Many business owners are so consumed with reaching the financial goals of their company that their personal and family financial goals get overlooked. But neglecting the personal side of your finances is a big mistake, says Tony Brant, a financial advisor with Skylight Financial Group.
“Your business world and your personal world are intertwined; so treat them that way,” says Brant. “You need to plan to grow your life just like you plan to grow your business and build financial flexibility throughout both your business and your personal life. And that means having available to you a number of financial reservoirs to provide for yourself and your family.”
Smart Business spoke with Brant about how to accomplish your personal financial goals while growing your business.
What is the first step to accomplishing your personal and family financial goals while growing your business?
The first step is for business owners to acknowledge and accept that their business and their family life are closely related. Oftentimes, they behave as though they are separate. At some point, every business owner will admit that to keep the business going and growing, they’ve made business decisions that have affected their personal life, sometimes even placing their family at risk.
You need to continually integrate the planning that you’re already doing on the business side with what’s important to you on the personal side. Look at what you’re doing from a business planning perspective; identify the goals, objectives, people, capital and markets that will contribute to the likelihood of the success for your business and model your personal planning after this format.
Establish a specific planning objective. If you are on track to grow your business’s sales by 10 percent this year, also consider growing your personal savings by 10 percent. Set parallel goals. After all that you’ve done to grow your business, ask yourself what you are doing for yourself and your family.
How do you begin planning?
Identify and articulate the vision you have for yourself and your family in the future by asking what matters to you; what do you want to happen, and what don’t you want to happen. Many business owners have a vision of financial security that includes a secure retirement, education for their children, freedom to pursue personal interests, enjoying a quality lifestyle, concerns over family members in need, and health care later in life. These things do not happen by themselves, and must be planned for accordingly.
At the most basic level, all business owners should incorporate a protection plan in their personal life, as well as their business life. Such a plan includes three major components. First is the protection of your income earning ability. Ask yourself, ‘What happens if I suddenly become disabled; even temporarily?’ Next, develop a sound cash reserve, both personally and financially, to deal with an unexpected financial crisis.
And lastly, ask yourself, ‘What would happen if I were to die prematurely?’ Are you prepared for such an unexpected event?
How do you address those components?
To help protect a portion of your income in the event that you become unable to work due to injury or disability, you should have a solid disability income insurance policy in place to provide a benefit a policy that you own personally and is portable and can travel from business venture to business venture. This is something that would complement, not replace, any group benefits that may already be in place through the business. Talk to your advisor about ways to build up reserves to deal with a financial crisis.
Life insurance can be a good vehicle to address the possibility of premature death. You can’t predict if you’re going to need insurance later in life for personal or estate planning needs, so you need to start building it now. That way, you can ensure that you have an adequate amount of life insurance to provide your business partners with liquidity to keep the business going successfully and provide for your family members.
How can a business owner find an advisor to help accomplish both business and personal financial goals?
Look for someone to quarterback the process that has the ability to collaborate with other professionals in the legal and tax arena to help you work through the process and keep you on track. A good business advisor should also be a good personal advisor, someone who will involve other family members in the process.
Find someone you like and trust, because you will build a strong personal relationship with this advisor. This professional will help you think about how to create solutions to overcome roadblocks and create opportunity to have the flexibility necessary for accomplishing your personal and business goals.
Treat your personal planning like planning for your business. Delegate management to your trusted advisors who will keep you accountable to the goals that you’ve established.
What are the consequences of failing to plan?
The biggest consequence of failing to plan properly is the loss of time. As a business owner you have enough to deal with on your plate as it is. If a plan is not in place to handle life’s unexpected events, time will be hard to come by amidst the challenge of coping with such events. Time is one of your biggest allies. By being consistent and planning on a regular basis, events or issues that arise become minor bumps in the road, rather than a major derailment.
This is why it’s so important to build in financial flexibility; because you never know what may be down the road.
Anthony Brant is a financial advisor specializing in closely held business planning with Skylight Financial Group. Reach him at (216) 592-7352 or email@example.com. Anthony Brant is a registered representative of and offers securities, investment advisory and financial planning service through MML Investors Services, Inc. Member SIPC. Supervisory Office: 1660 W. 2nd St. Ste 850. Cleveland, OH 44113. 216-681-5680. CRN201210-141091