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HAPPY NEW YEAR 2018 Financial Checklist by @AZanswers

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by Ann Zuraw | Featured Contributor 

HSA—Check if you are eligible for a Health Savings account.  An HSA is a medical savings retirement account and can be started with pretax money and withdrawn to pay medical expenses without taxes.

Asset Allocation—Review your overall investment portfolio.  What percentage do you have in stocks, bonds, or cash and how did it change over the year?  Do you need to rebalance?

Protect yourself with an emergency fund to plan for the unexpected – An expensive car repair, having to replace your air conditioner, or a leaky faucet is stressful enough.

  • Not having to worry about the expense b/c you have an emergency fund can really lower stress and allow you not to put off repairs which can cause even more damage

Prioritize your personal need for spending vs. saving– Start tracking your expenses and group them into two categories: fixed and discretionary. Everyone’s income and expenses are different – there are no two budgets the same.  You have to find what works for you and what your comfort level is – decide a minimum amount to keep in checking/minimum for savings/ and look to invest the rest.

Your risk tolerance—learn what it is and understand what it means for your investments.

  • Everyone has a different tolerance for risk – figure out your own.
  • Know your limits – how much are you willing to lose before pulling back on your investment.
  • Find a strategy and stick with it over the time horizon
  • Diversify, diversify, diversify!

Never Give Up and keep trying even if you fail at times.  Success is not going to happen if you do not try.

Estimate your realistic profit and cash flow for the upcoming year. Do this both for your business and for your personal life.

What concrete steps are you taking to achieve all your financial goals?  Are your goals Identified, Implemented or Ignored?

Your investment style—What is your personal style and preference?  Regarding both managing your business and how your retirement account is invested?  Where are you investing your assets and what are the gaps?

Estate Planning – The new tax code means significant changes for estate planning for passing on assets to the next generation. Talk to your financial or trusted advisors today about what it means for you.

Attitude—there are no “stupid” questions.  Have a positive attitude about your ability to handle money and ask for help when you need it.  You deserve it.

Realistic goals—Don’t overwhelm yourself and get frustrated by trying to solve everything at once. You need to take baby steps, establish your targets with a clear head, and can get started on this today.

Woman Up-it’s your money! by @AZanswers

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by Ann Zuraw | Featured Contributor 

Let’s say you inherited an IRA from your parents, or you’re the beneficiary of an inheritance from your beloved Grandmother. Or your business is finally doing so well (after many years of hard work and losses), that you have more income than you imagined.  All of a sudden with this financial improvement, you are trying to figure out how to handle the money.  Even if this financial gain was expected, you might find the size or the complexity of managing the assets overwhelming.

As a financial advisors to those that find themselves in this situation, I am continually fascinated by how people handle their assets.  Everyone views their assets in a variety of different ways. For instance, if you look at a certain stock in your portfolio and think of the person who gave it to you, you may find you now hold a certain amount of personal sentiment to it. Does this mean you will never sell this stock? Why do some people not think twice about selling a stock gift, while others would never consider selling it?  As your financial assets grow, your ability to evaluate and manage these assets needs to grow also.

We advise you to evaluate your new financial position as well as learn to manage your assets and the tax implications. Investments including businesses are ongoing entities, so they need to be managed from the perspective of an overall portfolio.

  • If your grandmother gave you the stock is it still your Grandmother’s money?  Or maybe you had built your company that may have been in the family before, or you started it from scratch.
  • When do you take ownership and responsibility for the gains or losses of the investment?
  • When do you have the right to make the decisions about how to spend or invest the money?
  • Let’s say your Aunt gave you Apple stock 15 years ago, and it has gone up tremendously.—Do you just give her credit for that decision and plan to hold it forever?—What if she gave you GE and you did not sell it and lost money?  Do you blame your Aunt for the win and yourself for the loss?

When we manage money for clients –when the assets go up the clients take the credit, and when it goes down, it is the advisor’s fault.  I get it—that is human nature and fact of this investment business.  But why do we become attached to certain stocks or investments because of the history?

We need to be professional about these decisions in managing our investment portfolio and not take unnecessary risk.  As entrepreneurs, you are dedicated to the growth of your business and are you reinvesting your assets in your company?

 “Woman Up” and take responsibility and control of your assets.  It is your money.

What is stopping you from having a Board for your Business? by @AZanswers

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by Ann Zuraw | Featured Contributor 

It does not matter what size your company is—the issues are always the same. Some critical questions to consider are: Do you have a growth strategy and how is it measured?  Do you know if your revenue, expenses, and margins are growing, stable or declining?  How leveraged is your balance sheet? Are you evaluating management and employee compensation? All company owners should start thinking about these questions today.

In companies where the founder still owns the majority (if not all) of the business and makes most of the management decisions, the founder is called a “Controlling Owner.”  As an entrepreneur and Controlling Owner, bringing on a Board of Directors is a responsibility of managing your company.

Ask yourself whether your business is still sustainable if you get hit by a bus?  Do you want your company to shut down if something happens to you?  Unfortunately, if you do not take action, you are heading down that path whether you want to admit it or not.

Growing up with a family Real Estate business, I started attending the company Board of Directors meetings just after graduating from college.   I learned the importance of quarterly, consistent meetings to consider the financial numbers. As the complexity and size of the company grew for 25 years, these meetings became even more vital.  Looking back on the initial Board established by my Grandfather, I am grateful for the roadmap he started that benefited both the company and family.

There are different names for it -Advisory Council or Board of Directors.  But the recommendation is to start now with a Board or Council.  It will evolve with complexity as your business grows.

Ideal Board:

  • Target 5 to 8 members
  • Include the founder/owner and potential family succession members- such as young adult children (even if not in management currently)
  • Independent Advisors who have skills the company needs to fill gaps in experiences (not vendors or paid advisors to the company)
  • Advisors who are on board with the long-term company vision.
  • Advisors who respect the family, and are willing to navigate family politics and set parameters for family involvement.
  • Advisors who can be both independent and work as a team.  The goal is to add value and not just be a “yes woman” and agree with the founder, management or family.

Advantages: Board of Directors meetings (preferably quarterly)

  • Provide you the discipline to face your facts/numbers.
  • Hold management accountable—discuss quarterly reports and budget. As the company grows with complexity  so should the information provided at the meetings
  • Track Key Performance Indicators—the metrics the company should be measured by
  • Establish strategy for future goals and vision for the company, weighing the differences between short-term strategy and long-term strategy
  • Act as a Fiduciary representing shareholders, which may be different than owners and management team. Sometimes those goals are in conflict—this needs to be discussed.
  • Shareholder Breakdown: Assess if the founder owns all of the shares—is this in the family’s best interest?
  • Balance the opportunities and concerns regarding family members working in the family business
  • Be a part of the big decisions while they are happening—taking ownership and not second-guessing after the fact.

So we’ve given you lots of issues to consider. Now, what action step can you take today to start building your Board of Directors?

 

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Planning for the  ”What ifs” affecting your Financial Life by @AZanswers

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by Ann Zuraw | Featured Contributor 

Planning for the ”What ifs” affecting your Financial Life.

 

Incapacity Planning

Incapacity of the mind can be a temporary condition or a long-term decline as one’s mental abilities begin to slowly “diminish.”  The older I am, the more I see situations that differed from expectations.  With more experience, I recognize the value of operating within “my lane of expertise.”  So as a female business owner, Mom, and investor, my advice is generated from that perspective.

What infrastructure do you have in place in case the unexpected occurs?

My 92-year-old Mother recently asked me what would happen to my client’s accounts if I had a stroke. Now let me remind you that I am perfectly healthy and based on my parents’ ages of 92 and 93—I have a long way to go…. Despite this, I do have a succession plan in place since this is “my lane” of expertise.  I diligently prepare for the unexpected in both my personal life and my business. Is your business and family ready? Do you have a plan in place?

There is a lot of emphasis on “succession planning” for people nearing retirement. However, the looming number of unexpected setbacks that may occur throughout life makes having a succession plan at every stage in life a reasonable necessity.

What resources are there to help with succession planning?

  • To Do List for Incapacity Planning: I encourage individuals, families, and businesses to be proactive in their life planning for the unexpected. Everyone should have all their legal documents in order and have an established plan for their succession. Check out some key actions needed to prepare a proper life succession plan.
  • Trusts: It’s important to emphasize that it is your responsibility to ensure a solid plan is in place should you become incapacitated. I strongly advocate the importance of having a Trust. Trusts provide you with a partner, the trustee, to help share the responsibility for whatever lies ahead. So, if you feel overwhelmed by the thought of going on this journey alone, consider using a Trust.

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Risks of a Prenuptial and Advantages of a Trust by @AZanswers

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by Ann Zuraw | Featured Contributor 

You spent years working hard to build your business and have acquired a substantial amount of assets. Your wedding day is approaching, and you’re excited about your future, but have you thought about protecting your assets in the event you become a statistic. Currently, 50% of marriages fail.

Should you keep assets separate and will you disclose the total value of your personal assets? What if you become a statistic of a failed marriage, will you be protected? Or are you leaving yourself vulnerable to losing half of your property?

Many individuals concerned about protecting assets consider a prenuptial agreement, but not many follow through due to its unromantic connotation. Did you know a prenuptial agreement discloses the value of both of your assets and it’s not easy to enforce or sign?

In a second marriage, a prenuptial agreement would not protect you from having to pay for your spouse’s medical expenses. Alzheimer’s care can cost upwards of $9000 a month at a 24-hour care facility and can quickly drain your assets.

NOW THERE IS A BETTER OPTION, consider using a “Domestic Asset Protection Trust.” It will protect and control your assets using a situs (the place to which, for purposes of legal jurisdiction or taxation, a property belongs) of South Dakota, and you do not have to be a resident of South Dakota.

Below are some of the Advantages of South Dakota Trust:

  • Privacy – trust documents are not required to be filed as a public record.
  • Flexible and Amendable – can be revised as life and goals change.
  • No state income taxes – when income is not distributed.
  • Keep control of assets – maximum flexibility and control regarding the trust’s asset allocation, diversification, investment management, and distributions.
  • Asset protection – from creditors, lawsuits, and ex-spouses. Assets include securities, insurance, art, Family limited partnerships, LLCs, real estate.
  • Lower cost structure – allows for the Trustee duties to be bifurcated.
As you can see, women entrepreneurs can significantly benefit from this trust as it provides the ability for a settler to fund an irrevocable trust with a closely held business and keep control of the asset. It also can be signed, sealed and funded before marriage, helping avoid an awkward conversation with an intended spouse. Now you are free to decide how much of your hard earned money goes into the marriage pool without guilt or pressure from outside forces.
Click Here to View Ann and David Discuss A South Dakota Trust
Ann Zuraw

 

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Defining Success – it’s not just about the money! by @AZanswers

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by Ann Zuraw | Featured Contributor 

Since many of you are entrepreneurs with your own businesses,–you probably work hard all the time. However, your profit and loss statement is not the definition of your success.  As you can see in the financial life infographic—your assets cover much more: family, house, retirement, legal, investment experience, job/career, community/network, attitude, education and health.  When we define wealth, we usually want to know a person’s net worth in terms of assets minus liabilities. But how do you define assets and liabilities?   It’s not how much money you make, but how are you living your best life with the money you have.  There are many factors to consider.

Take into account all the components to achieve the best quality of life when making financial decisions. When  any of these financial life factors are disappointing or not where you expected, it can affect your total well-being. Be careful not just to measure the dollar value of your assets.

  • Sustain a healthy lifestyle and the desire to invest the time and energy needed to improve health, i.e. healthy diet, exercise and regular exams.
  • Being content with where you live, and having the financial means to continue to live the lifestyle you enjoy without being financially fearful.
  • Maintain healthy relationships with family, friends, and community. Utilize all the resources available and give back to the community, all this leads to a sense of well-being.
  • Lifelong learning builds on human capital. You are your most valuable asset. Improving your skills can enhance your earning potential.
  • Appreciation for self and value the contributions you make to the world whether it is through your own business, family and/or community.
  • Be mindful of your finances, when you live within your means while saving as much as possible and spending wisely you give yourself the freedom to have a happy, healthy life that includes options.

Being “wealthy” is not just about having lots of money, it’s about being satisfied with the life you are living and the continued effort to expand upon your success.

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Lessons I Learned Growing Up in the Family Business by @AZanswers

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by Ann Zuraw | Featured Contributor 

“Luck is what happens when preparation meets opportunity” — Seneca

The lessons I’ve learned growing up in a successful family real estate business are countless. (How you define “successful” is a discussion for another day.) Today as a business owner myself; I realize luck had nothing to do with it!

My family worked diligently to master the complex challenges and intricate details of a successful working family business. They enforced certain conditions and boundaries, created a fair and transparent family board and put business before family to ensure their success.

My family understood that with knowledge, perseverance, and commitment from each family member, they would build a business that would survive for many generations (the company started in 1928). They enforced ethical business practices and made business matters a priority over family issues – this rule was never debated, just a fact.

The real estate development company owned by my family had a simple rule: No individual was to personally profit from the business, and all revenues were reinvested, there were no dividends, no payouts, no loans. All capital gains were to be reinvested to avoid taxation. The long-term goal was to build the company and develop the land.

Looking back at how our family managed the business with an infrastructure, which was instrumental.We evaluated the business performance using investment measures, professional board meetings following Robert’s Rules of Order, and with the transparency of all information.  The culmination of the years and generations of hard work and perseverance was the vote sale of the company in 2007.

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