Get Personal with Your Business Financial Planning

by

As a business owner, aligning business financial planning with personal financial goals is essential for your long-term financial health. But how to go about it successfully?

Here are 8 key strategies we recommend:

  1. Separate Finances: Maintain distinct accounts for personal and business finances. This ensures clear tracking of cash flow, expenses, and tax obligations, reducing financial complexity.
  2. Set Clear Goals: Define both personal and business financial objectives. For example, retirement savings, family expenses, and business expansion should align to support overall wealth-building strategies.
  3. Pay Yourself Strategically: Establish a salary or draw of consistent income that the business can support. Avoid withdrawing erratically because it disrupts cash flow and personal budgeting.
  4. Leverage Tax Strategies: Optimize tax planning for both personal and business finances. Utilize deductions, credits, and retirement contributions to reduce taxable income and maximize savings. However, don’t use strategies that may reduce your tax bill, but ultimately cause harm to your cash flow needs.
  5. Build Emergency Funds: Maintain separate emergency reserves for personal and business needs to address unexpected challenges without compromising either. How much to maintain? This is a personal question that relates to 1.) how much risk you are comfortable to take and 2.) how reliable and consistent your cash flow is from the business. You often hear 3-6 months of expenses as reasonable. In some situations, the Numbers Coach recommends over 12 months, due to the unreliability of business cash flow. (See this recent post for more guidance.)
  6. Plan for Retirement: Use tax-advantaged retirement accounts like SEP IRAs or solo 401(k)s. These account allow higher contributions for self-employed individuals, linking personal retirement savings with business success.
  7. Manage Debt Wisely: Balance personal and business debt to avoid over-leveraging. The Numbers Coach philosophy is to minimize the use of debt. When it is used, then prioritize debt repayment while ensuring sufficient liquidity.
  8. Consult Professionals: Work with financial advisors and accountants experienced in both business and personal finance to create a cohesive plan tailored to your goals. But remember, you are the only one who truly cares about your money. As much as your advisors try to have your best interest at heart, it is up to you to learn and know your numbers.

By integrating these aspects into your business and personal financial planning, you can build financial stability, meet personal aspirations, and position your business for long-term success.

10 Best Advice Mantras From Warren Buffet

by

The “Oracle of Omaha” has created an impressive following of people and his investing results have proven the test of time.  Below are some simple bits of wisdom that I believe are timeless.

  • Never lose money.  Buffets rule # 1 is to not lose money.  And his rule #2 is to remember rule #1.  Keep in mind if you lose 50% of your investment, then it takes 100% return to get back to even…yikes that’s hard.
  • Get high value for low price.  What his means is value is what you pay for.  Make sure that you are paying the right price for the value in the produce, business or investment that you are buying.
  • Build health money habits.  Habits are what drive our behavior.  It’s been said that finance is 80% behavior and 20% math.  If we don’t change poor behaviors with our wallet then we can expect for us to find success with money or building a business.
  • Avoid debt and more specifically credit card debt.  Be wary of credit card debt because interest rates can be as high as 18% and more.  If you must roll over your credit card balance regularly then you can’t afford spending on it.  In effect you are trading your future for your present satisfaction.
  • Keep cash on hand.  Come up with what your minimum cash balance needs to be.  Is it 3 months or 6 months of expenses?  “cash is to a business as oxygen is to an individual: never thought about it when it is present, the only thing in mind when it is absent,” said Buffet.
  • Invest in yourself.  Your biggest income producing asset is yourself.  Improve your skills to make yourself more valuable to the market.  Unlike other assets and investments, “nobody can tax it away and they can’t steal it away,” said Buffet.
  • Learn about how to manage money as a part of the investment in yourself.  Not everyone enjoys this subject, however, there are simple methods to follow that help you win with money.  Spend less than you make…. save 15% into a low-cost index mutual fund…it’s not how much you make its how much you decide to spend.
  • Trust a low-cost index fund. Expenses matter when it comes to returns on your investments.  Consistently adding to your investments each month or quarter exercises an important “money muscle.”
  • Give back on a regular basis.  There is a saying about giving of our “time, talents, and treasure” to our community and nonprofits.  I believe giving is a natural law of human nature where we want to help others in need.  Giving produces psychic benefits for the giver and it helps society move forward.
  • Long term game.  Investing not only dollars but in ourselves is a long-term game.  Building true financial security takes time.  Buffet said, “someone’s sitting in the shade today because someone planted a tree a long time ago.”

Together these pieces of advice can help take us on the journey to financial security.  The advice is simple and timeless.  Here is to your chance to implement the advice and reach your financial goals!

Mike

Buffet’s Advice for Financial Success

by

The “Oracle of Omaha” has created an impressive following of people and his investing results have proven the test of time.  Below are 10 simple bits of wisdom that I believe are timeless:

Never lose money.  Buffet’s rule # 1 is to not lose money.  And his rule #2 is to remember rule #1.  Keep in mind if you lose 50% of your investment, then it takes 100% return to get back to even.

Get high value for low price.  What he means is value is what you pay for.  Make sure that you are paying the right price for the value in the product, business or investment that you are buying.

Build healthy money habits.  Habits are what drive our behavior.  It’s been said that finance is 80% behavior and 20% math.  If we don’t change poor behaviors with our wallet then we can’t expect to find success with money or building a business.

Avoid debt and, more specifically, avoid credit card debt.  Credit card interest rates can be as high as 18% and more.  If you have to roll over your credit card balance regularly, then you can’t afford spending on it.  In effect, you are trading your future for your present satisfaction.

Keep cash on hand.  Come up with what your minimum cash balance needs to be.  Is it 3 months or 6 months of expenses?  “Cash is to a business as oxygen is to an individual: Never think about it when it is present, the only thing in mind when it is absent,” said Buffet.

Invest in yourself.  Your biggest income producing asset is yourself.  Improve your skills to make yourself more valuable to the market.  Unlike other assets and investments, “Nobody can tax it away and they can’t steal it away,” said Buffet.

Learn about how to manage money as a part of the investment in yourself.  Not everyone enjoys this subject, however, there are simple methods to follow that help you win with money.  Spend less than you make. . . save 15% into a low cost index mutual fund. . . it’s not how much you make, it’s how much you decide to spend.

Trust a low cost index fund. Expenses matter when it comes to returns on your investments.  Consistently adding to your investments each month or quarter exercises an important “money muscle.”

Give back on a regular basis.  Giving of our “time, talents, and treasure” to our community and nonprofits is a natural law of human nature where we want to help others in need.  Giving produces psychic benefits for the giver and it helps society move forward.

Invest for the long term.  Investing not only with dollars but in ourselves is a long term game.  Building true financial security takes time.  Buffet said, “someone’s sitting in the shade today because someone planted a tree a long time ago.”

Together these pieces of advice can help take us on the journey to financial security.  The advice is simple and timeless.

Here’s to reaching your financial goals! Mike

Financial Independence: Another Name For Freedom

by

I have been an avid reader of personal finance for over 35 years.  Maybe because of my business finance background or maybe it is something else, but it just seems to resonate with me. 

 

I have devoured books and podcasts about financial independence because I wanted to have the freedom to do the work I enjoy on my time. 

After my triplet girls were born, I became focused on this goal.  A friend of mine told me that in a “blink of an eye” our girls would be grown and away from home.  That seemed crazy after swaddling them in their baby blankets, but wow…. was my friend right!  It has gone fast, but I took his advice and focused on financial independence.

The equation I arrived at to define this freedom is: “Financial freedom” = [passive income + earned income from work I love to do] > my living expenses.

If I solved this equation, then the time freedom that I wanted would be at hand.  I focused on three factors to solve this equation.

  1. Building passive income from investments
  2. Maintain a reasonable standard of living
  3. Earn money doing work that I enjoyed

Generate passive income.   For me this means investments that generate dividends, interest, or capital gains from stocks and bonds.  I am comfortable with investing in the stock market using a simple approach with index mutual fund investments.  Others have invested in real estate with collecting rents or other assets that generate income without the need for labor hours.  Whatever works best for you and your risk profile is the right choice.  The idea is to create income streams that don’t require your labor effort (or at least a minimal amount).

Keep your living costs reasonable.  It was so easy for me and my family to inflate our lifestyle when the kids came along.  My wife and I worked hard for many years and felt the desire to have certain things that we could afford, and were “nice to have”, but not “gotta have.”  Being able to defer some spending that really was not going to make any difference to us in the long run made sense.  We lived below our means, but never felt deprived.  Simple family experiences were cherished versus the nice electronic gadgets that would not buy me my freedom.

Earn money doing work you enjoy.  So often I would hear friends or colleagues complain about their jobs, but they would not change.  Why?  Not always sure, but some may have felt stuck given lifestyle choices or fear of the unknown at the next business.  I didn’t always enjoy my work at times, but my attitude was one that I always took away some learning.  How could each new job or position help me get closer to financial independence and at the same time enjoy the journey?

Financial independence or freedom, whichever rings true to you, is both a mindset and a math equation.  If I had the right mindset and I understood the math behind it, then the time freedom with my family would be solved.  Are you ready for take your time back?  Let me know if I can help you.

Cheers to your freedom!
Mike

Scaling Up: “My Formula for Retirement”

by

Do you need a clear path to make sure you have enough money to retire? In this “Scaling Up” podcast, Numbers Coach Mike Iverson share his formula for retirement:

The Six Elements of Balanced Wealth

by

For many successful entrepreneurs, wealth is measured in the most traditional medium: money. There’s enough money to support a chosen lifestyle, provide for loved ones and save for a comfortable retirement. There are even opportunities to enjoy some of life’s real pleasures.

Yet for every entrepreneur who is content with financial success, there’s another who wonders whether there isn’t more to life. In his book, Wealth and Happiness: Using Your Wealth to Create a Better Life, wealth advisor and author David Geller explores the feelings of emptiness that sometimes accompany business success.

Drawing on his experience as CEO of a prominent Atlanta wealth management firm, Geller describes people who are financially well-to-do, but find their lives unfulfilling. Geller himself struggled with such feelings following divorce. His clients often struggled with similar feelings after the death of a spouse or the loss of a business partner.

In coping with the loss of an important relationship, money is of little comfort. Incremental increases of income are not met by increased happiness. In fact, many people in that situation experience a negative correlation between increased wealth and their levels of happiness. That got Geller thinking about his clients’ situations, as well as his own. If their lives aren’t better at the end of the day, what’s the point?

 

A Holistic Approach

He began to research the notion of happiness, including Aristotle’s theory that “happiness is the meaning and purpose of life, the whole aim of human existence.” He learned that happiness is built on the foundation of a stable, balanced lifestyle. In particular, he identified six elements of wealth that are always present in stable, balanced lives as:

  1. Time
  2. Money
  3. Talents
  4. Body & Mind
  5. Wisdom
  6. Networks and Community

The key component is not money, but relationships (Networks and Community). The quality of a person’s most important relationships is the surest measure of happiness. When people commit to nurturing those relationships, the other elements of wealth seem to fall into place.

As a wealth advisor, Geller now believes his job includes managing a client’s mindset as well as his or her money. His findings led him to redefine the wealth management firm and put in place a system that would help clients pursue overall fulfillment and happiness. The firm’s approach is based on a model called Behavioral Wealth Management, which incorporates scientific research about decision-making and life events.

Geller also identified barriers that prevent people from using wealth to maximize their happiness. One of the most common is confusing pleasure and wealth. Activities that are pleasurable ignite your senses. True wealth, on the other hand, is about igniting your passions to make a difference in someone else’s life.

Personalization of behavioral wealth management is possible through use of tools that assess a person’s attitudes toward money and relationships. It’s a science-based approach to achieving stability in a client’s lifestyle.

If you see an inverse correlation between an increase in your wealth and your level of happiness, it may be time to rearrange priorities. Give us a call at (404) 353-2148 or send us an email, and we’ll discuss ways to restore your sense of a balanced life.

Are You Insuring Your Life and the Life of Your Business?

by

by Duffy G. Elliott, CPA, CFP

As a business owner, you may not consider life insurance an integral part of your financial planning. However, life insurance is critical to an owner’s family, as well as the business, in the event of an unexpected death. In order to make sure both your family and your business are adequately protected, it’s important to purchase the
proper amount of life insurance coverage.

The amount of life insurance you need depends on your current net worth, the lifestyle you want to provide for your family, and ultimately, your personal desires. (see more detailed guidelines below).

For business owners, life insurance for the business is often referred to as “key man” or “key person” insurance. In this case the beneficiary of the policy is the business and not the owner’s family. The insurance is used to provide funds to help the business navigate through the change as a result of the loss of the owner. The funds may be used to buy out the owner’s family interest, find a replacement to lead the business, provide working capital to cushion any financial impact from the loss, or a combination of these options.

Key man life insurance is an important part of a business’ planning. Without it, all of the hard work by the owner and the sacrifices of the owner’s family could vanish.

A common rule of thumb is that you should purchase 5-7 times your annual income. Unfortunately, like most rules of thumb, this does not take into account individual circumstances and may leave you with an inadequate amount of insurance.

  1. First, you should consider how much your family will need every year, being sure to take into account the effects of inflation.
  2. Next, total your assets and other sources of family income. Be sure to include any benefits your family may be entitled to under any pension plans. If your spouse doesn’t work now, you need to consider if he/she would work if you died and how much he/she could earn. Don’t overlook social security survivors’ benefits available to your children under age 18 and to your spouse if he/she does not earn significant wages.
  3. Finally, determine how much life insurance you require. This will depend on how long your family will need this income, what rate of return can be earned on the insurance proceeds, and other factors.

Unfortunately, this is not a calculation that can be made only once. Since your needs will change over time, you should assess your insurance coverage periodically, especially if a major life event occurs.

To learn more about how life insurance plays an integral part of your business and personal financial planning, contact Duffy G. Elliott at Elliott & Associates Wealth Advisors at (770) 451-2446 or visit http://www.elliottandassoc.net/.