You’re an all-star business owner/manager. The company is growing, revenue forecasts are all pointing up, and new opportunities seem to be lining up before you. Everything’s looking great… except for your personal finances.

It’s a conundrum we’ve encountered all too often as CPAs: a world-class business owner whose company ledger is all tidy, while their own family finances are in disarray with minimal planning in place.

It’s not necessarily surprising, if you think about it. Top-notch business people obsess so much about their company, thinking strategically about its growth, that they lack the time and energy to place a similar emphasis on their own future. It’s like a person who keeps their professional work space shiny as a penny, while their house is cluttered.

In looking at the personal financial issues of business owners, they’re often deficient in one or more of the following areas:

Lack of diversification in investment portfolio

Lack of estate planning

No will or outdated will

Underinsured or not insured

Not planning for retirement

As a business owner, it’s natural to have confidence in your own enterprise and see it as your best investment. But it’s important to diversify your holdings so you can reap the highest return and protect yourself against calamity. The Great Recession wiped out many owners who hadn’t planned for such a possible event. Think of diversification as your armor and shield.

In terms of estate planning and wills, it’s surprising how many people in their 40s, 50s or even older have not done any at all! More commonly, people make out a will and a plan for passing on their accumulated wealth but leave it untouched for years – even decades.

If you don’t have a will, implement one immediately.  Ideally, wills should be updated every two to three years. Circumstances can change greatly during that time, whether it’s the need for new trustee or a redesignation of your favorite charities you want as beneficiaries.

Some business owners fail to properly insure themselves personally – life, disability, home, personal property, etc. – because they are optimistic people, or would rather spend the premiums on something else. Like diversification, it’s a matter of protecting yourself against the unforeseen. Consult with a trusted insurance broker to actively manage your risk exposure.

When retirement age approaches, business owners often don’t have an exit strategy. Much of their wealth may be tied up in the company, so it’s a matter of monetizing that so you can enjoy the retirement they desire. Succession planning can seem daunting if you haven’t thought about it before. I suggest reading our series of articles as a good starting place.

It’s also important to talk to your spouse or other family members about retirement: where you want to go, what you want to do, etc. A solid foundation of communication is the basis for an enjoyable retirement. Ask yourself and your loved ones the hard questions.

Given increased life expectancies, it’s more important than ever to plan properly for a secure and happy retirement. Don’t get so wrapped up in the day-to-day challenge of running your business that you lose sight of your own needs and responsibilities. Your family and loved ones deserve as much!

Tom Sponsel is managing partner at Sponsel CPA Group.

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