Discipline & Daring

Strategies for maximizing financial growth

Money. We could all use a little more of it and we never think we have enough. When it comes to maximizing financial growth over the course of a career, it takes a mix of discipline and daring in the right areas. Many people fall into the trap of making more expensive purchases as their income increases. That’s not necessarily a bad thing, unless you’re living beyond your means, but you may feel the pain come retirement time. On the business side of the income equation, maximizing financial growth requires a comprehensive strategy, one you evaluate and adjust periodically to get just right. In the personal and business spheres, here are strategies to bring the most in while limiting unnecessary expenditures.

Personal Financial Growth

In the back of our minds, we know we’re not going to be able to live or work forever. But without a firm action plan, it’s easy to put off saving for the future when there’s so much to worry about in the present. Soon enough, retirement rears its head, and if you’re not careful, you might realize too late that you don’t have enough money saved to rest comfortably.

Following the 50-30-20 principle (spending 50% of income on necessities, 30% on discretionary purchases, and saving the other 20%) builds a solid foundation for the future and takes advantage of compound interest and favorable rates. It’s a good idea to have a personal retirement fund apart from your pension or 401(k). After you max out your retirement accounts – the limit in 2024 is $23,000 for a 401(k) and $7,000 for an IRA – this fund can offer a bit more freedom to customize your long-term goals. You can make investments with more flexibility than more rigid accounts that punish early withdrawals.

What you invest in should change as you move through your career. At the outset, young investors can be freer to put their money into things that carry short-term risk but have big long-term potential.

“I’d invest in low-cost S&P 500 index funds and ETFs. This is the low-cost way to compound capital over a long period of time at relatively attractive rates of return,” Brown Brothers Harriman equity analyst Sid Arora advises.

Someone who invested $10,000 in the S&P 500 two decades ago and did nothing else with it would have $70,000 today, 1818 Partners equity analyst Miles Petrie told the BBH blog.

“While equities are more volatile than fixed income, if you are investing for the long term, you have the ability to ride out short-term volatility to, in principle, benefit from potentially higher levels of return on taking that risk,” he said.

As you get older and your capacity for risk lessens, bonds, fixed annuities, CDs, and utility and dividend stocks become better high-return bets. As ever, diversification is key to minimizing risk.

“The biggest mistake that I see risk-averse investors make is not having a properly allocated portfolio,” John Jones, investment advisor representative at Heritage Financial, told U.S. News. “There’s a sweet spot in an investor’s portfolio where you can preserve a portion of the portfolio against market fluctuation, and then stress and worry is not induced.”

A counterpart to money, worry is one thing we all have too much of and could use a little less.

Maximizing Business Growth

For entrepreneurs looking to maximize their businesses’ financial growth, the circumstances are a bit different, but the principles remain the same. There are some occasions when not spending money is the right decision. There are others where cutting costs in the short term ends up hurting in the long run. Some risks are worth taking.

First and foremost, maximizing financial growth for your business means having something of quality to offer, excellent service, and loyal customers. Take care of the first two and the last one takes care of itself. You have to know what your customers want and prioritize their needs, offering them something nobody else does. That’s the bedrock of a successful business.

“That’s exactly what the founder of every company did,” AIM Institute founder and president Dan Adams told BOSS. “They drove organic growth by figuring out what their customers wanted and doing something that others were not doing.”

While that will drive long-term revenue, that doesn’t mean you can just sit back and wait for the money to come in. You need a strategic plan, which means you need to make time for it. That plan has to be informed by data. What operating expenses have been showing little to no return? Labor may be a big expense, but would it be more costly to risk burning out your employees by overloading them? If your most productive workers leave, what’s the cost of replacing them? Where might it make sense to invest in automation that makes everybody a little more productive and frees up brain power for big ideas?

When those or other investment opportunities come up, you need to have the cash on hand to take advantage. Having a single integrated platform for finances can make all the difference. Often, businesses are hamstrung by not having clear insight into their cash flow.

“They have a separate place for the money that goes out of their business, the money that comes into their business, and the cash,” Brett Sussman, head of marketing & sales for American Express Business Blueprint & Banking, told BOSS.

To really maximize your business’ financial growth, you have to reassess periodically. That might mean taking a couple days at the end of every quarter to evaluate what is paying off and what isn’t. Just like with personal financial growth, setting concrete goals makes you more likely to achieve them. Learn and adapt, and you’ll get the most out life, financially and otherwise.