Business owners are a unique breed of people. We are the only people I know who will work 80 hours a week to avoid working 40 hours for “the man.” We have a tendency to pour all of our energy into our businesses. Yet, we often fail to take care of our personal wealth or personal health. In this newest series – Personal Finance for the Business Owner – my goal is to show you that your personal finances matter more than your business and give you the knowledge to work on this balance. Yes, your business probably provides you with your personal income. However, what you do with that income matters more than the business that provides you with it.
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In other series I’ve written for Financially Simple, we’ve covered how to take care of our businesses. Now, it’s time to change things around a bit. It’s time to take care of our personal lives.
As I said, my ultimate goal for this series is to show you that your personal finances matter more than your business matters. Yet, many of you are your business. You have a job that you happen to own. You’re investing in the future of your business. Yet, most likely, you’re failing to invest in your personal future. Therefore, your personal financial success or failure is dependent upon your business’s success or failure. That’s stressful!
Now that I’ve shown you how to begin a business, grow the value of your business, and sell your business, I want to show you how to manage your wealth holistically. I want to show you how to take control of your personal finances so that you feel confident about making financial decisions in and about your business. I want to:
So let’s get started. Let me show you what this new series will look like.
As an Investment Advisor Representative with Heritage Investors LLC, I work with a lot of business owners. Many are worth six, seven, or eight figures. I even have clients breaking nine figures in net worth! Still yet, some of my clients are net worth negative.
No matter what their net worth, though, whenever I work with business owners, I look at four different areas of their financial lives they can control:
Whenever I work with clients, I always look at their cash flow first. How do they get paid as a family, and where do they spend their money? Nothing is more important than that. In fact, if you were to Google “budget,” you would see tons and tons of different opinions and options on budgeting. However, that’s just a small amount of cash flow. So in this series, I’m going to start with a mini-series about cash flow – the ways you can get paid, the ways you can maximize your cash flow, and the ways you can keep more cash for yourself.
Next, I’ll dive into risk management. Yes, I’ve already discussed insurance your business needs, but what types of personal insurance policies do you need? Specifically, I’ll talk about what type of life insurance, disability insurance, and health insurance you need. What about car insurance, property and casualty insurance, or umbrella policies? Do you need all of that? Then, I’ll look at risk management from a legal standpoint. What documents do you need in place to protect yourself and your assets? Obviously, wills seem like a smart idea, but do you need a trust, too? I’ll start analyzing those risk management topics to see how well you are protecting yourself for the long-term.
As I delve into the third controllable area of your financial life, I’ll discuss four different types of investments I believe make the most sense for you to try to balance, depending on your personal goals. I’ll guide you through qualified, non-qualified, real estate, and business investments you can make. Inevitably, I’ll discuss possible tax benefits of certain investments, and I’ll bring Cost of Capital concepts into your personal investment life.
After I get through cash flow, risk management, and investments, I’ll get into distributions – how you will actually spend your money. There’s an old saying I heard years ago that says, “We are not in the business of getting all we can, canning all we get, and then sitting on our can.” In other words, we’re not just trying to create a hoarding effect from our investments; we don’t want to sit on them and never use them. Ultimately, you’re building and saving for some purpose. Therefore, let’s talk about what you will do with your money. How will you save it, and how will you spend it?
Now, here’s where it gets fun for me, and you’re not going to hear many financial people say this. Cash flow, risk management, investments, and distribution are all topics found by a quick Google search. You can become an armchair financial planner by the end of the day, telling us CERTIFIED FINANCIAL PLANNERS™ how to do our jobs. You may think you can control the first four parts of your financial life after Internet searches. Yet, there are four areas outside of your control that you need help monitoring:
No matter what, those four factors are out of your control. Yet, my job is to teach you to take control of your personal financial life so that your business becomes part of it, not the focus of it. Instead, your focus is preparing you, your family, and your life to fulfill your personal goals. Therefore, I’m going to spend some time talking about personal finance for small business owners.
Lawyer, politician, and author Frank Clark once said, “Many folks think they aren’t good at earning money when what they don’t know is how to use it.” I want to show you how you can take control of your personal money, how to use it if you will. I know how hard life is, and I know how frustrating money can be. Yet, it doesn’t have to be that way. Let me help you continue to make your life, at least, financially simple.