Whether To Invest in Your Business or Retirement. It’s Not an Either-Or.

I get this question all the time from business owners about where to invest.

Should you invest in your business or should you invest in an IRA for retirement?

My simple shpiel? You have to do both.

Then I hear this from other clients: Justin, I feel like I have no control over what happens to the stock market! I’d rather just put my money back into my business.

I get it. I feel your sense of having more control in your business but . . .

You still need to diversify. You can’t put all of your eggs in one basket and only invest in your business — even if you think your biz will be worth tons down the road.

Here’s why. Let’s say you regularly invest in your business for many years. So the value of your business is the only thing you have set aside for retirement. But what happens if you can’t sell your biz for the amount you want? Or even worse, what if it is worth zero by the time you try to sell it? You will be kaput. We don’t want that.

But what if you could develop an investment plan that wasn’t just tied to the stock market! Woohoo! Now we are talking. Wondering how to do that? Email me.

So how do you do both? Try reinvesting 5-10% of your revenue back into your business. Try saving 5-10% of your revenue for retirement.

To save, you need to set up a system and it needs to be automated. Not the willy nilly stuff where you do manual transfers from your business account to your savings account every month or two. We need to take things to DefCon 4. (Who saw War Games?) Take more control and automate your savings.

One of the first types of accounts you may want to set up for retirement is a Roth IRA. You fund it with after tax dollars. It grows tax deferred and as long as you keep it in till you are 59 1/2 the money you take out is tax free. Saweeet!

If you are single and your earned income is under $110,000, you should be able to contribute to a Roth. If you are married and your earned income is under $173,000, you should be able to contribute to a Roth. Please double check with your accountant.

If you want to invest in your business, there are so many ways to do it. Hire employees. Get office space. Redo your website. Or invest in marketing and technology. Your ROI could be big here.

Bottom line – diversify your investments. Put money away for retirement in IRAs, 401ks but also invest in your business.

Author's Bio: 

Justin Krane, a CERTIFIED FINANCIAL PLANNERTM professional, is the founder of Krane Financial Solutions. Known for his savvy, holistic approach to financial planning, he advises his clients on how to unite their money with their lives and businesses.

Using a unique system developed from his studies of financial psychology, Justin partners with entrepreneurs to identify, clarify and meet goals for increasing their business revenue. He works with entrepreneurs to create a bigger vision for their business with education and financial modeling.

He holds a Bachelor of Arts degree in Finance from University of Colorado, Boulder, graduating in 1994. Prior to founding Krane Financial Solutions, Justin was a Vice President, Investments, and Sales Manager at UBS Financial Services Inc., for 12 years, in Beverly Hills, California. Justin has earned the designation of Certified Investment Management Analyst from the Executive Education Department at the Wharton School of Business. He is also a Member of the Financial Planning Association, the largest organization of professionals dedicated to championing the financial planning process.

He has two children and lives with his family in Calabasas, California. Justin is an accomplished athlete and was a former junior ranked tennis player in Los Angeles. He loves to cook, travel, speak Italian, and spend time with his family. Justin is also an active member in the Cystic Fibrosis Foundation.