as her husband Mike pointed out, despite her significant income, Sandra faces a lot of competing pressures that cause her to worry about having enough money for both today and the future. She wants to give her kids the best possible start in life, meaning she and Mike are considering private school, not to mention other expenses like family vacations, summer camps, and extracurricular activities, many of which are not cheap. Sandra is also supporting her parents, who just moved to Canada from their home in India. In addition to her kids, and to some extent Mike, she now considers them her dependents as well.
And while she has a good job with lots of security, Sandra worries about saving for her future because she has no pension. With the health-care industry in flux, she’s concerned about job security. There are no guarantees that she will always earn what she brings in now.
Sandra’s anxieties lead her to take a fairly cautious approach to everything to do with money. Her investments tend to be very safe. She saves as much money as possible every year, shielding it in investments that are difficult to liquidate so that she and Mike aren’t tempted to access them for home renovations, trips or other lifestyle expenses.
Although Gary and Sandra are fictional characters, we bet you can relate to one or both of them. As a professional or the owner of your own business, you juggle all the tasks of managing your career and your bottom line, plus all the other demands on your time and energy, including family.
You probably get tremendous satisfaction from your work. And one of your biggest motivations for working so hard is to ensure that you create as much value and income as you can for yourself, and especially for the people you love. Yet you probably spend most of your time building your business or practice and very little time figuring out how the proceeds of your hard work will help you achieve your long-term goals.
How would you answer the following questions?
•Have you figured out the best way to extract income from your business in a tax-efficient manner, so you’re getting the most value from your hard work?
•Do you have a strategy to protect and expand your assets with the right balance between risk and reward? Have you determined how to achieve the appropriate level of return without exposing yourself to unreasonable risk?
•Do you have a plan to successfully transfer your business or the wealth you generate from it to your family when you stop working? Have you figured out what would happen if that day comes sooner than expected, in the event something happens to you before your planned retirement?
We’re guessing you didn’t answer yes to all of those questions. If that’s the case, you’re certainly not alone. Gary and Sandra would probably answer no to all of them. Like many other busy people, you’ve been focused on responding to all of the immediate demands that are placed on you. That doesn’t leave much time for long-term planning.
Maybe you have a vague sense that it will all work out in the end. Someday, you’ll organize things properly. Or maybe someone will come along and offer you a big cheque and take over what you’ve created. Then you and your family will ride off into the sunset and pursue all of your dreams.
But deep down inside, you know it’s not that simple.
You want to structure your affairs properly. But the truth is that when it comes to researching, analyzing, and planning the best way to extract, protect, and increase the money you earn, you just don’t have enough time left over after work and family commitments to be proactive, thoughtful, and comprehensive about your approach.
The answers aren’t quick and easy, nor are they readily available from existing financial literature or the vast majority of financial advisers. Here’s why:
AS AN OWNER-MANAGER OR PROFESSIONAL, YOU HAVE UNIQUE REQUIREMENTS AND UNUSUAL RISKS THAT MOST FINANCIAL ADVISERS AND AUTHORS SIMPLY DON’T UNDERSTAND OR TAKE INTO ACCOUNT IN THEIR ADVICE TO YOU.
From years of working with clients just like you, we can tell you that owner-managers and professionals are exposed to a number of unique hazards and risks. These traps and dangers aren’t addressed by the plethora of generic financial literature that you find at the bookstore, nor by the financial advisers at most banks and brokerages, because these issues aren’t relevant to the majority of consumers, who are employees.
As an owner-manager or professional, your situation is remarkably different. So you have to move carefully and strategically to avoid making the wrong decisions. We’ve identified 12 pitfalls that are unique to people like Gary and Sandra, and you:
1.Thinking you are in the same situation as others who don’t have your unique requirements.
2.Having an investment strategy that’s like a fad diet: too aggressive, risky and unrealistic.
3.Stressing about your finances and looking up investment values daily.
4.Thinking you’re diversified when you’re really not.
5.Paying too much in fees, and paying fees that are not tax-deductible, therefore costing you extra money.
6.Having too much or the wrong kind of life insurance.
7.Paying too much in taxes because you’re taking money out of your business the wrong way.
8.Relying on a cookie-cutter financial plan that’s actually a sales pitch to get you to invest or buy insurance or other financial products.
9.Using a plan that doesn’t take into account all the facets of your life and business and all the members of your family.
10.Thinking succession planning is a transaction you can work on when you’re close to retirement.
11.Investing before reducing debt or borrowing unreasonable amounts to invest.
12.Being afraid to spend because you don’t know where you stand. Believe it or not, you might actually be able to spend more than you think you can.
If you don’t have a strategy to navigate all of these pitfalls, or rely on the wrong advice, you could be at risk of losing tens of thousands of dollars, if not more, over the next few years. You could be forced to retire a year or two later than you otherwise might, maybe even later than that. And you could be creating a much smaller nest egg for your family, despite all your hard work.
You know what’s at stake. But we’re guessing that because of your busy life and the complexity of your financial requirements, you haven’t taken the time to sit down and create a comprehensive, customized, and detailed financial plan, or at least not one that addresses all of your needs. Perhaps the idea is daunting or even scary.
Certainly, research shows that 65 per cent of owner-managers and professionals have no plan at all. Of the remaining 35 per cent, our experience is that about 34 per cent have a plan that isn’t thorough enough. Maybe they have something that was given to them from a financial service provider that looks like a plan, but it’s really just a rationale for investing with that adviser. We’ll address these cookie-cutter plans and explain why they are nowhere near what you need.
If you’re in the remaining one per cent, congratulations and stop reading. You don’t need this book.
But if you’re in the vast majority, this book can help you. And it’s not a long or tough read that feels like a homework assignment. It’s meant to be helpful, relatable, and interesting. There are no acronyms or charts and graphs. You won’t have to learn a lot of new terminology.
