03/01/2012 06:45 am ET Updated Apr 30, 2012

Five Ways Women Entrepreneurs Can Get a Financial Life

I was honored to speak at the recent White House Urban Economic Forum for women entrepreneurs at Barnard College in New York. Surrounded by inspiring leaders like Valerie Jarrett (senior advisor to President Obama), Arianna Huffington (needs no introduction here), and Reshma Saujani (deputy advocate in the Office of New York City Public Advocate Bill de Blasio, and the organizer behind this wonderful event), and introduced to remarkable new faces like Janet Hanson (founder and CEO of 85 Broads) and Vera Moofre (president and CEO of Vera Moore Cosmetics -- she brought the house down!), it was easy to see why our country and economy would thrive with more women entrepreneurs.

But first we need more women to become entrepreneurs. According to the Kauffman Foundation, the number of start-ups reached its peak in 2010 with nearly 7 million new businesses launching, up from 4.7 million a decade earlier. But women are underrepresented, making up the "16-percent ghetto" of total entrepreneurs, said Debora Spar, president of Barnard, in her opening speech. On top of that, the wage gap persists: Women business owners make only 55 percent of what men make, and their businesses account for only 11 percent of all startup sales, pointed out Tina Tchen, executive director of the White House Council on Women and Girls.

Despite the odds stacked against them, the women at the event were courageous and determined -- especially at the workshop where I participated, "Second Acts & Comebacks," about women who have embraced later-in-life entrepreneurial success. In preparation for the panel, I called a few entrepreneur friends. One started a wildly successful clothing shop and had no retirement savings. Another served as president of a major fashion house, then opened her own thriving business, yet when asked about her retirement plan, she had to ask her husband. A third woman raided her 401(k) to fund a financial planning firm and her kids' college tuition; now she's 54, divorced, and has no retirement funds.

Their stories reminded me that although many women have second acts in work or love, most of us don't get second acts in our financial lives until it's too late. That's especially important for entrepreneurs, who are ambitious risk-takers -- which I love! -- but have fewer safety nets than traditional employees. Now is the time to get on track. Here's my list of five things women entrepreneurs must do to take care of themselves financially.

1. You must have health insurance.

This is non-negotiable: If you can't afford health insurance, you can't afford to go into business. Health insurance protects you in case you have a serious accident or illness. Without it, you could bankrupt yourself or your family. Self-employed folks (sans employees) can join a professional group, which lets folks purchase insurance at a group rate. Check with your local Chamber of Commerce, the Small Business Service Bureau, or the National Association for the Self-Employed. Or shop around for a low-premium, high-deductible policy that covers catastrophes at Business owners who have employees can set up a small business group plan. For help, try the National Association of Insurance Commissioners. If you have a pre-existing condition that makes it hard to get traditional insurance, take advantage of affordable PCIPs (pre-existing condition insurance plans). Visit to see the rules in your state. Lastly, look forward to 2014, when President Obama's Affordable Care Act will let individuals and small businesses access affordable healthcare through a competitive marketplace called an exchange.

2. Save for retirement.

When starting your business, it may be tempting to dip into your biggest pool of cash, which is often your 401(k) from your last job. My advice: Don't do it. You can borrow for your business, but you can't borrow for retirement. On top of that, you must keep saving. To estimate how much you need to save, use Choose to Save's Ballpark E$timate calculator. Don't let the number freak you out -- use it as motivation. Luckily, there are many retirement plans available to small business owners. Whether you're fully self-employed or working a day job on the side with a 401(k), consider opening an IRA. Roth or traditional IRAs let you stash up to $5,000/year. But small business owners should consider a SEP-IRA, which lets you contribute up to $49,000/year and grows tax-deferred. The catch: A SEP-IRA can get costly if you have employees, since you have to contribute to their accounts, too. You can make an IRA contribution for the tax year 2011 by April 15, 2012, so look into all the options, consult a CPA, and figure out which plan is best for you. But whatever you do, save.

3. Borrow wisely.

There's no shame in borrowing money to get your business off the ground, but do so in a way that protects your credit. Start by checking your credit score at -- this number will predict your eligibility and how much you'll pay for a loan. When borrowing, shop around for the lowest interest rate. If you can, avoid using your home as collateral or relying on high-interest credit cards. Instead, look to bank loans, which currently boast low interest rates (but can be hard to get). At the bank, ask about Small Business Administration (SBA) loans -- a record $30 billion in SBA loans were issued last year. To get started, fill out a short survey to see which SBA loans are right for you. And keep an eye out for Startup America, a White House initiative with several programs to help entrepreneurs secure loans and find mentors. It certainly indicates the Obama administration's energy and attention to the needs of small business owners.

4. Pay quarterly taxes.

The companies that pay you probably won't withhold taxes, so checks will seem bigger than they are. To avoid writing an overwhelming check to the IRS once a year, pay estimated taxes quarterly. And make sure you pay enough self-employment tax, too. The good news is that self-employed folks have tax deductions galore. You can deduct half the Social Security and Medicare taxes you pay, all of your health insurance premiums, business travel expenses, office supplies and equipment, and (sometimes) home office expenses. If you're baffled, consider hiring a CPA. Which brings me to No. 5...

5. Get a good CPA.

The most important choice in life: your spouse. Number two: your accountant. The right person can make the difference between success and drowning in paperwork, debt, and audit notices. A CPA (certified public accountant), EA (enrolled agent), or attorney will have the most experience. Call around to see which ones match your needs, and check out their qualifications, including credentials in accountancy and taxation. Recommendations from friends may not be a safe bet (hello, Bernie Madoff!). The National Society of Accountants and American Institute of CPAs are online directories to help you search, and the Accreditation Council for Accountancy and Taxation has a list of questions to ask when starting the selection process.

Best of luck on your business ventures!

Beth Kobliner is a personal finance commentator and journalist, the author of the New York Times bestseller "Get a Financial Life: Personal Finance in Your Twenties and Thirties," and a member of the President's Advisory Council on Financial Capability. Visit her at, follow her on Twitter, and like her on Facebook.