Money: Looking Ahead and Planning the Future

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Last month, we talked about dollars and sense for the consultant or rather, dollars and common sense, with a bent toward what to do right now. This month, we’ll talk about the future. Consultants — and above all, tech consultants — tend to live in the moment, pulled in a thousand directions by a wayward schedule, a BlackBerry that won’t stop beeping and the incessant demands of clients who do not understand that a two-minute e-mail outage is not a scandal.

All that is reason enough for stress. But it’s not a reason to put off planning for tomorrow, much less 30 years from now. You don’t want to work forever, do you?

Start a Rainy Day Fund
Murphy (of the eponymous law) was, in my opinion, a man of sunny disposition. Not only will things go wrong, they’ll go wrong at least twice, at the worst possible moment and when you’re already near your breaking point. Having been caught without a rainy day fund myself, I can assure you that you’ll need one at some point in your career. You can lose a major client. You can lose a house full of equipment. You can get sick. (Even with good health insurance, you’ll need copious cash.) The point is simple: Life’s emergencies demand money.

A six months’ supply is good. A year is better if you can swing it. Just tote up your monthly budget and multiply by six or 12 (and be sure to use real numbers based on historical data, not top-of-the-head projections that turn out to be optimistic).

Why six months? Mostly so you can sleep at night. But remember that the average job search (should you go that route) takes three to four months, according to experts. And the average sales cycle on a technology project can run from two days to two years. You’ll need time to raise money if disaster strikes, and disasters, by their nature, tend not to be patient.

How do you save the money? With discipline. If you’ve got something left over after you’ve paid your bills, put a portion of your after-tax dollars into a savings account before you spend it on movies, the iPhone or that trip to Tahiti. It’s a small act of discipline that will pay dividends for a lifetime.

Plan for Retirement
As a consultant, you don’t have the luxury of a monthly matching contribution to a 401(k) and other retirement perks. But that doesn’t mean you can’t have the benefits of the full-time employed.

There are all kinds of tax-free or tax-deferred retirement plans for the self-employed, from simplified employee pensions (SEPs) to Keoghs to solo 401(k)s to Roth IRAs. If your spouse has a retirement plan at work and you don’t, the government also has ways for you to stash away money and earn tax benefits.

Of course, none of these are easy to figure out on your own, which leads us directly to the next piece of advice, and it’s a good one.

Get Help
An accountant is not cheap — at least, not a good one. But not having an accountant sometimes can be more expensive than having one. A qualified accountant can keep you from costly errors on tax returns, major investments and long-term financial planning. He or she can funnel your dollars into the best investments and help you attach hard and fast numbers (a dollar sign, if you will) to your dreams. Whether it’s a home in St. Moritz or a new car, every expectation has its price.

If you can’t afford an accountant — and bear in mind that a vast number of consultants can’t, most often when starting out and merely trying to pay the rent — then you can still educate yourself. The Web is replete with money gurus, advice sites and a gold mine of free information. Stick with well-known, widely trusted names (The Motley Fool, Kiplinger, SmartMoney and Fidelity come to mind, although they’re by no means the only games in town) to avoid bad or shady advice.

And don’t be cowed by money’s foreign language. The mysteries of amortization, Class A shares, yields and even such exotic terms as “dead cat bounce” (the way a stock that’s hit bottom tends to bounce up briefly) will become clear with a bit of study.

So what are you waiting for? It’s time to get started. After all, 30 years can go by at Internet speed. David Garrett is a Web designer and former IT director, as well as the author of “Herding Chickens: Innovative Techniques in Project Management.” He can be reached at editor (at) certmag (dot) com.

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