Financial stability is a struggle for small-business owners and entrepreneurs. Without giving heeds to finance reports, it could be a particularly nerve-wracking task.
The main focus of an entrepreneur should be to control and maintain their finance, yet this is often one of the most difficult tasks a business owner had to manage.
Financial success is attained by an entrepreneur that has the ability to run a business efficiently and can implement long-term financial tactics to achieve their goals. To accomplish financial independence phase, an entrepreneur must follow this plan set from start to finish. We have divided the plan into the set of 4-4 steps making it easy for you to understand.
The Four Essential Steps
Before starting the steps, here is the rule to keep in mind. There is a possibility that you will fall down from the staircase if you directly move to 4th step before covering first three. Same goes in this case; you need to take one step at a time before embarking on the fourth step. The first three steps will help you to create a stable cash-flow and operate without any debt.
Regrettably, there aren’t many financial plans that cover these steps before investing. In its place, they focus on annuities, insurance and bonds without any plan to fund their retirement. This often leads to vulnerability and anxiety when the business owners understand that they are not prepared for retirement.
But following these four steps sequentially will lead you to success by increasing your self-assurance and energy.
- Optimise The Money You Have
For controlling your future finance, you need to control your present investment. While running a business, there is always a long-term plan instead of weekly or monthly plans. By controlling your cash-flow, you can maximise your profit rate, cost-cutting, save tax and continue to educate in the field of business. All you need to do is make a strategic plan and hire a team of advisors that can help you to progress annually.
- Eliminate Debt
You need to understand that debts are of two types: productive and reductive, and their basic difference. As implied by the name, reductive debt is the debt that is consumed by things that don’t offer any return. You can consider it as bad credit card debt that is better to be eliminated. Whereas, the productive debt will provide you with an income in return and will be valued. This step will focus on eliminating reductive debt, build a strong credit score and ways to utilise productive debt. It is more of a debt management to ensure your financial growth to provide economic freedom.
- Create Cash Reserves
As for liquid cash reserves, there are two reasons you must understand:
- You will need the money when things will go against your business plan to avoid credit card debt.
- You will need to achieve short-term goals when they will present without any delay.
As an entrepreneur, new opportunities will rise constantly and you would want to grab them as soon as possible. It is human nature to take advantage of things that will benefit us in future. There will be many instants when the problem will cross your path out of nowhere or opportunities will line up without you knowing. No matter what the situation is, you will need reserves at that time. You need to make sure that you have expenses available at any time which will keep you at peace.
- Invest And Grow
When you are done with the three steps then you can start to work on this essential step to ensure your luxurious retirement life. Many people consider starting investing as soon as they set off getting profit from their business. This is not always a good idea. The ultimate fundamental of investing money is to achieve good returns. It is like a reward given to you by yourself. But if you don’t have a proper line of direction in investment, then it will not provide you financial stability. So, think before you invest your money.
The Four Essential Elements
Follow up the essential steps with these essential elements to complete this 4 x 4 plan. This will offer you so much of power as an investor, wealth builder and business owner. The four steps should be measured by these four elements to understand the growth rate and benefit. This will give you a direction to follow so that you can achieve your financial goals
- Freedom Planning
In this step, you will plan out to convert your income into investments. With these funds, you will get a better return that will allow you to live luxurious life when you decide to quit working. Everyone have to go through many levels of the financial line throughout their lifespan.
Being younger, your main focus is on the addition of assets and revolves around earning a living. With the increase in income, your focus is turned to saving and investing money so that you can live a lavish lifestyle. It will spin around attaining enough assets to live your future in peace. Generally, this is considered as retirement phase. But it is more of a financial independence time with sufficient asset to provide stable income return.
- Asset Security
This step speaks about protecting your assets from any problem or issue that can take it away. It can be anyone: relative, investors, government etc. Your assets include not only your machine and business but real estate, bond and stocks too. In simple words, anything that can provide you with a lifetime income is at risk of exposure. You need to protect it. All you need to focus upon is proper planning to provide boundaries that can prevent others from stealing your hard-earned assets from you.
- Estate Planning
You can consider this similar to your asset security. This will ensure that if you are not physically present then also your assets are protected and safe. In this case, it will be passed as a legacy in any matter chosen by you without being handled to the government.
- Planning Of Tax
Taxes are the biggest expense for everyone, whether they are an employee or business owner. The only difference between a tax and other expenses is that you can choose. We are not talking about the choice where you get to decide to pay tax or not. In any case, you have to pay taxes but with simple choices, you can have a more tax-efficient way to save finance.
Now with these points, your financial plan is ready. You are all set to grow, protect and distribute the product of your hard work.