Seven Things To Do With Your Money

July 9, 2012

Seven Things To Do With Your Money

We focus, understandably, on how to make money. But just as we too often prepare for failure and not success, we don’t examine what to do with money once we earn it.

Here are my suggestions for entrepreneurs and boutique firm owners:

Pay yourself 10 percent. Put this in a separate account to be used for emergencies, unanticipated expenses, slow periods, and so forth. Put 10 percent away from EVERY fee you receive.
Escrow estimated taxes. I’d rather use my money than give it to the government earlier than I must, but we all have to settle up at some point. Have your taxes estimated for the year and gradually build up that fund.
Maximize your retirement plan contributions. Whether IRA, Roth, SEP IRA, 401K, special defined plans or whatever, maximize the legal contribution well before the deadline. (When the deadline is the following April, as is the case with IRAs, try to make the full contribution by December 31 to start the new year with next year’s contributions, not “catching up” with the prior year’s.)
Pay down debt. It’s as important to pay down debt as it is to save in many cases. Stare with the most expensive interest rates and pay down all credit card and short term-loans. If you’ve done that, pay extra principal amounts on your monthly mortgage.
Contribute to charities and non-profits consistent with your beliefs. This could be animal welfare, the Red Cross, arts groups, religious groups, or anything similar. When you’re successful, philanthropy should be a key priority. (Or: Provide funds for less fortunate relatives and family members.)
Reinvest in your business. You may need newer or additional computers, or a better web site, or a new blog, or storage space, advertising, or part-time help.
Keep cash handy. You may want to stop using credit cards, or invest in an attractive stock, or fund an alternative business, or take up a new hobby. Don’t let it burn a hole in your pocket, but having money to act on impulse or out of passion is an enjoyable aspect of life.