Today, there are an estimated 12.3 million women-owned businesses. To give that some context, approximately 43% of entrepreneurs worldwide are women. A study conducted by Fidelity Investments showed that women are often less prepared for retirement than their male counterparts.
Here are several financial habits women entrepreneurs can consider in pursuit of their money management goals:
Become an investor
Statistics have shown that women generally outperform men when it comes to investing. Identify your risk tolerance, conduct your own research and get the help you need from a financial professional to make the most informed decisions. It can be difficult to prepare efficiently for retirement without a way to potentially grow and preserve your wealth.
*All forms of investing involve risk including possible loss of principal. You should only invest the money you can comfortably lose should there be unexpected market volatility.
Expand your financial literacy
Understanding finance, conducting your own research, and making informed financial decisions with the help of a financial professional could benefit you in the long term. “When you have knowledge, you make a better client,” says wealth manager and author Nancy Tengler.
Safeguard your credit
A strong credit rating is critical for business growth, access to financing and landing a favorable interest rate. It also provides the ability to build trust with business partners and suppliers and creates the foundation as a credible and stable operation.
Prioritize your debt repayment
Prioritizing paying down your debt is important because it helps to avoid paying interest that would accrue if you only paid the minimum each month or failed to make payments on time. These costs could grow significantly over time.
Carefully manage your spending versus your revenue
As an entrepreneur, managing your spending versus your revenue is critical to keep working toward financially strengthening the business. If you aren’t careful and your spending exceeds income, you could find yourself in a budget deficit. This is an indication that the company might be unstable.
Have an emergency fund
Ensuring you have cash on hand is critical should your business experience some form of disaster. Microsoft CEO Bill Gates is noted for stating that his goal was to have enough cash on hand to cover payroll for an entire year. That may be excessive and impossible, especially for first-time entrepreneurs. However, should something unexpected occur, saving up a few months’ worth of cash could be the difference between riding out a storm or sinking.
Diversify your finances
Never put all your eggs in one basket. Having your finances diversified over various instruments helps mitigate the risk of the impact of any one investment not performing as you hoped.
Consult a financial professional
You may be great at starting and running a business as an entrepreneur. Finances, though, are a different set of challenges. Consider getting help from a financial professional who can help you conduct a comprehensive review of your finances and create strategies and manageable goals to keep you on track.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by LPL Marketing Solutions
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