Financial Serenity Month - Chapter 4

This is the last post in the Financial Serenity Month. We have been talking about retirement planning. Before we conclude this month's theme, I would like to underline the fact that financial serenity does not have to happen at the "traditional retirement age" - it is exclusively about the ability to live according to one's wishes and standards without having to work; that is, you don't have to work in order to generate the income you need. Retirement planning is discussed in this context because that means you only work if you choose to, and not because you have to.

And if I have convinced you to start setting money aside, you may now start worrying where that money is going to go. The main objective is for the money you set aside to come back to you with friends – the more, the better. And in order for that to happen, you cannot leave it parked in a savings account. Nothing against banks, they are just not a great vehicle for increasing your net worth through savings; not with an interest rate pretty close to 0%. 

The type of investment and the company, as well as the status (qualified funds versus non-qualified funds), will depend on your needs, risk tolerance and when you need to have access to the money. All investments should be personalized for you. Therefore, either you are an expert, become an expert, or hire an expert to help you. 

The one sure way to figure out which investment will bring you the most money is using the Rule of 72. This will show you how many years it will take for your investment to double. No matter the amount you invest, don’t you want to know how long it would take for your money to double? To find this out, you would take the interest rate you receive and divide it into 72. This number signifies the number of years it would take you before your money doubles without your adding anything extra. For a 1% interest it takes 72 years to double the money you deposit – let’s not even look at under 1% (which is what you get from your regular savings account at the bank). For an 8% interest rate – the average growth of the market – it would take your money 9 years to double. Would you rather wait almost a lifetime, or would you like to double it in 9 years?

Now that you understand why it is important to have a plan to exit your business into retirement, you are ready to set a system in place. And the best thing to do is to make saving for retirement a priority. If you ever heard any financial experts talk about saving money, you are probably familiar with the phrase “pay yourself first”. There is no better recipe for retirement. Whether you can direct 10% of your income towards retirement, or you need to start with a smaller amount, it is always best to start. As you get into the habit of saving, you will find it easier and more rewarding. If you struggle in the beginning and are afraid you might run out of money for current expenses, don’t worry: you are not alone.

You will find creative ways to take care of current needs as soon as you have the system in place to redirect the money from current expenses to future serenity. Since not everyone has the discipline to set money aside for retirement on a regular basis, the best thing to do is to automate it – a set date, maybe a set amount. You can always change and adjust, you only need a starting point. And remember, you can always count on help from a financial professional if you lack the knowledge, the will or the discipline to follow through.

Financial Serenity Month - Chapter 3

Last week we discussed about the retirement ideas that pertain to entrepreneurs. This week we will also include the employees in our conversation. I would like to share some scary statistics, with the hope that you take them seriously and act on the information we are sharing here.

For someone who has a job, the retirement planning is set in place by the employer, and all they have to do is follow the system. Even with all the steps already planned, a large number of Americans do not take advantage of the offers. And the scary part is that among solopreneurs and the self-employed (without the path already designed for them) the numbers are even higher.

There are some really scary statistics I want to share: only 2 out of 3 Americans save for retirement currently (according to a statistic from 2017). And if this is not bad enough, more than half of the ones who save, have less than $10,000 in their retirement account. Yet, surveys say that 51% of Americans feel they are saving enough. The article I was reading was stating that “Transamerica found that only about half of workers feel they are building a nest egg that will sustain them in retirement” (The Motley Fool, April, 16^th, 2017). While the article implies there are not enough people who are comfortable with their level of savings, my first reaction is: how can that many people even feel they have enough? Reading the statistics, I realized that only about 30% of the U.S. population has more than $10,000 in retirement savings. And with that being the case, where does the extra 21% of people get their feelings from? Did I scare you yet?

As entrepreneurs, solopreneurs and self-employed increase in numbers all across America, this is a unique opportunity for them to change these statistics. I’m not saying it is easy but it is simple: there is no other way to be and feel secure in retirement. Even employees who see their retirement coming from the employer diminish, have to also set aside money. Entrepreneurs don’t even have that luxury. There is no cushion that can provide a feeling of security. For those who can sell their business, there may be a stress-free retirement in sight. But the majority of small businesses – the solopreneurs and the home-based businesses – will probably never have that option.

If you own a sellable business and decide to sell it, the first thing you need to find out is the value. And you need to understand that the value you think it is worth and the amount of money that someone is willing to pay may be two different things – as is most often the case. After having a valuation done by a third party, such as a CPA, the next best step is talking to a financial specialist who can educate the seller in a few options – financial and insurance products – that can be set up by the buyer in order to increase the amount received by the seller through this transaction. This is a way to increase either the retirement income or the family protection, or both.

When selling the business is not an option – or if you want to have more money in retirement to ensure enough income – the best idea is to start saving as early as possible. Now, I understand that most entrepreneurs reinvest the majority of their income in order to grow their business. Even so, retirement savings must be a priority. And if the 10% that financial advisors advocate sounds like too huge and intimidating of a number, it is OK to start with a lower percentage. The main goal is to start. You can always increase the amount. Plus, something saved is always better than nothing saved. One of my favorite quotes is a Chinese proverb: “the best time to plant a tree was 20 years ago. The next best time is now.”

Saving – for retirement, for a big-ticket item, or for a rainy day – works the same way. The younger you are or the earlier you start saving, the more time you have for it to grow.  But it is never too late to start, and you are always better off starting to save NOW than Never, or even Later.

Financial Serenity Month - Chapter 1

There are so many financial gurus who advocate for financial freedom – the ability to maintain your lifestyle without having to work – either by accumulating a certain amount of money that is invested to generate the income, or by generating a passive cash flow that is equal or higher to the salary/commission received from the current work.

I started my financial education in the US with Suze Orman and Robert Kiyosaki, and I always thrived to achieve the financial freedom they taught me about. And through my journey toward financial freedom I heard Tony Robbins explaining about “the science of achievement” and “the art of fulfillment”. And this cemented my commitment to achieve financial serenity.

What is financial serenity to me?
Financial serenity is a combination of financial freedom and the serenity brought on by feelings of accomplishment and fulfillment. This is the result of achieving worthy goals and reaching significance by being able to give freely to a cause one is passionate about (may that be time or money). I learned from Zig Ziglar that financial independence means you can do what you want when you want. My goal then became taking women – and a few good men – to the next level, and guiding them to financial serenity: a step beyond freedom and independence.

According to statistics, getting out of debt or saving more money – or even financial freedom – is a popular New Year’s resolution, second only to losing weight. The problem with setting this as an annual goal – over and over again – is that it really is wishful thinking, and not a well thought out plan. Therefore, the resolution is renewed the following year, rarely with any significant success. Most people want to make a leap from the have-not to the have column when it comes to their finances. They feel that they can triple their income, or annihilate their debt within the year. Tony Robbins wisely said that “most people overestimate what they can do in a year and underestimate what they can do in a decade”.

The most likely approach to achieve a financial goal is the “slight edge” – per Jeff Olson, in his book with the same title. He talks about doing small things every day that will compound over time to achieve big results. While this approach can work with any goals, from health and fitness, to relationships and personal improvement, I believe it is the only sustainable path to achieve lasting financial goals.

It is my hope that more people will have financial goals for this year than the previous, and that even more will have these goals the next year. While anyone can achieve his/her financial serenity with proper planning and a focus on the long term goal in order to stay on track, I believe that the most likely path to lead to this accomplishment is through your own business.

I'm not suggesting that an employee cannot achieve such a goal, I'm merely expressing my opinion that self-employment or business ownership can be a simpler path to it. And with that, I must explain that I am by no means saying it is easy - just a simpler formula because you hold all the cards when you own your source of income.

Let's look at some ideas on how to accomplish such a goal next week!

SMART Goals for Financial Freedom

There are 2 ways to work towards your financial freedom:

1.    Figure out how much money you need annually to live comfortably, to at least maintain your current standard of living. Then, take that number and divide it by 0.4% to find out the total amount of money you need to have set aside. When you invest this money (once your reached your number) and generate at least 4% interest, it will generate the income you need.

2.    Figure out how much money you need annually to live comfortably, to at least maintain your current standard of living. Then, work on building assets that generate enough money annually to provide that amount without you holding a job. These assets can be: real estate investments, businesses, investments.

Visualization of your goals is important, and so is planning. You either plan your work, and then work your plan; or you fail to plan, and then you plan to fail. The reason why planning your finances is probably your most important plan, is that all your dreams and goals will be in some way connected to money.

Writing down your goals and having a vision board will help you find ways to achieve your goals; your brain will come up with ways to lead you to what you most desire. Which also means you must be very certain that your really desire those things you claim to want. Part of the planning and mapping of your goals will include coming up with the money to achieve some of your goals. Of course some goals like happiness and health don’t have a price tag. Others like a trip, college education or a new house or car, come with a price tag that must be known.

It may seem simplistic to say that if you know how much something costs you can start working on achieving that. However, even though it is simple, that is how it is done. I’m not saying it is easy – otherwise everyone would achieve their goals. But it is simple – in 3 steps: see it, map it and plan it. All that is left is the hardest part: doing it.

When setting your goals, keep in mind that they must be SMART in order for you to reach them: Specific, Measurable, Attainable, Relevant and Time-bound. In order for you to achieve your goals, they have to fit in this SMART description. So if your goals are vague - ie. I want more clients, I want to make lots of money - you need to redefine those goals. It is not good enough to want more money; your brain does not work on anything so vague. So think instead: How much money? ("a lot" is not a number - therefore it is neither Specific, nor Measurable) When do you want to have the money by? (give yourself a deadline) And, perhaps most importantly, make sure your goals are Relevant: do you really want it? Is it Relevant to you?

If you are a successful business woman, whether you own the business or lead a corporation, you probably rely on a board of advisers. You may call them mentors, business partners or directors. They are your sounding board when it comes to ideas regarding business growth and what is the best way to implement new ideas to achieve the objectives. But how about your financial life? Do you have a board of directors to run your ideas by? Do you have an accountant who knows your like and your story to help you lower your taxes? Do you have an investment adviser who looks out for your best interest in a fiduciary capacity?

Money Mondays episode 3

https://www.spreaker.com/show/money-mondays

This show introduces you to Dr Samantha Madhosingh and her money story - and it is a genuine treasure. We also talk about retirement and how to prepare for it. One more step towards your Financial Serenity.

Are you ready to RETIRE? If not NOW, when?

3 Reasons you should plan for retirement NOW

You may be familiar with the saying “The best time to plant a tree was 20 years ago, the next best time is NOW.” If you started your business thinking of it as your retirement ticket, make sure you have a contingency plan. Starting your business does not guarantee an automatic retirement plan for you. If your business is dependent upon your ability to perform, what happens if you are unable to perform for a period of time? Does your business continue to make money, depositing a percentage of that income into your retirement fund? Absolutely not.

Developing a contingency plan doesn’t mean your business fails, it simply means you have a plan for retirement – outside of selling your business.  If you have postponed thinking about your retirement planning, here are 3 reasons you should not postpone it any longer:

-         -- You may not be able to work forever, or may not be willing to: You started your business because you were passionate about it. There is no guarantee that you will find someone else that will duplicate that passion. You must be prepared for that. Perhaps you have hopes for your children to one take over your business, and they may very well be on board, but be prepared in case they are not. In any case, you will not continue actively working your business forever, so you do need to plan a proper exit strategy.

-         -- Your business may not sell for as much as you hope: It is common for business owners to choose to sell their business at retirement. Because you have an emotional connection to your business, chances are, you will always place a higher value on it than it really is worth on paper. Be prepared for this when you put your business on the market.

-        -- Social Security is not enough to live on, and medical expenses may increase: As you get older, it is naïve to think that government benefits alone with cover your life expenses. As time goes on, the social security budget continues to shrink while inflation continues to go up, raising the cost of living and medical expense. To enjoy a quality of life in retirement, you must have a plan that includes more than just social security.

No matter how much you LOVE what you do, you probably won’t to do it forever. Think of professions like a plumber, a baker, or a hair stylist; despite your passion for your work, your body will just not allow you to work this kind of professions into old age. As we age, the quality of service that we can offer will eventually start to deteriorate. That’s why we retire.

My goal is not to scare you, just to make you think. It’s your life, live it your way – just make sure that it is the BEST way for you (and your loved ones).

Are you working in your business or on your business?

HAVE YOU THOUGHT ABOUT THE "WHAT IF'S"?

As a solopreneur, you got into business to pursue your passion. If you’re a baker, you love to bake, if you’re a plumber or handyman, you love to fix things. However, what so many new business owners forget is that there is more to owning a business than just doing all of the things you love. There are things like insurance, taxes, payroll, marketing, all of the administrative tasks that are necessary to run your business but you don’t really want to do, right?

Here’s the challenge: if you spend 100% of your time inside your business, you don’t know what your business looks like from the outside. Don’t get me wrong. It is imperative that you continue to do the things that you are good at. But there is much more to business than your core product line. It has to be facilitated, managed and grown. Take a minute and think about your role in your business. 

If you are a solopreneur, the buck stops with you. So, what happens to the business if you cannot work tomorrow? What happens if you are absent from your business because of an accident, a stroke, cancer or death? Do you have a plan?

People rarely like to address these scenarios because they seem morbid. But you now have an asset to protect and if you don’t have a plan, that asset will lose value. If you want your business to continue to thrive and be transferable to your family, you need to protect yourself with adequate insurance, so your family can have the money they need to hire an expert – even if it is only temporary. Otherwise, your LEGACY will be bankrupt.

Consider protecting your business and your legacy. Otherwise, all of your hard work will be for nothing.

Don't Let Your Legacy Disappear! What All Business Owners Can Do To Secure Their Future.

Have you thought about your LEGACY?

Well, if you are a parent, your KIDS are your legacy, and you are probably proud. If you are an entrepreneur, your BUSINESS is your legacy, and you should also be proud. You have treated your business as a beloved child for many years, and now it is time to step down, retire or sell it. How do you ensure your business is in good hands? How do you make sure it will thrive without you?

Your legacy can be tangible and intangible. You give your kids an intangible legacy while you raise them. All of those priceless memories of teaching your kids do the right thing, stay on the right path... They probably ensure your children will have a bright future. And that is your intangible legacy to them. How do you ensure your tangible legacy (your Business) also passes on to them?

If you have grown children who can take over, make sure your wishes are not relayed to the family just during the Thanksgiving dinner. Make sure the information is also in writing. And, most importantly, that someone knows where it is. If your children are too young to take over, have a contingency plan - for the number of years until they can step up.

And if you are scared because there is no one you trust to take over, or your children are not interested in the business you built? Well, maybe that conversation around the dinner table should focus on what the family thinks is the best way to preserve the business beyond the time you work it. Listen to their input and plan accordingly. Don't forget to do that in writing!

Food for thought: Are your ESTATE PLANNING DOCUMENTS updated?