Almost three quarters of small business owners report being in “survival mode” in the pandemic, while almost 44 percent are not confident they’re saving enough for retirement — up 5 percent in two years. I have Financial Security Expert and two-time New York Times best-selling author Pamela Yellen to share:
With the financial shock of the pandemic and recession, more than two in five (43 percent) of small business owners are contributing less than one percent or nothing to retirement, a recent survey finds. Among findings:
- 47 percent don’t have an emergency fund to support them through a downturn
- 79 percent have no access to loans
- 75 percent lack open lines of credit
Many small businesses owners are so immersed in the daily demands of running their companies that they neglect planning for their own retirement, Pamela says. They keep investing in their businesses and fail to plan for their eventual exit, at their own risk.
“Most business owners and professionals are risk takers to some degree. If you had little or no tolerance for risk, you’d be working for somebody else,” she says. “But take minimal to no risk with your money that’s outside of your business. That’s your ‘safe money’ or Plan B money.”
For more than two decades, Pamela has been advising business owners how they can prepare for the next downturn. Here are her 3 keys to retire rich despite the pandemic and recession:
Step #1: Increase Your Profits and How Much You Put in Your Personal Pocket From Your Business — Learn everything you can about “direct response marketing,” as opposed to the dumb kind of marketing most businesses rely on. Using direct response marketing lets you track every dollar you spend and the return on investment you get from it. Equally important is to keep increasing the money you pocket from your business.
Step #2: Keep Your Lifestyle in Check — Resist the constant pressure to spend by adopting the 24-hour and seven-day rules. Except for basic necessities, wait 24 hours before making small purchases. For larger purchases, like a new appliance or TV, you’ll wait seven days to consider whether you really need or want that item before making the purchase. For major purchases like a car or luxury vacation, wait 30 days. Do this consistently for a month, and you’ll be amazed at how many things you thought you really needed have lost their pull over you.
Step #3: Create a Safe Money Plan to SAVE the Difference — Work toward saving 20%, 30% or even 40% of your pre-tax income. It can be done, and if you increase your savings by 2 or 3% each year, you’ll be surprised by how fast your nest-egg will grow — and you won’t feel the pinch.
Finally, Pamela recommends this key piece of advice: Know the difference between “saving” and “investing” and act accordingly.
“To save means to place money you can’t afford to lose in a vehicle that is safe and has guaranteed growth. You are certain your money will be there when you need it,” she explains. “In contrast, to invest means to place money in a financial vehicle or an asset that has a certain amount of risk. You hope to make a gain, but it’s not guaranteed. In fact, you might even lose your original investment money.”
The only money you should invest is money you can afford to lose — or money that you’re able to let languish in the market for at least 20 years, if necessary, until it recovers, she adds. Why 20 years? “Because since 1929, we’ve had THREE market crashes where the Dow took between 16 and 25 years to return to its pre-crash level,” she says.
Pamela has written two best-selling books based on her investigation into more than 450 financial products and vehicles in her search for safe alternatives to conventional retirement plans and risky investments. From her research she explains a method business owners can use that allows them to fire their bankers and become their own source of financing, and to know the guaranteed minimum value of their savings on the day they plan to tap into them, and every step along the way. This method, which Pamela calls Bank On Yourself, has provided savers with up to 9.94 percent annual returns over half a century, and never had a losing year in 160 years.
About the Author: Pamela Yellen is founder of Bank On Yourself, a financial investigator and the author of two New York Times best-selling books. Readers can get a free copy of her latest book, “Rescue Your Retirement: Five Wealth-Killing Traps of 401(k)s, IRAs and Roth Plans — and How to Avoid Them” here for a limited time.