Tuesday, June 23, 2015
Should I Use My 401K to Start A Business?
June 23, 2015
I am currently living on my 401K money. I was laid off and is waiting on my unemployment benefits. I do have the option of moving back in with my parents because their health is deteriorating. Many of my friends used their 401K to start a business but they said they wasted a lot of these funds. I am thinking about using my 401K to start a business so what advice would you give me? Living Off 401K, Oklahoma
Dear Living Off 401K:
First of all you want to make sure you pay only your necessary bills such as your rent/mortgage, food, and utilities with your 401K. Don’t pay off credit cards or other expenses with your 401K.
Many people who get laid off, live off their 401K money for a year then run out and get a minimum wage job, which is crazy. Remember this money is only going to last you so long so you should not use it as an ATM machine. It should be your goal to make this money last as long as possible while you are building and growing your business.
When your unemployment benefits are approved, use these funds instead to start a business or try to get another job – even if it is part-time and use those funds to fund your business.
Most business owners underestimate the time it will take for them to start receiving money in a business. Sometimes it might take anywhere from 2 to 3 years to make money in certain businesses so you certainly want to conduct the proper research and be prepared.
That’s why it’s a good idea to work with people smarter than you – such as coaches and consultants. They will help you save some of your money by helping you avoid many financial mistakes that most new business owners make.
To learn more about how business works read “How To Take Control of Your Own Life: A Self-Help Guide To Starting Your Own Business” (Series 2) – which is available as an e-book and paperback.