Planning Before the Plan

According to a recent survey by nonprofit American College, about a third of small business owners have no financial plan in place. Whether it’s because these owners feel that the business will take care of them in the long run or simply don’t have the time, the fact is that they have no solid plan for how they will fund the latter part of their lives. When you think about the reasons you started the reason your business in the first place—among them to create wealth—the lack of planning takes on an even bigger dimension.

The bottom line: Hope is not a strategy. Business owners tend to compartmentalize their finances and hope they have them coordinated in their heads. But, before you even approach a plan, it helps to get organized and get everything on paper. In terms of financial planning, that’s the step that most people tend to skip. It takes time and effort to get the building blocks in place (budget, financial statements, credit structure, etc.). And, most often, business owners, and advisors, tend to focus on just the investable assets, not on how all the pieces fit together.

When we approach financial planning, we tend to tell clients to focus on what they can control. Today’s “headline” financial or economic events keep coming and change with ever-increasing speed, never mind the fact that personal finance gets more complex every year. When we approach the “plan before the plan,” it helps to walk through a financial punchlist of sorts, we we’ve broken down into three core steps:

  1. Laying the foundation. This includes documenting the budget, financial statements, creditors and credit structure, wills and estate, safe deposit box inventory, and current tax returns.
  2. Building the house. We look at short- and long-term savings, college savings, and retirement savings.
  3. Protecting the house. Health insurance, life insurance, disability insurance, auto and home insurance, and long-term care insurance.

Perhaps the most critical issue—and one that often stops people in their tracks—is having a personal budget in place. There are other considerations, but having the information above in hand helps us move forward with a plan that has a solid foundation. Just as important as laying that foundation is having a partner that can help guide you through the process and remain accountable to keeping you on plan.