Every business owner should have goals not only for their business but also for what they intend to do with the profits they earn from the business as you start to improve your income. However, when you start to think about these goals, it’s easy to see how they can start to become a jumble and it can be hard to think about which ones are better worth pursuing.
Stability comes first
First of all, if it’s looking like you’re about to lose your car or your home, or you’re in enough debt that it can start to affect your ability to run the business, that’s where you should be aiming the bulk of your expendable income from your profits. Get out of debt and get some stability in your life so you can start looking at other goals.
Contribute to the long-term
No matter what else you do, you should always ensure that at least some of your cash is heading for your retirement. The sooner you start putting aside some cash, even a little, the easier it can be to meet your eventual retirement goals. If you’ve reached your thirties without anything set aside, you need to dive into a retirement checklist and make it an active goal to make sure you’re sorted for the future. It’s going to become harder the longer you leave it.
Have some emergency savings
It’s never easy to tell when you’re going to need a little extra cash, but without any sort of buffer, it’s too easy to go raiding the savings every time a sudden expense hits. It’s a good idea to have some form of emergency savings set aside so that you’re not either going into your savings or building up needless unplanned debt.
Investing it back
You can invest some of your own earnings back into your business but you should already have money set aside from the overall profits to do just that. Rather, if you have expendable income after meeting your primary needs, it’s a good idea, in general, to start building an investment portfolio. At a minimum, it can help boost your retirement plans, but it can also help you generate real wealth.
Rank, divide, and achieve
When you have worked out what your financial needs are, you might find you have several. Depending on which is the most urgent and has the highest priority, think of a hypothetical division for each. For instance, 50% towards paying off debt, 20% towards retirement, 20% towards emergency funds, and 10% towards investments. Pay yourself first, setting aside a portion of every paycheck that is designed to meet your financial goals, and split that portion along the ratio you decide on.
The truth is that all of the goals mentioned above are worth considering, but there’s no single answer as to which is your priority. However, by outlining your existing financial needs, for yourself and the business, present, and future, it becomes easier to see where you should be putting your profits.