Recently I visited a broker to help me figure out where I stand in terms of business capital. I have decided I’m not super excited about taking loans, so I thought stocks may be the best avenue. Well it turns out, I was wrong.
Stocks are not great short term and anything with a quick return is often extremely high risk. So we settled on a Roth IRA coupled with a mutual fund. What’s a Roth IRA…or mutual fund? Well basically, an IRA is a retirement savings account that lets you dip into it and withdrawal the funds that you have put in. You can’t take out the interest earned, but you can take out the amount of funds that you actually deposited. A mutual fund is where the earned interest (or dividends, depending) comes from. It’s a group of stocks that are managed by a company and they are buying and selling from several different companies all at once, so if the value of one drops there are 50 others making up for it. Basically, we decided on a savings account that earns money at next to no risk of losing, which I am able to withdrawal from whenever I want, as long as it’s money that I put in and not the interest.
This works for me because if my money is somewhere else then I am less likely to spend it (especially because I know interest is being earned). Then when I need funds to start up the business, I can take out some of the money that I put in without any sort of penalties or tax issues (because all deposits are made after it’s already been taxed.) I’m not going to do anything massive, just put in about $40 a paycheck and see how fast it grows.
So what am I going to do with the money that I currently have saved (and my tax refund) that I was planning to invest in stocks to make millions of dollars (that was before my dreams were dashed by my very realistic broker)? I plan to pay off personal debt. I don’t have much, but none is better than even a little.
Since I don’t know what kind of business I will be, I want to leave my options open. Some business types depend heavily on the owner’s personal finances (like a sole-proprietorship or even a partnership), while other potential types (S-Corp) rely on investors. Regardless, I want to be in the position to choose the business type that is actually best for my business, I don’t want to choose it because I am not in the financial position to choose anything better. Soon the only debt I will have on my head is my mortgage, and with luck I will be able to make some principal payments to bring down the balance– which will also bring down the amount of interest I will have to pay.
At this point, it’s all about cleaning up and making room for possibilities.