As our businesses grow and our schedules fill with serving clients, it’s easy to overlook how our personal financial needs might have changed. Here are eight best-practice tips of millionaire business owners and how they personally protect their wealth.
1. Move your money from banks to brokerage accounts.
Instead of having their money tied up at banks, most affluent individuals hold brokerage accounts at investment companies. The advantage is that you can more easily invest excess cash in fairly low-risk interest- or dividend-bearing investments such as bonds. I’ve even seen multi-millionaire use their brokerage accounts as checking accounts.
The bottom line is your money should always be working for you. Make sure you don’t have huge amounts of cash lying around earning no interest. It’s harder these days to get a good interest rate, but not impossible, and every little bit helps.
2. Protect yourself with insurance.
I suspect everyone reading this has the requisite auto and homeowner’s insurance. The question is, are you fully covered for every contingency that could happen, and if not, are you willing to shoulder the risk? Just a few of the types of policies to consider include:
Personal: home, auto, health, disability, dental, life, umbrella, and many more.
Business: property and casualty, business services liability, director’s and officer’s liability, worker’s compensation, business interruption, auto, non-owned auto if you have employees driving for you using their own cars, health insurance for workers, life insurance for officers, and many more.
I recommend meeting with an insurance professional who can perform a risk audit to make sure you are aware of any coverage holes, especially if your business has grown significantly or your needs have changed.
3. Keep more of what you make.
There’s nothing wrong with paying the least amount of taxes that are legally required. The fourth quarter is when to make most of your tax-saving moves, so don’t wait until March or April when it could be too late.
Make sure you have a great tax adviser, and reach out to them at least once a quarter for ideas on how to keep more of what you make.
4. Hire slow, fire fast.
You’ve probably heard it before, but it’s more important than ever. It’s a good idea to run extensive background checks on all new hires (and current employees as well if you haven’t done so). A criminal background check is essential, and I’d recommend running employment verification, social security number match, education verification, and social media search (You might be surprised to discover you were considering hiring someone who tweets a lot of four-letter words with known gang leaders).
If your state laws allow it, I recommend running a credit check too. Risk of fraud becomes real when three things are present: 1)opportunity due to poor cash controls (which is more common in small businesses) 2) dire need, which has grown exponentially lately as life savings have been depleted and borrowing has increased, and 3) rationalization in the employee’s mind. You can really only control number one, but with a credit check and where it’s allowed by law, you can see if number two is present. Be careful, though; in many states, it’s illegal to make hiring decisions based on credit checks if the person won’t directly be handling money.
5. Create a bright future.
Pay your future self out of the earnings you make today. Set up a retirement plan so that you can maximize deductions and ensure a comfortable future for yourself.
6. Make it easy on your heirs.
It’s never a good time to think about what will happen after you’re gone. But especially if you run a business, you’ll want to not only have a succession plan in place, you’ll want to make sure someone knows enough about your operations to be able to slip in to do an orderly shutdown, a sale, or continue operations. Something as simple as not knowing your passwords and pins or where all of your accounts or contracts are can wreak havoc on your grieving loved ones, not to mention business operations.
If your personal will is not up to date and your circumstances have changed, then it’s time to revisit documents such as your medical instructions, organ donation wishes, burial preferences, and the like. Gruesome, yes. But imagine these two scenarios: 1- your grieving family and they don’t have a clue where anything is, what to do next, what you wanted, and the confusion that exacerbates the grief, and scenario 2- your grieving family who has a clear checklist of where everything is, who to call for help, what to do next, and exactly what your wishes were in these emotional times. Which one would you wish on your loved ones?
7. Pay attention to your numbers.
I hear it over and over again: the people who become millionaires are clearly on top of their operational numbers. They know their business by the numbers, inside and out.
A good accountant can help you develop the systems and reports you need to stay close to your numbers like the millionaires do. Let us know how we can help you with this.
8. Pay it forward.
When you’ve been successful, you can decide if you want to support causes that are near to your heart. This might mean helping people in need that you can relate to, volunteering, or simply providing a big tip to wait staff. People who are highly successful often create their own foundations and nonprofit organizations so that they can become champions of causes they believe strongly about.
How did you measure up on the eight tips to fiscal responsibility? If you know you have some work to do, mark it on your calendar, break it down into small manageable steps, and get started on building or protecting your financial prosperity. If we can help in any way, please feel free to call us.