Some Techniques to Catch Up on Retirement Savings

Small business owners bear the burden of saving for their retirement and shouldn’t count on the sale of their companies to provide the financial security they seek. Many owners often plow extra cash back in the business rather than socking it away in a tax-advantaged plan. The good news: growing older entitles you to make “catch-up contributions” designed to increase savings as retirement approaches.

How to Catch Up on Retirement Savings

1. Catch-up Contributions to 401(k) Plans

The maximum salary reduction contribution to a 401(k) plan in 2017 is $18,000. However, starting in the year in which you attain age 50, you can increase the contribution by $6,000, for a total contribution of $24,000. The $6,000 catch up contribution is intended to boost retirement savings for those nearing retirement. However, the additional contributions can be made without regard to prior contributions, so the term is really a misnomer. Both the basic and catch-up contribution amounts may be adjusted annually for inflation. Find more information in IRS Publication 560.

2. Catch-up Contributions to SIMPLE IRAs

If your company has a SIMPLE IRA, the basic contribution amount for 2017 is $12,500. However, starting in the year in which you attain age 50, you can increase the contribution by $3,000, for a total contribution of $15,500. As in the case of 401(k) plans, both the basic and catch-up contribution amounts for SIMPLE IRAs may be adjusted annually for inflation. Find more information in IRS Publication 560.

3. Catch-up Contributions to IRAs

Whether or not you have a qualified retirement plan, you can increase retirement savings through IRAs and Roth IRAs. If you are eligible to make contributions — there are income limits for Roth IRAs and income limits for traditional IRAs for those who are participants in qualified retirement plans — you can increase your annual contributions. The basic contribution to a traditional or Roth IRA for 2017 is $5,500. However, starting in the year in which you attain age 50, you can increase the contribution by $1,000, for a total contribution of $6,500. The basic contribution limit may be increased annually; the catch-up contribution amount is fixed by law. Find more in IRS Publication 590-A.

4. Catch-up Contributions to HSAs

If you have a high deductible health plan (HDHP), you can contribute to a health savings account (HSA) on a tax-deductible basis. The annual contribution limit depends on whether you have self-only coverage or family coverage. For 2017, the contribution limit is $3,400 for self-only coverage and $6,750 for family coverage. However, starting in the year in which you attain age 55, you can increase your contribution by $1,000 (each spouse must have his/her own HSA to make a catch up contribution).

Why is this healthcare-related savings program included in a retirement savings blog? The reason: Funds in HSAs are not subject to any required withdrawals and aren’t forfeited if not used for medical care (there’s no use-it-or-lose-it feature for HSAs). And, in fact, there’s an important retirement savings aspect. Funds withdrawn to pay for qualified medical expenses are tax free but funds can be withdrawn for other purposes. When funds are used for other purposes, they’re taxable and subject to a 20 percent penalty. The penalty, however, does not apply for distributions after age 65. In other words, if you contribute to an HSA and don’t use the money for healthcare, you can use it penalty free to supplement retirement income. Find more information in IRS Publication 969.

Note: The American Health Care Act that is currently under consideration in Congress would:

  • Increase the basic contribution limit to the amount of the out-of-pocket costs for a high-deductible health plan (e.g., $6,650 for self-only coverage and $13,300 for family coverage in 2018)
  • Cut the penalty to 10 percent
  • Allow catch up contributions for each spouse to one HSA
  • Treat over-the-counter medications as qualified expenses (no doctor’s prescription needed).

5. Delay Social Security Benefits

You can begin to collect Social Security benefits at age 62, but the benefits will be reduced for life. You can collect benefits without reduction at full retirement age, which is age 66 for those born between 1943 and 1954. However, you can increase your monthly benefits by delaying benefits beyond full retirement age. More specifically, benefits are increased by 8 percent per year. Thus, a person with a full retirement age of 66 who delays benefits until age 70 would see benefits increased by 132 percent. There is no additional increase for delaying benefits past age 70. Use a calculator from the Social Security Administration to determine the effect of delayed retirement on your benefits.

Help Your Business When You’re Strapped for Cash

In general, the times when you need money the most are going to be the times when it’s hardest to get.  Think about it from a lender’s perspective.  If you’re hemorrhaging money, you’re a lousy risk.  But even successful entrepreneurs have moments when there’s just an ugly money crunch, and the only thing that will get them past it is an influx of cash.  Here’s how to generate some $$$:

What to Do During a Business Cash Crunch

1. Stop the Bleeding

This step is absolutely the most critical.  You must step back and take a hard, dispassionate look at your company and find places to cut expenses.  Be creative, be ruthless, and if necessary, be willing to get an outside opinion.  If you don’t get your expenses under control, then you’re going to be perpetually short of money.

2. Get a Cash Advance

This option is great if you’ve billed clients and are just waiting for them to pay up.  A company called Fundbox offers in innovative solution.  Fundbox gives you an advance based on your invoices, you collect from the clients, and you pay off Fundbox, with interest, of course.  You don’t want to use this strategy as a day-to-day model, but it can help get you out of deep water.


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3. Dig Deep

If you’re sitting on valuable assets, you may have found the right time to sell them.  Whether you find a buyer for heirloom jewelry or you decide to take a second job, sometimes a sacrifice can make the difference between keeping your business afloat or closing up shop.

4. Crowdfunding

When your problem is one of capital for an expansion of your company, then crowdfunding can be manna from heaven.  If you’re going to make a go of crowdfunding, you need to prepare a compelling pitch (for which a freelance pro may be of use.)  The only downside is that money for crowdfunding can take quite a while to make it to your bank account, but if you have a brilliant idea that you simply don’t have to money to implement, crowdfunding may be your answer.

5. ROBS

Don’t let the scary acronym (Rollover as a Business Startup) keep you from investigating this program that lets you use 401K funds for your company.  There are lots of restrictions, so make sure you understand the program.

6. Get a Loan

A loan won’t necessarily fix all your problems, but it sure can help with a short-term cash crunch.  And businesses now have more options than just begging at a bank.  Fundera is a fantastic lending operation that can help you with funds for any number of business needs.

7. Generate Cash

Okay, this may sound simplistic, but don’t leave any stone unturned when you’re in a fiscal crunch.  My favorite option is to create a special offering, whether it’s a discount or a new premium package and get your clients to buy in.  At the end of the day, it’s much healthier to bump up revenue rather than taking out a loan.

Finally, the best way to ensure your company doesn’t end up with a cash shortfall is to run your business profitably.  Putting profit first and setting aside your predetermined percentage of profit from every single bit of revenue will help you trim expenses and ensure your company remains financially solvent.

Getting Your Small Business Debt Free

Debt is a necessary part of running a small business. A business loan, line of credit or a business credit card can help your company hire new employees, purchase equipment and finance growth. But too much debt can stifle cash flowand put your business at risk. And the less you owe, the more you have to reinvest.

The average U.S. small-business owner has $195,000 of debt, according to a 2016 study by Experian.

Small Business Debt Management Tips

Here are five steps to digging your business out of debt.

1. Take Inventory of Your Debt

Sort all of your debts by interest rate and monthly payment. This includes payments on business loans, lines of credit and business credit cards as well as outstanding payments due to vendors.

This process can help you prioritize which debts to tackle first. Some experts recommend starting with the highest-interest-rate debt.

New small-business owners should aim to have all of their debt repaid within their companies’ first 12 months to lower the risk of bankruptcy, says Winnie Sun, founding partner of Sun Group Wealth Partners in Irvine, California, which provides financial planning for businesses.

2. Boost Sales

Once you have a debt management plan, you can think about ways to boost your sales. Here are a few ideas:

  • Reward loyal customers. A loyalty program can increase customer satisfactionand retention: About 82 percent of people said they were more likely to shop at a store that offers a loyalty program, according to a 2014 study by Technology Advice, a tech services firm.
  • Get active on social media. Sun advises engaging with customers on social media. Respond quickly to comments, ask for input, and pay attention to your company’s Yelp reviews: 84 percent of people trust online reviews as much as personal recommendations, according to a 2016 survey by marketing company BrightLocal.
  • Consider raising prices. With the right strategy — such as offering a volume discount on large orders — you can do this without losing customers. Volume discounts can help your business stay competitive, according to the Harvard Business Review.

3. Cut Costs

Ideally, boosting sales brings in enough revenue to tackle your debt. But if your expenses are running a bit too high, here are three ways to cut them:


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  • Sell off equipment, office supplies and other items that you don’t use often. Buy used equipment or lease if necessary.
  • Downsize to a smaller office with lower rent and utility costs, consider a co-working space that doesn’t require a long-term lease, or relocate into a home office.
  • Split costs with other companies. “Look for other people who are running similar businesses and consider sharing resources. Share employees, internet services,” Sun says.

4. Refinance High-cost Debt

The Federal Reserve raised interest rates in March and has signaled two more rate hikes in 2017. These increase the cost of variable-rate debt, including credit card balances and lines of credit.

If you can’t afford to repay debts in full anytime soon, consider debt consolidation or refinancing, especially if you have strong credit.

With refinancing, you’d take out a lower-interest loan to repay the original loan. With consolidation, you’d combine several loans into one new loan.

“If you can change the loan from variable to fixed, and then pay it down quickly, then that would be ideal,” Sun says.

Business credit card debt can also be refinanced or consolidated via a balance transfer to a new card with a 0 percent interest promo period; watch out for fees and aim to pay it off in full before the 0 percent period is up.

All of these options let you lock in a lower, fixed interest rate and decrease your payments.

5. Shorten Payment Terms with Clients

Maybe your business has clients on a long-term payment plan. Or perhaps they consistently pay late. In either case, it might be time to revise payment terms.

For example, give new clients 30-day — rather than 90-day — payment terms. Offering an early-payment discount or charging a late-payment penalty can also be effective strategies for collecting on unpaid invoices.

Need Small Business Financing?

NerdWallet has created a comparison tool of the best small-business loans to meet your needs and goals. We gauged lender trustworthiness, market scope and user experience, among other factors, and arranged them by categories that include your revenue and how long you’ve been in business.

News For This Month: Insurance

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Businesses – My Most Valuable Tips
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The Essentials of Options – Getting to Point A

What You Need to Know When it Comes to Web Hosting Providers Just like any other kind of commercial business, you should know that web hosting companies is also regarded as a profit enterprise. These companies search for websites in the internet that they can host in order for those websites to function well. Nonetheless, this is only the beginning of your working relationship with your web hosting provider. In these modern times, there are so many web hosting providers already and you can choose one among them that can help build your website in the online business. One of the things that you need to bear in mind when selecting a web hosting provider is that the company you will choose should also aim in making sure that you be successful in your business venture. With that being said, it is important for you to know that not all web hosting companies have the same aim. Therefore, the best thing that you can do is to ensure that you have chosen the most suitable web hosting company that can cater to the needs of your business for it to become successful. When it pertains to a good web hosting provider, there are certain features that you must look for. If there a lot of customers that are attracted on your website, it only means that you did not made a mistake in the web hosting provider that you have chosen to help you. Without a doubt, the goal of most businesses, regardless of what it is, is to attract many customers. Therefore, the more customers will be attracted on your website, the more income you will have.
3 Options Tips from Someone With Experience
One of the things that you should also take into account when you choose a web hosting provider is their capability to make use of less energy. This is because using less energy will be helpful and good for the environment. Through this way, you will be able to help save the environment while saving some money for the energy costs at the same time. Just think of it this way, saving on your expenses is very essential for the reason that it allows you to spend on other things that is also important for your business. In addition, your expenses for running an online business will be a lot lesser than expected due to the fact that you are using less energy. Having said that, you should always bear in mind the importance of choosing a web hosting provider wisely for the reason that they are highly capable of helping you attain the success you want for your business.Getting Down To Basics with Options

Lessons Learned from Years with Sales

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Businesses Tips for The Average Joe
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How To Raising Startup Money from Friends and Family

For a start-up, initial capital can mean the difference between two founders with just an idea or two founders with a beta product that has real users and could even become the next Uber. While investments from friends and family can be crucial to getting your business off the ground, such investments also come with an additional set of responsibilities. After all, these are the people you grew up with, run into at gatherings, and perhaps even call your father-in-law. Said differently, it is always important to remember you have pre-existing personal relationships with these people that likely trump any need for capital. To that end, below are some important considerations to keep in mind when seeking capital from your friends and family.

1. Be HonestThe great thing about a friends and family round is that these potential investors already know you and have faith in you. They want you to succeed and want to believe that your idea has the potential to make an impactful change. As a founder, however, you should not take advantage of this faith. You should educate these potential investors of the risks associated with investing in start-ups broadly as well as the specific risks unique to your business. Just as important, if you do receive an investment, be sure to provide periodic updates on the status of your business.

2. Explain Investment Terms: Your friends and family may be sophisticated lawyers, doctors, engineers, consultants and so forth, but that doesn’t mean they are sophisticated early-stage investors. Take the time to create a term sheet and lay out exactly what form the investment will take and make sure to explain what that actually means to your potential investors.

While there is a lot of literature on common investment structures for start-ups, like the classic convertible note or the newer SAFE or KISS, your friends and family investors may think they understand the structure when they actually don’t. For instance, an unsophisticated investor may see the interest rate and maturity date associated with a convertible note and think – “Worst case, I’ll get my money back with interest in a couple of years if this doesn’t work out.” The truth is, however, that if the start-up is unable to grow sufficiently before maturity, chances are the investment amount won’t convert into equity because the start-up has failed to raise additional institutional capital, or alternatively, the start-up won’t have sufficient liquidity to pay off the loan.

3. Documentation: A founder should treat an investment from friends and family like an investment from a stranger and should appropriately document the transaction. Documentation does a couple of things: (1) it clearly spells out the intention between the parties and (2) captures the rights and obligations of each party.

4. Offer Fair Terms: Investors in a friends and family round are taking a big risk (if that wasn’t clear from the above) and should be compensated accordingly. As a founder, you should take the time to understand what terms are fair and reasonable given the amount of risk undertaken and offer investment terms that balance such risk. The last thing you want to do is take advantage of your relationship and the trust and offer terms that are less than fair.

Created a Rainy Day Fund

You’ve got your emergency fund set up — three to six months of living expenses set aside for unexpected events — and you’re finally feeling a sense of financial security. But what, exactly, constitutes a financial emergency?

We asked financial advisor Laura Scharr-Bykowsky for tips on when to tap your emergency fund and other advice on saving up for a rainy day.

When Should People Tap Their Emergency Funds?

Emergency funds provide peace of mind when there’s an unusual or catastrophic event in your life. Loss of income due to unemployment or disability is the primary intended use. Your emergency fund can also provide much-needed money if you face a major medical event.

Your fund should be able to cover out-of-pocket deductibles for your health, property and casualty insurance and at least six months of income to cover your expenses during a job search. Keep the money in a cash account insured by the Federal Deposit Insurance Corp.

Does it Ever Make Sense to Use It for a Non-emergency?

Some people may decide to tap this account if they have a large, unexpected maintenance or repair bill such as a new roof or heating and air conditioning unit. Others may raid their account to buy a new car. If you deplete your account in this way, try to build it back up as soon as possible, because you’ll be vulnerable if you have a true emergency. I would recommend this only if you have a stable job and good insurance.

Any Other Savings Tips?

Set up separate savings accounts for different goals and include a line item in your monthly budget to save for these less frequent expenses — for example, one savings account for home repair, one for car replacement and another for at least six months of living expenses.

This method can prevent you from raiding your emergency fund. Setting up separate savings accounts is easy and helps us stay honest with our spending.

Start a Business with No Money

You have a dream but no money to put toward the dream. That’s not uncommon among entrepreneurs. Don’t let the lack of money deter you from a business you know other people would find benefit from. Here are a few ideas of how to get your business off the ground with no money.

1. Some are Easier Than Others

If you don’t have any startup capital, service-based businesses are perfect. Product based businesses require you to purchase and then resell. Service-based businesses like consulting, advising, or things like content creation or web design, only need equipment you probably already have.

2. Get Creative with How You Raise Funds

Consider the story of how Outbox Systems started. The founders had a dream of connecting two software applications together but didn’t have the money to build it. Instead, they worked out a deal with another company where they would build a similar product for a discounted rate yet retain the rights to sell the product to others. That’s creative financing. How can you get creative with how you raise money?

Starting a business is hard. It’s not comfortable. Expect long days, a lot of hard conversations, and plenty of people telling you it won’t work. You don’t have the money to hire people to do tasks like cold calling and door to door sales so you have to take on the task. If you commit to being the person that does just about everything in the beginning, startup costs are much lower.

4. Creative Fundraising – Part 2

Yes, there’s friends and family but today we have crowdfunding, local and national incubators, accelerators, and microfinancing. If you don’t know what these are, do some Googling and learn about them. Look for communities of investors in your area and tell others about your business. There’s plenty of funding that doesn’t involve banks and credit cards.

5. Start Simple

Your dream might include a pretty big business offering a wide variety of products and services but for now, keep it simple. Sell a single product or service. Build your customer base and later branch out into other products and services.

One of the most expensive parts of running a business is acquiring customers. If you gain their trust with one product or service now, selling something else later is much easier.

6. Start as a Hobby

At some point you’ll have to quit your day job but that day isn’t today. Hobby businesses often come from the person’s love of something. Maybe you have a corporate job during the day but you love to bake when you come home. Start with people you know and allow your network to grow from there. Your marketing costs are zero and you still have money coming in from your day job.

7. Work for Somebody Else

Although they may not admit it, most business owners became entrepreneurs thinking they knew more than what they did. In fact, many businesses fail because the person was ill-equipped to build a successful business.

Before you start your own business, work or intern with somebody in the business already. The experience you gain will allow you to start your business knowing what you truly need to spend money on and what you don’t. You’ll also gain insider knowledge of the industry and possibly a healthy customer list from the beginning.

8. Use Free Services

The Internet is full of high quality services you can use for free. Mailchimp is a powerful e-mail marketing platform that’s free for the first 2,000 e-mail addresses. Wufoo allows you to make online forms, and although Facebook and other social media platforms won’t put your ad in front of large amounts of people unless you pay, you can still gain some traction by telling people what you’re doing.

There’s also freelance platforms like Fiverr, Elance, and Upwork that have quality freelancers willing to help with logo and web design, and other service for cheap. You could get a logo made for $5!

9. Barter

Don’t have any money? Offer to barter your services in exchange for somebody else’s. There aren’t many small business owners that aren’t looking for ways to get quality services for little or no cost. What you have, they want, and they’re willing to trade for it.

10. Hustle!

Finally, go into your business endeavor with a hustling mindset. Be ready to do anything legal and ethical to get your business off the ground. Don’t like cold calling? Do it anyway? Not a graphic designer? You can find templates online for just about anything. Don’t want to do any free work? It might be worth it to get your name out there. If you don’t have the money to pay for services, you have to do them or find somebody who can and will do it for free.

Just as you would do just about anything for your family, you have to have the same mindset about your business.

Getting Wrong About Investing

Starting a business takes a lot of savvy. Many entrepreneurs border on genius when it comes to their particular niche, and that’s why people are willing to invest in, buy from, and do business with them. While a particular entrepreneur may thrive in her/his field, they may struggle in one common arena: Personal wealth management.

Entrepreneurs spend so much time garnering investments that they often don’t take the time to make any of their own. If you’ve ever started something you probably know all too well how easy it is to invest in a project, with no promise of a return. You pour all your time, energy and in this case money, into a venture hoping that it takes off (and eventually pays off).

One founder has set out to solve this problem. Paul Adams, CEO and Founder of Sound Financial Group, has a passion for helping fellow entrepreneurs reach personal financial success. As a result, his Seattle-based investment firm manages millions in capital for its clients. Paul has some great insights on where and why founders often struggle to manage their own personal finances.

Personal Wealth Management Tips

1. Legacy vs. Retirement Dreams

When most of us think of retirement, we think of vacations, houses and no debts. Adams and Sound Financial recommend an alternative perspective. Instead of putting your focus on how you’re going to spend your savings, think about the legacy you plan to create. “First, cast your vision of the future; then set an intention for any financial advising relationships you engage in, establish a plan and strategy and track your progress going forward.” Having this mindset helps vision driven founders find purpose in their financial planning.

2. Selecting the Right Kind of Assets for Long-term Withdrawals

Adams also details that “Anticipating a lifetime of withdrawals from a defined asset pool over an indefinite period of time is a complex challenge for which there is no simple solution. Pursuing this challenge can require creative approaches and persistent vigilance.”

Once you retire/exit/sell you’re essentially out of a job, so you’ll need to have saved well.

Solution? Plan for market fluctuation and have clear expectations of what your desired retirement lifestyle is going to cost. You’ll need to ensure that your investments are able to meet those expectations.

3. Your Business is Great, But it Might Not Be Great for Investment

The other mistake entrepreneurs make when relying on their businesses for personal success is banking on a sale price down the road. “I know entrepreneurs that have based their retirement plans on the current value of their business. The problem is, 10 years from now when they plan to sell, no one might be willing to purchase it for that price. It’s important to create a strategy that doesn’t rely on such variables.” Adams shared.

Loving your business is great. It’s natural for founders to believe that their ventures are also worthy of personal investment, but startups are risky and markets are volatile by nature, so you shouldn’t just rely on your ventures for retirement funding.

4. Mistakes in Calculating Net Worth

So much of getting a business started is pitching to the right people and selling the value of a venture. It’s not uncommon for entrepreneurs to present the best version of things in order to get people on board. Unfortunately when it comes to self-valuation things get a little tricky.

Often entrepreneurs simply calculate the most current value of the business and use that as a baseline for their own net worth. Adams shares that “There’s a difference between your personal balance sheet and that of your business. Entrepreneurs who are new to financial management also make the mistake of including the wrong assets in their calculations.

Vehicles, homes and similar assets have real value, but they shouldn’t make it into your net worth calculations unless you plan on selling them soon and not replacing them.”

Measuring your net worth is a critical part of your financial strategy because it helps you determine what investments you need to make to plan for retirement. An inaccurate assessment of your current worth may lead to shortfalls down the line.

5. Don’t Make Commitments Without Having Them in Your Existing Plans

Adams shared “I can’t tell you how many entrepreneurs get themselves into trouble by committing to things without including them in their financial strategy. Expenses like vehicles, college tuition or a better house are easy to aspire to or promise, but planning for them is a whole different game. Whenever you want to commit to something in the future for you or your family, start including it in today’s plans.

The key is having the patience to incorporate these goals as a part of your long-term strategy. It also requires a degree of self-awareness and self-control. You have to be able to realize a want or a desire and postpone it until you can assess its impact.

So to recap, Adams recommends that you:

  1. Plan your legacy before you plan your retirement,
  2. Plan what your retirement withdrawals will be based on both the kind of assets you have and the lifestyle you plan on living,
  3. Don’t base your retirement on the future sale price of your ventures,
  4. Accurately measure your net worth to help determine what’s needed to accomplish your retirement goals,
  5. Don’t commit to expenses before including them in your strategy.

Many leaders and founders spend more time managing the success of their business than their own finances. The fact of the matter is you’ve worked hard to achieve the success you’ve earned, so you owe it to yourself to manage it well.

Simple Money Management Tips for Your Personal Finances

The best financial advice tends to apply to pretty much everyone. You don’t need a spreadsheet of pros and cons and complex scenarios. What you need is a rule of thumb.

There’s no shame in using one-size-fits-all advice. A study of West Point cadets, for example, found teaching rules of thumb was at least as effective as standard personal finance training in increasing students’ knowledge and confidence as well as their willingness to take financial risks. Researchers found money rules of thumb were more effective than teaching accounting principles to small business owners in the Dominican Republic.

Here are a dozen shamelessly simple money rules of thumb I’ve collected over the years. (These address how you borrow and save. If you just want to know how you’re doing with money, we’ve got a quick way to score your financial health, too.)

Personal Money Management Tips

1. Build Up Emergency Savings

You need to be able to get your hands on cash or credit equal to three months’ worth of expenses. The classic emergency fund advice — that you need three to six months of expenses saved — is great, but it can take years to save that much and you have other more important priorities (see “retirement,” below). While you build up your cash stash, make sure you have a Plan B for a true emergency. That could be money in a Roth IRA (you can pull out your contributions at any time without paying taxes or penalties), space on your credit cards or an unused home equity line of credit.

2. Save 15 Percent for Retirement

If you got a late start or want to retire early, you may need to save more. Run the numbers on your retirement plan. For most people, 15 percent including any company match is a good place to start. Even if you can’t save as much as you should, start somewhere and kick up your savings rate regularly. Retirement should be your top financial priority. You can’t get back lost company matches, lost tax breaks and the lost years when your money isn’t earning tax-deferred returns.

3. And Don’t Touch that Money

Leave retirement money for retirement. When your retirement fund is small, you may feel like spending it doesn’t really matter. It does. Taxes and penalties will cost you at least 25 percent and likely more of what you withdraw. Plus, every $1 you take out costs you $10 to $20 in lost future retirement income. Once your retirement fund is larger, it may be easy to convince yourself there are good reasons to borrow or withdraw the money. There really aren’t. Leave the money alone so it’s there when you need it.

4. Save for College

Get in the habit of putting at least $25 a month aside for college as soon as your child is born. Even small contributions to a 529 college savings plan can add up over time — perhaps the difference between choosing the best school and choosing a school based on its financial aid package. (But if you have to choose, retirement saving is more important. Your kids can always get student loans, but as you’ve probably heard, no one will lend you money for retirement.)

5. Plan and Manage Your Student Loans

Your total borrowing shouldn’t exceed what you expect to make your first year out of school. At today’s interest rates, this will ensure that you can pay off what you owe within 10 years while keeping payments below 10 percent of your income, which is considered an affordable repayment rate. What if you didn’t limit your borrowing and are now struggling? You have options.

6. Cars: Buy Used and Drive It for 10 Years

New cars are lovely, but they’re expensive and lose an astonishing amount of value in their first two years. Let someone else pay for that depreciation and take advantage of the fact that today’s better-built cars can run well for at least a decade if properly maintained. You can save hundreds of thousands of dollars over your driving lifetime this way.

7. Car Loans: Use the 20/4/10 Rule

Ideally, you wouldn’t borrow money to buy an asset that loses value, but you may not always be able to pay cash for a car. If you can’t, protect yourself from overspending by putting 20 percent down, limit the loan to four years and cap your monthly payment at no more than 10 percent of your gross income. A big down payment keeps you from being “underwater,” or owing more on the car than it’s worth, as soon as you drive off the lot. Limiting the length of the loan helps you build equity faster and reduces the overall interest you pay. Finally, capping the size of the payments prevents your car from eating your budget.

8. Make Credit Cards Work for You

If you carry a balance, look for a low-rate card so you can pay off your debt faster and don’t mess with rewards cards right now. If you pay in full each month (as you should), find a rewards card that returns at least 1.5 percent of what you spend. You should regularly review your rewards programs to make sure you’re getting enough value from them. The programs can change, as can your spending and the way you use rewards. (For a “lazy optimizer” approach, check out “Sean Talks Credit: How I Maximize My Rewards with Only a Few Credit Cards.”)

9. Square Away Your Insurance

Cover yourself for catastrophic expenses, not the stuff you can pay out of pocket. Insurance should protect you against the big things — unexpected expenses that could wipe you out financially, such as your home burning down or a car accident that triggers a lawsuit. You want high limits on your policies — and high deductibles, too. Small claims don’t make financial sense in the long run. You may gain some small insurance payments, but you risk a rate increase that could more than cancel out your gains.

10. Choose a Reasonable Mortgage Amount

If you can’t afford the payment on a 30-year, fixed-rate mortgage, you can’t afford the house. You may be able to save money by using another kind of mortgage, such as a hybrid loan that offers a lower initial rate. But if you’re using an alternative loan because that’s the only way you can buy the home you want, you may have set your sights too high. A budget-busting mortgage puts you at risk of spiraling into ever-deeper debt, especially when you add in all the other costs of home ownership.

11. Choose the Right Mortgage Rate

Fix the rate for at least as long as you plan to be in the home. Plans can change, obviously, but you don’t want a big payment jump to force you out of a home you hoped to live in for years to come. If you’re pretty sure you’ll be moving in five years, a five-year hybrid could be a good option. If you think you may stay for 10 years or more, though, consider opting for the certainty of a 30-year fixed rate. (Compare rates on different types of mortgages.)

12. Back-burner Those Mortgage Prepayments

You have better things to do with your money than prepay a low-rate, potentially tax-deductible mortgage. Shaving years off your mortgage and saving money on interest sounds great. But before you consider making extra payments to reduce your mortgage principal, make sure more important priorities are covered. You should be saving enough for retirement. You should have paid off all other debt, since most other loans have higher rates and the interest isn’t deductible. It would be smart to have that emergency fund built up as well and to be adequately insured. If you’ve covered all of those bases and still want to pay down your mortgage, have at it.

Financial Tech’s Disruption

“My six-month-old baby daughter is probably going to open her first bank account, not with an HSBC or a JP Morgan, but rather with a Facebook or Apple.” Financial technology (fintech) aficionado Henri Arslanian believes that in the future, banks will be obsolete.

Instead, people will turn exclusively to solutions such as Facebook or Amazon for their financial needs. He reasons that people are willing to trust Facebook with pictures of their children. And they trust Amazon to provide their daily essentials. It follows that there’s no reason why people wouldn’t also trust these companies to be in charge of their money.

Users are, in fact, already starting to do so since they can now send each other money through Facebook Messenger. This is just one example of how technology is upending the world of finance.

Financial tech changes such as cryptocurrencies are far removed from the lives of the average person. They are little understood at this point. But others are impacting our access to goods and services in our day-to-day lives. As they are doing so, the impact of fintech on business is bringing about some very real benefits, especially to small businesses.

Out of a Crisis, Fintech

As you might expect from its dependence on technology, fintech is a relatively new industry. Arslanian defines it as “the innovative use of technology in the design and delivery of financial services.” Put another way, when advances in technology start changing the way we handle financial transactions, we can call that fintech.

Fintech emerged to fill a gap. In 2008, banks were consumed with dealing with the fallout from the recession. They were unable to adapt their services to advances in technology and to people’s changing expectations. But technology progressed whether they were able to keep up with it or not.

Smartphones became ubiquitous. Consumers increasingly expect to be able to manage any aspect of their lives on their portable devices. This includes work, dating relationships, transportation (Uber), and finances. Fintech arose to meet a need the banks were simply not meeting.

The Impact of Fintech on Business

Breaking Boundaries in Business

The cryptocurrency bitcoin is an example of a fintech development that probably doesn’t affect the lives of most people — at least not yet. Created in 2008, bitcoin is entirely digital. No banks or government agencies regulate it, making it potentially groundbreaking for the world of finance.

While most people have probably heard of bitcoin by now, the average man or woman likely has no experience with it and does not really understand what it is.

Increased Mobility

But many of us have now made payments through Square, a company that enables the processing of credit cards through mobile. Companies are no longer restricted by location.

Credit and debit card payments are no longer limited to one machine that needs to be hooked up in one place. Now business owners can sell their wares anywhere they want to, whether across the world or in a local market.

Decreased Red Tape

Another advantage financial tech is providing for entrepreneurs is that it is making it easier for them to fund their businesses. Traditionally, startups had to turn to banks if they wanted loans. But now, through fintech, startups have other options, such as peer-to-peer lending.

Arguably one of the “greatest innovations to come out of the fintech movement, ” peer-to-peer lending is when many lenders contribute a portion of the money to a particular loan. To receive the loan, the business simply pays a monthly premium to the lending platform.

Fintech makes it possible for entrepreneurs to get funding much more simply. They no longer need to go through all the steps required to apply for a loan at a bank (during which a business might get rejected).

Crowdfunding (when a group of people donates money to a particular cause) is another new option for businesses looking for funding apart from a bank. While you do have to pay fees to benefit from crowdfunding, you also don’t have to pay the money back like you do with a loan. Kickstarter and IndieGogo are well-known examples of crowdfunding platforms.

Of course, these solutions are not magic bullets. For example, you can’t decide to crowdfund and then expect people to dump money on you, making your business a success. It’s important to have a strategy for your enterprise. But fintech is nevertheless opening doors that have previously been closed to startups.

Cause for Debate

As you might expect, uncertainty surrounds the fintech industry. Bitcoin is unprecedented both because it is digital and because it is controlled by users — not banks or governments. But it wasn’t long ago some were arguing bitcoin had already failed. This debate was the subject of an article from The Economist two years back.

It also doesn’t help that for much of its history, bitcoin has been associated with illicit activities, such as purchasing drugs on Silk Road, a former online black market. Yet bitcoin has gained legitimacy over time, particularly as investors have taken interest in it.

In the past several months, bitcoin’s worth has risen dramatically. On May 20, 2017, the price of bitcoin passed a record-breaking $2000.

Could financial technology make banks entirely obsolete? What could happen is that banks will adapt, possibly partnering with fintech companies to meet the needs of their customers.

Even though it failed pretty quickly, a partnership of Wells Fargo and Amazon to offer discounted student loans would be an example of such an adaptation. As one writer points out, “The argument towards fintech being perceived as a disruptor is largely due to the fact that fintech start-ups have the freedom to be a lot more nimble.”

Yes, fintech is filling the gaps left by the banks. But it is quite possible that financial institutions, which have the advantages of greater resources and a longer history, could wise up and take advantage of the innovations fintech is offering.

If they don’t, they are almost certain to become artifacts.

Future of Financial Tech

In his Afterword to Neuromancer, sci-fi author William Gibson wrote, “The future, whatever else it may be, is always infinitely, flagrantly, more peculiarly strange than the products of our imagination.”

It is hard to predict what the future of fintech will look like. But there is no doubt that it is already having a significant impact on our monetary transactions. As a result, it cannot help but affect the opportunities available to small businesses.