Using Your 401k to It’s Fullest Advantage
Historically, your retirement savings were comprised of three legs: social security, pension, and personal savings. The belief was that these amounts would be equal and would replace a certain percentage of your working income to provide you with enough money to sustain your lifestyle after retirement.
Somewhere along the way in the last twenty or so years, companies realized how expensive it was to provide a defined benefit plan (meaning you were guaranteed a fixed sum per month upon retirement). Improved healthcare means retirees are living longer than was expected when the plans were originally set up.
With pressure from Wall Street and general economics, companies began cutting these plans in favor of defined contribution plans (meaning the company will put some amount in, but will not guarantee what will be there when you retire). The best known defined contribution plan is the 401k plan.
By switching from a pension to a 401k plan, the company saves significant money, but places the onus of saving for retirement entirely on the employee. At the same time, the savings rate of Americans has dropped from the 8-10% rate seen in the 60’s and 70’s to 1.2% in 2007.
What this means is that most people have no savings and no idea whether their 401k will cover their retirement or not. Let’s say you are retiring next year (at 66) and you have averaged $65,000 per year for the last thirty five years. You will receive about $22,000 in social security.
To make up the difference, you will have to have $43,000 per year to maintain the same standard of living. Ignoring inflation, if you expect to live another 17 years, you need $731,000. Saving that amount of money is hard, but it can be done.
A great place to start is the 401k offered by your company. In 2008, you can contribute up to $15,500 each year and at most companies, that amount is matched at a certain percentage rate. If you were able to do this for twenty years, you would have the money you need for your retirement. This is due to compound growth and the fact that your retirement funds grow tax-free.
Don’t miss out on this great benefit. Chances are you are already enrolled. The Pension Protection Act of 2006 encourages employers to automatically sign up their employees. All you need to do is start your contributions and you will be on your way to a fiscally healthy retirement.
When Your World Gets Shaken
If you are a regular reader, you’ve probably noted that the posts have been a little spotty recently. Hopefully, since my life has calmed down a little, I will resume daily posting. It has been a busy couple of weeks.
One client has a board meeting which involved a full day of prep. Another has a business plan that needs completing, and another needs immediate consulting services around an upcoming event. Plus we had house guests and our babysitter graduated from college and moved away. Ugg.
This sort of week will happen to every entrepreneur sooner or later. Try to roll with it.
- Remember, cash is king. When you get busy, don’t let that affect your cash flow. Don’t neglect sending out invoices or following up on overdue accounts receivable. Don’t forget to pay your rent or utilities.
- Ask for support. If you need to work late, ask your spouse to take on the load with the house and the kids. Ask your staff to take on tasks that they can do that you don’t have time for.
- Get enough sleep. When you are stressed and working double time, it’s easy to stay up late to get work done, but you will pay for it the next day if you are dragging.
- Avoid bad habits and eat healthy food. For a week, you can skip alcohol or fatty foods. This can give your body the extra energy you need to make it through the week.
- Plan time in the future when you can get to any of the things you have neglected. Then they won’t nag on your mind while you are completing the important stuff.
Being an entrepreneur will take you through a series of ups and downs on practically a daily basis. Work hard to stay on an even keel while you steer your business through rocky waters.
Venture Capital Carnival - Vol. 5
This month I still received a lot of submissions that were not technically within the carnival topic; however, a lot of the submissions were relevant to startup and venture backed companies, so I added a section at the end on general business advice.
Joshua C. Karlin at Marketing & Fundraising Ideas submitted How Not to Ask for a Major Gift.
Jose DeJesus MD presents Business Loans - How to Get Funding for Your Business posted at Physician Entrepreneur.
Herrera at Life, Money & Development submitted the 7 Attributes of Leadership.
That concludes this edition. Submit your blog article to the next edition of venture capital using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.
Board Meetings - What to Accomplish
Board meetings for a private company are meant to gather the board of directors periodically to discuss high-level corporate strategy issues. Your board of directors should be a group of five to seven knowledgeable business people who have experience in your business.
When you get together, ask your senior officers to prepare reports that detail the information that the directors would need to make decisions on the direction of the company going forward or to correct or assist in correcting problems that have come up on the past.
In addition to metrics on their divisions, the senior officers should provide a list of items of interest from the past period, what they plan on doing in the next period, and what threats they see to accomplishing their goals. This will allow the directors to discuss whether they think the company is heading in the right direction as a whole.
If you do not have a board of directors, a monthly or weekly meeting with your senior management should accomplish the same thing if they bring you the same information. However, if you are interested in growing the company significantly, you should consider building a board of directors so you have the advice you need to take the company to the next level.
Business Etiquette - Dinner with Investors
If you have potential investors flying in from another part of the country, you are likely to have them for dinner. Meals can be a pitfall in any relationship, either business or personal. Many people judge your ability to select a restaurant, pick wine, and sit through a meal as a proxy for how you conduct your life. If you are unable to do these things with appropriate acumen, you will likely be judged unfit to receive funding, especially if the investor is on the fence about your company.
Manners are about making other people feel comfortable and behavior that is seen as disrespectful, discourteous or abrasive is usually unintentional.
Here are some basics to get through a dinner with an investor.
- Pick a mid-level restaurant with good food. Select a restaurant that has a variety of choices on the menu including a vegetarian selection.
- Make a reservation. If the restaurant you pick doesn’t take reservations, pick another restaurant.
- Dress to match the dress of your guests. If they are wearing suits, wear a suit. If they are wearing jackets, wear a jacket. Err on the conservative side. Regardless of the dress, be neat, clean shaven, and wear unwrinkled clothing.
- If the guests are coming in their own car, make sure they have good directions. Arrive a little early - always make sure you arrive before your guest.
- Allow your guests to select their own seats, but encourage your team to sit between the guests to facilitate better conversation. If you have two people who are better conversationalists, have them sit on opposite sides of the table to keep conversation flowing. Arrange this before you arrive at the restaurant.
- If you are expected to pick the wine, be prepared. If you are not a wine connoisseur, call the restaurant ahead of time and ask to speak to the sommelier. He or she should be able to give you some good mid-range wines in both white and red.
- When you site down, remember that your bread plate is on the left and your drinks are on your right. During the meal, use your flatware from the outside in. Put your napkin in your lap. If you would like bread, salt and pepper, butter, etc., as for it to be passed, don’t reach over someone for it.
- When selecting your meal, pick one that is easy to eat and does not have a tendency to leave distracting bits of food in your teeth. Take a bite of food and put your flatware down before chewing and swallowing. Don’t talk with any food in your mouth.
- Don’t drink too much.
- Some business talk at the table is okay, but don’t let it overwhelm the conversation. Stay off of topics that may be sensitive, sex, politics and religion are good ones to avoid. A good way to avoid saying something stupid is just to ask a lot of questions and let your guests do all the talking.
- If none of your guests order coffee or dessert, then you should not either. If they do, then at least one or more of your team should do the same. This can be tricky because they may not want to order first. In this case, you should judge how you think they feel and follow that instinct.
- Pay. They are your guests, you are expected to pay.
In general, good business etiquette is about making people feel comfortable and valued. If you provide a nice meal with good conversation, then you have succeeded even if you accidentally use the wrong fork.
