10 Strategies for Business Owners to Create, Manage, and Distribute Wealth

The global pandemic brought on some challenges like supply chain delays, inflationary spikes in segments of the economy, and a very tight labor market and despite them your business is still successful. Yet maybe these challenges, or even other circumstances, have placed financial pressure on your business that you still need to navigate. Whether your business is booming or under a bit of strain, a key question still needs asking: How is your personal financial situation?

A healthy business does not automatically translate into you being on a positive track toward your long-term financial priorities and goals. Similarly, a business with challenges does not automatically translate into a troubled personal financial situation. Business owners who have a healthy financial life have been intentional about achieving that success. Those who are not yet financially successful, or who do not know how to become intentional in pursuit of financial health, can implement 10 strategies to begin that journey

  1. Pay yourself first. Saving income into a qualified retirement plan, starting at the youngest age possible, can reward business owners with the power of compounding growth over a lifetime. 
  2. Know where your money should go. Optimally, a maximum of 50% of gross income will go toward financial needs: loan payments and taxes. The next 30% of income can go toward wants, otherwise known as lifestyle spending, allowing 20% to be saved toward long-time financial priorities.
  3.  Know where your money goes. A fiduciary financial planner, or even budgeting software, can identify how your income is currently spread across your financial needs, wants and savings. If savings are not 10% to 20% of gross income, it greatly reduces the probability of funding future financial priorities.
  4. Properly align financial priorities: needs, wants and savings. Reconcile the gap between where your money is going relative to where it should be going. Determine, either with a fiduciary financial planner or independently, how to redirect personal cash flow into the right categories. 
  5. Properly align loans. Rather than paying down debt as quickly as possible or avoiding debt altogether, wealth can accumulate tax-efficiently at a faster rate through pairing an intentional debt repayment methodology with the funding of a qualified retirement plan or other tax-efficient vehicle. Keys to success include establishing or refinancing into loans with tax-deductible interest and/or very low fixed rates with longer terms. Proceeds from any reduction in required monthly loan payments should be entirely redirected into savings, rather than spent on lifestyle.
  6. Design the best company retirement plan for your cash flow. Small business owners can utilize standard or even custom-designed company retirement plans to save very large sums annually on a pre-tax and tax-deferred basis. 
  7.  How much you can afford to spend. While no one wants be eating ramen forever in order to save money evaluate where you should be spending money. Maybe you don't need the most expensive house or the most luxury car. Creating a comprehensive plan that balances the wants of today with the need for long-term financial health can be beneficial to helping find that balance.
  8. Comprehensive approach to investing. Portfolios should be considered in aggregate and in the context of your need, ability and willingness to take investment risk. Assembling and rebalancing a globally diversified portfolio in pursuit of market-like returns follows the evidence of successful investing.
  9. Manage risk through proper insurance coverage. Insurance transfers financial risk from an individual, or a business, to a larger pool of people and companies. Transferring risk protects against undesirable and unexpected events. Insurance is not an investment vehicle, and it is not a retirement plan structure. It is, however, critically important to be protected across many areas of risk at a proper level. 
  10. Establish an estate plan. A proper estate plan should include all documents that will empower successors upon one’s incapacitation or death, plus specify who and/or what will benefit from the transfer of possessions and assets after death. 

It is important to recognize that these strategies are not arbitrary but are instead designed to specifically support the pursuit of defined, personal financial goals. Rather than focusing only on your business operations, you should implement processes to comprehensively connect your business and your personal financial health. Your personal income starts with the bottom-line financial health of your business, yet, by applying these 10 strategies, your priorities for the future do not have to remain dependent solely on the present health of your business.

Copper Leaf Financial can help you situate your personal finances to help your business succeed. With offices in Rutland and Williston, Vermont Copper Leaf Financial develops a customized wealth management plan designed to integrate every aspect of your financial life. Call us today at 802-878-2731 to schedule a strategy session and begin building your road map to financial success. You can also email us at info@copperleaffinancial.com.

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