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Want to Start a Business but Don’t Have Enough Money?

image of person at a desk with the article title: start a business but don't have enough money

Startup entrepreneurs of often let a lack of money hold them back. Today, we’ll share 3 ways to get started when you don’t have enough money.

Click the player to listen to this episode of The BIGG Success Show Podcast. Below is a summary of our discussion.

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My Employer is Eliminating 401(k) Matches

retirement Companies are responding aggressively to the bad economic news. Layoffs, hiring freezes, and salary freezes have been some of the most common actions so far.

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Now, more and more employers are looking at eliminating the matching of 401(k) contributions. According to a survey by Watson Wyatt, the global human resources and financial services firm, things are changing quickly. In October, 2% of firms said they had already cut back on these matches and 4% said they planned to. Two months later, in December, 3% had already made the cut and 7% said they intended to.

And these are large companies. Established brands that we all know. Motorola, FedEx, Kodak, and Starbucks just to name a few.

They’re usually using the word “suspend” rather than “eliminate” when they announce these cuts. But it raises a question:

If my employer stops matching my contribution to my
401(k), should I still keep making contributions myself?

It forces us to save

This is perhaps the biggest reason to keep making contributions. Financial planners have said for years that we should pay ourselves first. Investing it before we get it, as we do with our 401(k), is the best way to make sure that happens.

Most people report that they don’t really miss the money. It’s like the taxes that are deducted from our paychecks – the government knows most of us won’t miss the money if we don’t see it.

Of course, there are ways to set up an automatic deduction from our checking or savings account for investments outside of a 401(k). That’s really close to having it deducted from our paycheck, but it’s not quite the same. That little variation can make a bigg difference for some people. You have to judge that for yourself.

Higher limits

The next best option to a 401(k) for most people would be an IRA because contributions may also be deductible. You should check with your financial advisor about the specifics of your situation.

Because you invest before paying taxes, it’s as if the government is making part of the contribution for you. For example, if you made a $1,000 contribution to one of these retirement plans and you’re in the 25% tax bracket, you would pay $250 less in taxes. So, in essence, you’re only out of pocket $750.

With either plan, you don’t pay taxes on the money you earn on your investments until you pull it out. Deductible and deferred – that’s a pretty powerful combination.

Where the 401(k) gains favor is that it has higher maximum limits – your contributions to your 401(k) can total up to $16,500 in 2009 ($22,000 if you’re over 50). You can’t contribute more than $5,000 to an IRA in most cases.

If my employer cuts or eliminates my 401(k) match, are there
reasons to fund my retirement through another vehicle?

A lot of 401(k) plans offer fairly limited investment options and you may pay lower fees in a plan that’s not a 401(k). 

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The bigger issue

It’s not like we don’t already have a sense of it. But recent months have reinforced this paradigm. We can’t count on anyone or anything for any part of our financial future. We must take full control of our own finances. We have to build our own safety nets to make sure we are financially secure.

How much will you have at retirement?

It really boils down to three factors:

  • how much we invest
  • how much we earn on our investment (after all fees and taxes)
  • how long it is invested

From these three factors, we see that we have three options if we don’t want to retire on less money:

1st – We can try to earn more on the money we invest.
That involves taking more risk and we don’t have much appetite for that right now. So this probably isn’t going to fly with most of us.

2nd – We can postpone our retirement.
This buys us more time. People who are really close to retirement right now may not have much of a choice. They may have to do this. But if you still have some time on your side, there may be a better way.

3rd – We can increase our contributions.
Look at your budget and see if there is any way you can make up for the investment your company was making.

If your employer reinstates matching contributions, you can stop contributing at the increased rate and enjoy the extra money in your budget … or …

… you can keep making your higher contributions to give your retirement a kick!

To all our readers in Australia, happy Australia Day! And we hope our friends in India enjoy Republic Day!

And thank you so much for spending time with us today. Join us next time when we discuss extreme multi-tasking. Until then, here’s to your bigg success!

 

Direct link to The Bigg Success Show audio file:
http://media.libsyn.com/media/biggsuccess/00316-012609.mp3

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Finding Your Passion One Week at a Time

at_the_topToday, we welcomed Sean Aiken to The Bigg Success Show. Sean graduated from college a little over a year ago but didn’t know what he wanted to do. So he decided to work a different job one week, every week,  for one year. In the process, he raised over $20,000 for charity. His journey has been covered by the Canadian Broadcasting Corp, The New York Times, Good Morning America, Radio France, The Australian Radio Network, and too many more to mention.

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Got Milk? Young Mom Finds Her Mission

By Bigg Success Staff
05-06-08

Inspirational Stories

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Jill Youse had a supply problem – she had too much! She had been freezing extra breast milk for her new baby girl, but she knew she didn’t need it all. So she searched the internet for a place to donate her reserve milk.

She only found one organization in South Africa that provided breast milk to orphans. So she contacted them, but they told her that they couldn’t make it work logistically.

But Jill Youse is a very determined person. She found a way to make it work, and in doing so, launched the International Breast Milk Project (IBMP).

Now two years later, she has been featured on Oprah and ABC News, in Women’s Health and Time , by Daryn Kagan in her book What’s Possible, and on well-known web sites such as Freakonomics, Gimundo, and now Bigg Success!

According to UNICEF, babies in the developing world are six times more likely to survive their first two months if they are fed breast milk. The IBMP says that approximately four million infants worldwide die before they reach four weeks in age.

Breast milk helps boost their immune system better than any other alternative. Delaying breast milk feeding just one day can double the infant’s chances of dying before one month.

The IBMP was the first organization in the world to provide breast milk from the United States to orphans in Africa. Today, approximately one-fourth of the milk donated goes to Africa. The rest goes to critically ill infants in the United States.

This IBMP makes money from the milk that stays in the United States to support other initiatives – such as funding rain water harvesting tanks and a water purification system for a children’s home in Kenya and a healthcare center in Tanzania.

Jill’s organization has received the Charities Review Council Seal for meeting all sixteen of its Accountability Standards. According to the IBMP’s web site, 99 percent of all monies received go to programming, with less than one percent for management and fundraising expenses. Now that’s efficiency!

The IBMP’s next shipment is scheduled for this month – over 55,000 ounces of mothers’ milk will be delivered to Africa. That’s the result of thousands of woman donating their excess breast milk. In the process, they become philanthropists who are making a bigg difference.

You can help out the IBMP by donating milk, money or mind power! They are growing rapidly and need any resources you’re willing to offer. Check out their web site for more details!

Jill started with a small problem and turned it into an opportunity to solve a large one, ounce by ounce. She’s a mom on a mission! 

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Don’t Fear the Banker!

A lot of us are very uncomfortable talking about money, whether that means negotiating your salary, asking for a sale, or asking for a loan. So the thought of going to the bank to get a loan can be very intimidating.

The loan process seems somewhat mysterious. Wouldn’t it by nice to know where bankers are coming from? Then you would be better positioned to get the money you need.

3 things to understand about your banker

#1 – Banks can’t afford to lose money.
A lot of people don’t realize that banks operate on relatively thin profit margins. So, contrary to popular belief, they don’t make that much money on every loan.

The biggest question every banker has when looking at every loan proposal is …

Will we get paid back?

They’re more concerned about the return OF their investment than the return ON their investment. That comes later.

#2 – Banks don’t fund start-ups.

This is perhaps one of the biggest misperceptions in the business world. People think the bank is the best place to go for money they need to start a business.

To which we say, reread our first point! Bankers are relatively risk averse for the reasons stated above and more. So banks don’t tend to lend money to new, unproven firms.

You might be saying, “But I know people who got money to start their business from a bank.” Here’s the distinction – the bank wasn’t loaning money to their BUSINESS; they loaned them money as individuals FOR their business. If you look deeper, you’ll find that, in almost every case, they secured the loan with equity in their house or some other asset.

#3 – Banks need to lend money.
That’s their business. So if you need money, and you can prove that you can pay it back, and you have some assets to secure the loan, go to the bank with confidence!

Your bank is just like your favorite video store.
Video stores rent DVDs for a fee. Banks rent money for a fee. So going to the bank is just like renting a movie. You have to return the movie and pay a fee. And hey, unlike video stores, bankers don’t charge their fees upfront!

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Our bigg quote today is by the great Stephen Covey:

“Seek first to understand, then to be understood.”

Understand your banker’s needs so you stand to get your money needs. 

Next time, we’ll discuss how to offer criticism without being critical. Until then, here’s to your bigg success!

 

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