Keep More Money Month - Chapter 2

This week we will talk about another way to keep more of the money you make. As a business owner, you may need to buy items on credit, whether you have a business credit line or you have to use personal or business credit cards. This last scenario is often the case for solopreneurs and home-based businesses. 

One place to spend your money is the interest on loans you take out. Therefore, it stands to reason that paying less in interest means keeping more of the money you have. Many business owners finance big purchases in their business by using personal credit cards. For those who have good credit, the interest might not be high, which can help with not letting a lot of money go towards interest. most cases though, it proves more cost efficient to take out a loan - preferably for the business - instead of charging the purchase on a credit card. 

There are experts who can help you with building business credit, so you don't keep using personal cards. Even before this can happen, it is a good strategy to build a relationship with your banker, so you can take advantage of good advice when you need to purchase a big item on credit. Even though I recommend to my clients to use a couple of banks for their accounts, I believe in using the same branch (or a couple of branches) for most of your banking needs. This will help you build a relationship not only with the teller that attends you most of the times but also with the branch manager. As they get to know you better, make sure to talk to them about your business and its needs. 

If you do find yourself charging big purchases on your credit cards, make sure you keep track of your balances and make payments beyond the minimum, so you can pay it off as fast as possible. One way to spend less on interest is by asking the credit card company to lower your interest rate. Some of the companies are willing to negotiate when you make all payments on time and you maintain a good credit history.

It is not a great idea to risk your home by refinancing credit card balances into your mortgage, or as an equity loan. Though this may mean lower interest, it also puts a lot of pressure on you not to lose your house. Your health does not deserve this extra challenge! The tax savings you would get on the mortgage interest may be substantial though, so it is worth checking with your accountant or tax specialist.

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!

Is your business FOR SALE? How much is it worth?

What is your EXIT strategy?

I know you think you will work your business forever, but that’s just not realistic. I can hear you saying: “But I LOVE my business… I don’t want to stop working… I can’t stay at home and do nothing… I like to work… I miss the activity, and cannot let it go…” Those are all valid arguments against retiring but sometimes your exit from your business is not completely within your control.

Even if you can and will work for the rest of your life, a great business should live longer than the founder. The only way to ensure your wishes are respected is through proper planning. Don’t let your LEGACY disappear! Make sure you have an exit strategy! Here are just a couple of exit strategies to consider as you’re putting your plan together:

·         -- Sell your business: Mark Cuban, Kevin O’Leary, and many others became billionaires by selling their businesses.

·        --  Pass your business down to a child or family member: Some people want to make their business a family legacy, passing it down to their children and/or grandchildren. Make sure you have an adequate plan to execute this desire. You also need to be prepared if your children decide that they do not want to run your business.

I understand that none of this is exactly pleasant to talk about because you’re actively building your business now. But, despite your feelings, you need to give some consideration to what is best for the business. You put your blood, sweat and tears in your business for many years – it is your child – so you must make sure it will thrive after you are no longer around, or are no longer able to actively work it.

Regardless of your specific exit strategy, make sure you have systems in place to execute it properly; whether your plan to sell your business or will it to a family member, you want to make sure to leave an easy to follow blueprint to sustain your business for years to come.

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).

Scary? Yes! Necessary? VERY!

How much life insurance do you need?

This is a subject that most Americans choose to avoid. The first thought is that it is just plain morbid. Who wants to think of the unthinkable happening? You want to live life, not think about dying, right? But, what about those you love? How important is it that you protect and provide for them, even when you are gone? Outside of the fear factor, other people avoid taking care of this out of sheer procrastination. There is no sense of urgency. The truth is, we don’t know when but one day we WILL leave this world, and our family will bear the responsibility of taking care of things for us, in our name, on our behalf. We cannot alleviate the emotional pain, but can do something to prevent the financial pain.

When considering your life insurance policy, there are some things that you need to consider. These five questions will navigate you through the process of setting up your policy. Carefully consider the answer to each of these questions before sitting down with an agent. And, if you’re unsure about some of these, highlight them and work with your chosen agent to help you figure it out. A good agent will focus on the best possible outcome for you and your family.

Q1: How much do you want your funeral to cost?

Q2: How much money will your family miss annually when you die?

Q3: How many years will your family need your income in order to adjust to new situation?

Q4: What debts do you leave behind that your family has to take care of?

Q5: What future needs do you have to take care of? (E.g. Kids’ college)

You want the peace of mind in knowing that is something happened to you tomorrow, your family would be taken care of. Don’t delay in putting together a good life insurance policy. Honestly, it’s better to have the wrong kind of life insurance, than no life insurance at all. So don’t postpone this process while you analyze it to death (pun intended). Consult with 2 or 3 different to determine who you feel most comfortable working with. But, most importantly, don’t postpone it. Tomorrow is not promised for any of us!

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.