From the course: Consulting Professional Weekly Tips

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Saving for your future in the USA

Saving for your future in the USA

From the course: Consulting Professional Weekly Tips

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Saving for your future in the USA

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- Unlike a corporate job, a retirement plan isn't automatic when you run your own consulting firm. That said, there are many savings vehicles out there like individual 401(k)s and other accounts geared toward entrepreneurs. Learn what they are, set one up, and contribute regularly. A common one is the individual 401(k). The rules currently allow you to contribute about $18,000 a year plus 25% of the net income of your business up to a total cap of $54,000. That's a lot of money to grow tax-deferred. Check with your accountant or financial advisor to see what you might be eligible for. Also, build a solid cash cushion. When a consulting engagement ends, it's not always clear when the next paycheck is going to come in. Have sufficient reserves to get you through those thin times and invest when you're above that reserve threshold. I personally keep four months of cash on hand and invest anything above that amount. There's no big company out there looking out for you. You've got to take…

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