Starting a Business to Achieve Financial Independence

This week, I’m sharing with you my thoughts on achieving financial independence. I believe that is is absolutely possible to attain the goal of financial independence, whatever that means to you as a Baby Boomer. And it’s never too late to start working on that goal.

Yesterday, I talked about Step One: Don’t Spend all the Money (DSATM). The first step is necessary, so you can have enough money to move on to Step 2: Starting a Business.

What Kind of Business? First, let me explain what I mean about a “business.” The business can be anything that provides you an income and that will allow you to deduct the expenses you had while gaining that income. The business can be full-time or part-time.  And the term “business” can include:

• Owning and renting property
• Becoming a coach or consultant
• Working as in independent contractor or contract worker from home
• Farming (including raising organic produce and free range animals)
• Having a stable or kennel and breeding pets for sale
• Creating crafts and selling them, either on Etsy, the Internet, or flea markets/craft fairs
• Internet sales
• A small manufacturing or distributor business
• A retail store or restaurant
• Operating a franchise….

The list goes on and on, but you get the idea.  Starting a business is an important step in your quest for financial independence. Having set yourself a goal of DSATM, you will have money to spend. You can put that money in some nice, safe investments, but consider the benefits of investing some of that money in a business.

Here are three reasons to start a business:

Reason One to Start a Business:  To Follow Your Passion
Maybe you have been sitting in a job with a company for many years and suddenly you wake up and you realize you don’t really enjoy what you are doing.  My husband is a good example; he worked at a big company for over 27 years, and finally decided that was enough.

You may have a hobby you’ve been pursuing for some time, and you decide you want to do it full-time.  Or maybe you’ve run across an idea you can turn into a business, or you’ve found a franchise opportunity that looks good.  Whatever it is, you should be passionate about it.  If you are going to be doing it for a long time – years – it had better be something that makes you wake up excited to go do it.  If it’s not your passion, it’s just work.

Reason Two to Start a Business: To Make Money
I don’t know any business people who went into business just to have fun and follow their passion.  We all need money to live on, and in this case, we need money to achieve our dreams of financial independence. So, you need a business that will generate some money. It doesn’t have to be a lot – depends on how much you need to achieve your financial goals.  But, if you want to breed Shetland Sheepdogs, you need to sell them for enough money to pay your bills and keep a little for yourself.

Reason Three to Start a Business: To Deduct Your Expenses
Here is the key reason why owning a business is better than working for an employer – you can take a tax deduction on your business expenses.  This means you can lower your tax bill and save money, putting some aside to use for you financial goals.  Here are some examples:

• If you love quilting (that’s me, by the way!), find a way to create a product or service that you can sell to quilters. Or sell your quilting to craft shops.  Keep track of your expenses.  At the end of the year, tally up your income and expenses.  If your income is less than your expenses, you can reduce your income tax by that much.  But this isn’t just a hobby, so you want to make money.  You want your income to exceed your expenses.  (The IRS has strict rules about “hobby losses.”)
• You decide to leave your management job and do consulting. You sign up with CoachU and become a coach.  Your expenses in learning how to be a coach, and in setting up your business can be deducted from your income.
• You have always wanted to own a bookstore.  You decide to look into a franchise, like Little Professor or Lemstone Christian Bookstores.  You do your homework and find a business loan and get started.  You abilitiy to deduct your expenses can put you on the road to financial independence.

No, I’m not saying it will be easy.  You will have to prepare a business plan, find financing (unless you can find the business on your own), and do all the startup stuff to get going.  But nothing good was ever achieved without hard work.  And you have that goal of financial independence in your sights.

So, now you have embraced the principle of DSATM, and you are saving money and putting some into a business to save on taxes and generate more income.  Now, what?  Tomorrow, Step 3:  What To Do With the Money.