It goes without saying that 2020 has been a rough year for businesses, especially small businesses. The pandemic and economic downturn have taken a toll on entrepreneurs. It’s taken up so much mental bandwidth that business owners have not been able to plan ahead. Of course, the services at VersaTel Solutions are designed to take some of the more mundane tasks such as bookkeeping and process development off your plate. But even for our clients, it was hard to look ahead to 2021. But now is the time to start planning ahead, before you fall too far behind. Here are three things you should be doing to prepare for your financial future.
Increase your retirement plan contributions: We’ve written before about the need for small business owners to plan for their retirement. As we wrote last year, “One downside of being self-employed is there is no big corporation looking out for your retirement. No one is funding a pension or matching 401k contributions.” And retirement planning is one of the things that many business owners have let slip this year. Wealth adviser Brett Miller wrote on cnbc.com that retirement planning should be one of the action steps that small business owners whose companies have made it through 2020 need to take. He advises business owners to evaluate their retirement savings and try to catch up if you stopped contributing earlier in the year to preserve cash. “If your business has recovered, there is still time to contribute before year-end. For 2020, the maximum contribution for 401(k) plan salary deferrals is $19,500, or $26,000 for those age 50 and over.” Figure out how much you’re short, and divide that amount by the number of pay periods you have left in order to make up any shortfall.
Look at your investments – Miller wants you to know “It’s also time to get back in the stock market. By holding onto much of their cash this spring and summer, many small-business owners stopped investing any of their “after-tax” earnings, fearing every dollar would be needed to keep their businesses running. Unfortunately, the equity markets quickly rebounded in late spring and went on a tear — and these investors missed out on substantial gains.”
Re-evaluate your liquidity needs – Miller says to do this you should “Start by setting aside a reasonable amount of cash, or considering opening a home equity line of credit. These moves will provide you with a safety net without jeopardizing the long-term benefit of compound earnings from future investments.” Once you’ve saved an amount you’re comfortable with he advises you to, “(Resume) after-tax savings using a dollar-cost averaging strategy. This will work down the excess cash by making periodic purchases over time and reducing the impact of day-to-day market volatility.”
We may not be completely out of the woods when it comes to the pandemic, but there does seem to be a light at the end of this long Coronavirus tunnel. Reach out to us at VersaTel Solutions. We can help you with day-to-day tasks, giving you time to grow your business. Make sure you and your company are ready for a better 2021