OPEN THESE 5 ACCOUNTS:
- Personal Checking Account
- Business Checking Account
- Emergency Savings Account (for rainy days)
- General Savings Account (for long-term goals)
- SEP IRA
- (Optional) 529 Plan
- (Optional) Additional Investment Account
FIRST UP, THE CHECKING ACCOUNTChecking is often the first—and for some, the only—account that people open. This makes sense when you are first starting out, but once a solid financial infrastructure is built your checking account will actually be more of a “leftover” bucket—what remains after paying bills and allocating money to your savings accounts.
BUSINESS CHECKING ACCOUNT
EMERGENCY SAVINGS ACCOUNT
SAVINGS ACCOUNT FOR EVERYTHING ELSE
A SEP IRA is a type of traditional IRA for self-employed individuals or small business owners. (SEP stands for Simplified Employee Pension.) The equivalent for someone in corporate America is a 401(k). Any business owner with one or more employees, or anyone with freelance income, can open a SEP IRA. Contributions, which are tax-deductible for the business or individual, go into a traditional IRA held in the employee's name. Employees of the business cannot contribute - the employer does. Like a traditional IRA, the money in a SEP IRA is not taxable until withdrawal.
One of the key advantages of a SEP IRA over a traditional or Roth IRA is the elevated contribution limit. For 2020 business owners can contribute up to 25% of your net self-employment earnings or $57,000, whichever is less. DO NOT OVERLOOK THE SEP. This is the perfect retirement vehicle for the self-employed cosmetologist or barber. ;)