Women Business Owners: 4 Steps to Grow Your Personal Wealth
In recent years, women have embraced entrepreneurship in staggering numbers.
Between 2014 and 2019, the number of women-owned businesses increased 21% to a total of nearly 13 million. (Over the same period, growth in the number of women “sidepreneurs” – that is, those with a “gig job” or “side hustle” – was nearly double the overall growth in women entrepreneurs, at 39% to 21% respectively, per the American Express 2019 State of Women-Owned Business Report).
Entrepreneurship of all stripes comes with the challenge of managing both personal and business finances simultaneously.
“It’s common among all business owners, not just women, to invest most of their time and resources into today and the here-and-now and they don’t look far enough ahead into the future,” says Kristen Vitale, director of First Midwest Financial Network (FMFN). “And that’s especially true now, with COVID-19, for a lot of small business owners in industries that are struggling.”
Looking ahead – to saving, wealth generation, and retirement planning – “doesn't happen sometimes until it's too late,” says Vitale. “But the earlier you start investing, the more time you have to let the market work for you.”
As head of FMFN, Vitale leads a team of financial consultants who meet with clients (including business owners) who are looking to not only invest but also to do things like education planning, financial planning, and retirement planning. She recommends these financial steps to women business owners and others who are ready to think smarter about their financial future.
1: EVALUATE & PREPARE FOR THE UNEXPECTED
Common among business owners is “a failure to plan,” says Vitale. That includes “failure to prepare for some of the unpredictable events that can happen in the economy, the market and life events as well.”
One can’t plan for the unexpected, however, without understanding the everyday. Entrepreneurs and others who are focused on the here-and-now need to first sit down and “evaluate their end-to-end financial situation,” says Vitale, to ensure they have enough savings to cover at least 3-6 months of expenses.
Business owners, specifically, need to also think about their succession plans and life insurance policies to ensure no harm to the business should they pass away unexpectedly.
2. PLAN & PARTNER FOR SHORT- AND LONG-TERM SUCCESS
From there, “it’s about short-term and long-term planning,” says Vitale, “and taking the steps to make your plan a reality.” She recommends making goals for the short term (say, 5-10 years) and long-term (retirement) – factoring in other considerations like homeownership, family, or education expenses.
“Establishing goals before you meet with a financial advisor can save you a lot of time and headache,” says Vitale. “These steps are really important in preparing yourself and in helping you find somebody who will understand that your personal plan is just as important as the investments you make.”
Vitale recommends doing your research on financial advisors and consultants – including asking for referrals from other business professionals – to find the right relationship.
“Find somebody who is not only experienced and that you feel that you can trust, but also who you like,” says Vitale. “It's really important that you like the individual because the intent is that this person will see you through to your retirement, and that’s a multi-year relationship.”
3. INVEST WITH CONFIDENCE & REVIEW YOUR RISK TOLERANCES
That said, women are sometimes averse to risky or complex products. Findings have shown that women are less confident investors than men (according to Accenture Reinventing Wealth Management for Women, 2017) and that they are less likely to invest in risky financial assets (per 2009 findings from the German Institute for Economic Research).
“Women tend to be more conservative or considered with their investments, and sometimes don’t take the risks needed to reach their financial goals,” says Vitale. “At least annually, you’ll want to look at things and re-evaluate your risk tolerances to be sure they are in line with your investments. Environments change, and your plans and risk levels need to change with them.”
Vitale recommends educating yourself on what risks you want to take, which means not being afraid to ask questions.
“Knowledge is power,” says Vitale. “You have to understand and evaluate all risks. I think a lot of times that's where we as women do a little better if we have a financial partner we trust, we should feel comfortable asking questions so that we fully understand what we're getting ourselves into and the level of risk that we want to take. There are many complex products out there and knowing all of the details of what we're investing in is important.”
3. START NOW
If you know the details, however, some risky or complex products are worth considering. Every investor has a different time horizon for retirement, but the riskiest choice an investor can make is not to invest at all. For women business owners, especially, there’s no time like the present to get started.
“It's time in the market, not timing in the market,” says Vitale. “A lot of business owners invest all of their money into their businesses. They need to find ways to pay themselves and prepare for the future.”
Make sure your financial plan has a strong foundation. Connect with a First Midwest Financial Network Consultant today.1
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