Quiz: How well are you looking after your Finances?
from Profit magazine
If there is one lesson for us all to remember from the dot bomb implosion, it's the need to be prudent and vigilant in safeguarding our personal capital. All too regularly, the best laid plans do go astray, so planning for the worst case scenario is always a wise recourse. Financial planning need not be an expensive or time-consuming exercise, but it does need to be looked after, and the sooner, the better. Trying to plan for likely contingencies requires knowledge and foresight, so here's a quick quiz to give you a head start.
1. Have you increased the risk to your personal finances by investing all of your equity in your business, or is your portfolio safely diversified into other opportunities?
2. Have you remained current on business insurance options such as Segregated Funds, Key Person Insurance and Overhead Insurance that help to guarantee your business's continuing viability in the event of an unexpected crisis? MEANING YOU SHOULD INVESTIGATE, BUT NOT NECESSARILY BUY THESE PRODUCTS? I’m suggesting some of these options are relatively new and I think the question suggests these are good ideas for a business owner to consider. A rewrite that contains the answer is: Do you hold business insurance options such as Segregated Funds, Key Person Insurance and Overhead Insurance or are you willing to risk your business's continuing viability in the event of an unexpected crisis?
3. Have your planned a tax-efficient exit strategy for your eventual retirement, or will Revenue Canada be the chief beneficiary?
4. What measures have you taken, such as incorporation or spousal ownership of equity and capital, to minimize your personal liability in case of business bankruptcy?
5. Do you take maximum advantage every year of all tax-saving vehicles available to you such as RRSP and RESP?
6. Have you engaged the services of a certified financial planner to review your personal finances and provide the best advice on how to manage your investments?
7. Have you provided any personal guarantees for company loans, potentially placing your home and other assets at risk in the event of business bankruptcy.
8. Have you provided an adequate salary for yourself and your family commensurate with your level of responsibility and hours spent on the job?
9. Have you ignored the potentially tax saving tools of an Individual Pension Plan (IPP) or Retirement Compensation Arrangement (RCA) for both retirement and succession planning for you and your business?
10. Do you increase your savings as your takehome pay increases by following a budget, or do you spend all of your paycheque (and often more?)
11. Do you practice sensible money management by automatic payroll deductions from your paycheque to a savings and/or retirement account, paying off your monthly credit card balances, and setting money aside for large purchases?