Small-business owners can be instrumental in boosting the economy, but when it comes to their own finances, sound financial practices can be lacking, according to the results of a new survey.
A majority of entrepreneurs polled in a CNBC/FPA Small Business and Financial Planning Survey
have their life savings tied up in their business, which is a risky way to prepare for retirement. Just 30 percent of business owners said they are growing their wealth by making investments outside of their businesses.
"Small-business owners are very myopic and tend to focus on the viability and growth of their business, ignoring much else, including their long-term financial needs," said Michael Branham, a certified financial planner who is chairman of the FPA and president of Cornerstone Wealth Advisors in Minneapolis, Minnesota, a firm with about $200 million of assets under management that services small-business owners. "There needs to be balance between their personal and professional money goals."
In addition to a more balanced approach to finances, small-business owners should map out a plan for retirement as well, experts say. The responders identified a lack of exit strategy as one of the foremost financial concerns they face. It can be hard for business owners to think about someone else running the business when they finally hang up the reins, so they simply don’t think about that inevitable stage.
Financial advisors identified three actions entrepreneurs can take to help better plan for the future: diversify, prepare for the worst and plan for succession.
Small-business owners might not know that there are special retirement plans created just for them. To find out more about the small-business retirement savings options available, schedule a one-on-one IRA checkup
with an Equity Trust Senior Account Executive.