Should I Cash Out My 401K to Fund My Business?
In the early stages of business, it’s often hard to define where your business finances start, and your personal finances end.
This kind of situation starts out innocently enough.
Maybe you book tickets to business conferences, set up software subscriptions, and furnish your office space, all with your personal credit card.
Perhaps you have a few rough months income-wise and have to use your savings to fund payroll along with a backlog of ongoing expenses.
But then maybe you come up against some unexpected costs and go to your savings account, only to realize there’s nothing left and you’ve backed yourself into a financial corner.
Of course, you immediately reach for your credit card, but you remember you’ve maxed that out on all your day-to-day living expenses.
What would you do?
Plenty of people have found themselves in desperate situations like this, and have found themselves considering equally desperate actions.
That’s why in this week’s video, I’m answering the question:
“Should I cash out my 401K to fund my business?”
As someone who takes risks day in, day out, you may be really surprised to hear my answer to this question.
Watch it now!
Prefer to listen? Click here:
ARE YOU WILLING TO RISK EVERYTHING?
Over the years I've seen entrepreneurs take drastic measures to fund their business. While it's tempting to take any financial reserves you have and put it into the health of your business, I always advise business owners to never leverage their personal financial security for the benefit of their business. I'm Kelly Keenan Trumpbour, angel investor and venture capitalist. Today I'm going to talk to you about why you should never sacrifice your own financial security for the benefit of your business.
Here's the thing about drawing on your own personal financial security. Unless you know that you play well under extreme pressure, it's not going to serve you in the long run to always be wondering if you're going to be okay from month to month. It's hard enough as an entrepreneur to give up a steady paycheck, but do you want to really abandon your safety net for if something drastic happens in your life?
Too often I see that do or die pressure hurts a business mindset more than it helps it. Sometimes people think it's the opposite, but it's very hard for entrepreneurs to concentrate on their business when everything is up in the air in their personal financial security.
Think about it. How can your business actually succeed if you don't have a sense of stability? You're the person running the show. If that business is dependent upon you being balanced and able to encounter any problem with a clear head, having financial worries is just going to make it that much harder.
Are there success stories where you hear about people drawing out their savings and making a go of it in a way that's a huge win? Of course there are, but they're the exception. You really have to know yourself and know what's best for you. At the end of the day, you have to provide for your basic needs, and having some sort of cushion is good when you go into creating a business not knowing where it's headed.
Resist the temptation to overdraw on your personal accounts. I know it's hard, and businesses take a lot of money. While there's success stories of people using everything they've got to fuel a business and making a go of it, that's the expectation and not the rule. What I've seen more often than not is that it's in the best interests of the business owner to give themselves safety and a sense of security so they can just do the job well and know what's right for them and their company.
Unless you know in your gut that you thrive under that kind of pressure, you're not going to be able to convince anyone that your business is staying together. How daring do you want to be in growing your business? Head over to seejaneinvest.com/riskpersonality and take the free quiz, or follow the links to find out where your risk comfort zone really exists.
Until next week,
Miss last week’s post? Check it out here: 7 Ways to Fund Your Business Growth.