From medical expenses and car troubles to unemployment and home repairs, a substantial fund of liquid money (ie. easily obtainable and transferable into cash) can save you and your loved ones in a tight spot. It’s good to set aside a set amount of money each paycheck for an emergency fund pool.
3. Debt
Once you have life insurance and an emergency fund started its time to begin chipping away at all that debt. It may appear impossible, like a dark cloud looming above your financial security, but let me tell you, you can pay down your liabilities and live debt free. You just have to make a payment and stick to it.
4. Retirement
Since we live longer than our male counterparts we’re more likely to be left with the financial burden late in life. So while you're at it, open up a 401(k) or other retirement fund. And yes, you can totally do these even if you're self-employed. It is absolutely crucial to start a retirement plan early on and pay steady and substantial amounts into it.
Strategize For Your Personal Future As A Woman & Caregiver
Personal futures look differently for women than they do for men. We live longer, take on more parenting responsibilities (even financially), are more likely to provide caregiving money to our parents, and yet we’re paid less and have less perceived access to financial investing. Don’t let perception fool you, take advantage of my four financial foundations from the previous section and secure your future investing!
Then look to your loved-ones and start planning for their protection. As our parents age, the women in the family are more likely to take on the burden of care for their parents. An AARP study found that 2 out of 3 caregivers were female. With low-savings accounts in elder generations, many resort to Medicaid for their health cost coverage. While Medicaid certainly has its advantages, care is extremely limited through the system, leaving many loved ones in facilities that families don’t feel comfortable with. This is where long-term-care insurance comes in. With long-term-care, your loved ones can receive the care they need in their own home instead of a sterile nursing home facility. It also helps to offset retirement depletion, where women often dip into their retirement savings to help foot the bill for their parents.
Don’t fall behind the curve when it comes to investing, use your small business as a springboard to boost your small surpluses into thriving investments that’ll help secure your future.