Is it time for you to regain control of your finances?
Elizabeth and Doug thought they were doing everything right with their finances.
Elizabeth quit her graphic design job to freelance two years ago and was building up her list of clients. She was careful about rolling over the $75,000 she accrued in her corporate 401(k) plan. Doug, a successful sales executive and knowledgeable investor, had a variety of investments in stocks, mutual funds and IRAs, as well as a beautiful home in Manchester.
When Doug came to see me, he had just won a major contract and was coming into a considerable sum of money. He was spooked after losing money on a stock in the aftermath of a negative earnings report.
“I should have seen it coming,” he explained, “but I was traveling every week, and I took my eye off the ball.” When we looked at his portfolio, he had $50,000 in a low-interest money market fund — money from sales commissions he just hadn’t had the time to invest. In addition, his 401(k) plan was heavily concentrated in company stock — always a risk in the event of a drop in share value. When Elizabeth and Doug’s sons were born, they set-up state-sponsored college funds, but they’d been lax about making contributions. As a result, it is unlikely enough money for tuition and expenses will be there for the boys, ages 9 and 12, when they need it.
Elizabeth and Doug’s situation is not unusual. Entrepreneurs and business professionals understand the importance of saving for long-term financial goals, yet personal finances take a back seat when it comes to driving the business. They know it’s important to revisit their portfolio periodically and reallocate investments as needed. But they don’t act and the money sits.
They come to us when there’s a sudden increase in cash flow, like a big product order or sale of their business, and they’re looking for investment advice. These are smart, savvy people. They hold master’s degrees, engineering or law degrees. They’ve built their business, or expanded their practice or franchise, under challenging circumstances, often at great personal expense. They’re at a stage where they no longer have to reinvest the money back into the business or juggle to pay vendors. They know they should do a better job at managing their investments, but there’s the notion of, “I’ll get around to it” — and then the next big order comes in.
The result is their money is sitting in money markets or in under-performing investments.
The best way to regain control is to make your finances a priority, whether you choose to manage your portfolio yourself or let a financial professional do it for you.
If you decide to go it alone, that means finding a partner who can provide low-cost, quality tools and research so you can make the best decisions possible. Those who have not reviewed their portfolio in the past six months should seek professional help. You have worked too hard for your money to sit idle.
If you’ve intended to do it yourself, but haven’t, or recognize you could use some help, here are some suggestions:
• Admit that you don’t have the time, and just let go. This is often the toughest part for entrepreneurs who are used to being in charge. Sure, you can do it yourself, but why? You pay your accountant and lawyer for their services. Go to a financial adviser and put your efforts into growing your business.
• Once you’ve decided to go to a financial adviser, make the appointment, even if it’s six months from now. Between now and then you’ll find an excuse to cancel, so treat it like a client meeting and resist the temptation to reschedule.
• Give yourself a holiday present. Since the holidays are slow for many business owners, it can be a good opportunity for you (and your spouse) to meet with a financial adviser. Reward yourself for having the good sense of making personal finance a priority — by delegating it to somebody else.