Congratulations on deciding to start a business to become a family daycare!

Congratulations on deciding to start a business to become a family daycare! You are among a special group of individuals who have chosen the profession of caring for young children.  Getting Started in the Business of Family Daycare is important.  You have chosen this work because you love children. You also now have an opportunity to earn money to help support your family. Each year thousands of providers have successfully set up their businesses, and we welcome you to this caring profession.  Thank You for caring.

This post introduces important topics that every family childcare provider needs to know about to run a successful business.

Introduction: How Do You Begin?

1. Start by Promoting Your Business
2. Create a Contract and Operating Policies
3. Begin Keeping Records
4. Reduce the Risks of Your Business
5. Manage Your Money & Plan for Retirement

How to Manage Your Money and Plan for Retirement

Learning to manage your business money is a vital skill. You need at least 70% of your current income when you decide to retire to maintain your current standard of living. Social Security will generate less than half of this amount. It’s important to save money through your own retirement investments and you can on average expect to live approximately one-fourth of your life while in retirement. Good planning ahead will make a difference.

• Start Educating yourself about money. Two excellent books are Personal Finance for Dummies, by Eric Tyson, and Making the Most of Your Money, by Jane Bryant Quinn. You may also be able to learn more by attending classes and workshops in your local community.
• It’s important to know what you spend your money on. For at least two months, begin tracking every dollar your family spends. Put your spending expenses in categories under two headings: fixed expenses and flexible expenses. Examples of fixed expenses include your mortgage, utilities, insurance, and any loans. Flexible expenses include food, clothing, entertainment, vacations, and so on. To make savings a top priority, set aside a savings amount at the beginning of the month as a fixed expense. Try cutting something under flexible spending if you are going to be short at the end of the month.
• Pay off all credit card debt. If you can’t afford to fully pay off credit card bills at the end of each month, this is a sign of overspending. The money saved from paying interest on credit cards can be used towards your retirement.
• Pay cash for all purchases. The only exceptions to this rule are the purchase of a house, home improvements, and a college education. Even try to set aside any extra money each month in a car replacement fund so that you may be able to make a larger down payment on your next car.
• Start saving in small amounts. Some providers set aside the amount of a payment for one child as their retirement savings.
• Remember Time is money. The sooner you begin saving the better. This example illustrates good point. Tracy and Joe are twins. Susan starts saving for her retirement at age 35. She saves $2,000 a year for ten years and earns 8% interest each year. At age 65 she will have $151,000. Joe waits to start saving until he is age 45. He saves $2,000 a year for 20 years and earns 8% interest each year. At age 65 he will have $99,000. Although he saved twice as much money as his sister Tracy, he has a third less money because he waited 10 more years before he started to begin saving.
• Purchase insurance needed to protect yourself against any major disaster.
• Planning for retirement is a long-term goal. Before making long-term goals, make sure you have a plan to meet your short-term goals (one to five years). Short-terms goals can include buying a car, making a down payment on a house, and so on.
• Set up a plan to meet your regular monthly expenses if you become disabled or are out of work for three to six months. You don’t want a short-term emergency to wipe out all your retirement savings.
• Target at least 10% of your net income (income minus business expenses) for retirement savings. If you are over 40 years old, then 20% is better if you can afford it!
• Don’t wait until the end of the year to put money into your retirement account. Start investing a small amount each month.
• If you don’t know where to invest your money, put your retirement savings into a money market account. This is a safe starting point and then start educating yourself and get advice about where to put your money. Don’t ever invest in stocks or bonds until you understand their risks and rewards.
• Depending on your household and business income, you may be eligible to participate in several retirement plans. These include a Traditional IRA, Roth IRA, SIMPLE IRA and others.

Saving money and planning for retirement is not simple. But you can educate yourself about all your finances. By doing so, you will have more control over your financial future. For more information google the Internet on Money Management and Retirement planning. Visit Pooh Bear’s Daycare again soon…we’ll be looking out for you.