Financial Planning Helps You Make Your Money Count For The People You Love

One of the biggest mistakes I’ve seen people make when it comes to financial planning is to ignore it completely or put it off for so long that the big benefits of financial planning expire worthless. The earlier you start planning the more bang you’ll get for your buck, however, financial planning is valuable at any age.

Most people put off thinking about planning because of misconceptions about what the process involves or how it can benefit them. As part of its public education efforts, Certified Financial Planner Board of Standards Inc. (CFP Board) surveyed CFP® professionals about mistakes people make when approaching financial planning. The survey showed the public’s most frequent mistakes included:

· Failing to set measurable financial goals.

· Making a financial decision without understanding its effect on other financial issues.

· Confusing financial planning with investing.

· Neglecting to re-evaluate their plan periodically.

· Thinking that planning is only for the wealthy.

· Thinking that planning is for when they get older.

· Thinking that financial planning is the same as retirement planning.

· Waiting until a money crisis to begin planning.

· Expecting unrealistic returns on investments.

· Thinking that using a planner means losing control.

· Believing that financial planning is primarily tax planning.

Make Your Money Count with A Plan

To avoid making the mistakes listed above, realize that what matters most to you is the focus of your planning. The results you get from working with a planner are as much your responsibility as they are those of the planner. To achieve the best ROI from your financial planning engagement, consider the following advice.

Start planning as soon as you can: Don’t delay your financial planning. People who save or invest small amounts of money early, and often, tend to do better than those who wait until later in life. Similarly, by developing good financial planning habits, such as saving, budgeting, investing and regularly reviewing your finances early in life, you will be better prepared to meet life changes and handle emergencies.

Be realistic in your expectations:Financial planning is a common sense approach to managing your finances to reach your life goals. It cannot change your situation overnight; it is a lifelong process. Remember that events beyond your control, such as inflation or changes in the stock market or interest rates, will affect your financial planning results.

Set measurable financial goals: Set specific targets of the results you want to achieve and when you want to achieve them. For example, instead of saying you want to be “comfortable” when you retire or that you want your children or grandchildren to attend “good” schools, quantify what “comfortable” and “good” mean so that you’ll know when you’ve reached your goals.

Realize that you are in charge:When working with a financial planner, be sure you understand the financial planning process and what the planner should be doing to help you make your money count. The planner needs all relevant information on your financial situation and your purpose (what matters most to you). Always ask questions about the recommendations offered to you and play an active role in decision-making. Being in charge means your financial planner doesn’t take all the responsibility for every decision.

Understand the effect of each financial decision and the big picture: Each financial decision you make can affect several other areas of your life. For example, an investment decision may have tax consequences that are harmful to your estate plans. Or a decision about your child’s education may affect when and how you meet your retirement goals. Remember that all of your financial decisions are will impact the big picture of your overall plan. This is where the skills of a professional financial planner can make a big difference.

Re-evaluate your financial situation periodically: Financial planning is a dynamic process. Your financial goals may change over the years due to changes in your lifestyle or circumstances, such as an inheritance, marriage, birth, house purchase or change of job status. Revisit and revise your financial plan as time goes by to reflect these changes so that you can stay on track with your long-term goals.

Successful planning offers many rewards in addition to helping you Make Your Money Count and achieving what matters most to you. When CFP® professionals were surveyed about the most significant benefit of financial planning in their own lives, the top answer was “peace of mind.” Over my career, many clients have told me that their purpose for financial planning is the same – peace of mind. When you invest the time and money to work with a competent and trustworthy planner, you are far more likely to go to bed at night knowing you did everything possible to make your money count for the people you love.

The Primary Cause Of Business Financing Frustration

Finding proper business financing is not easy at the best of times for most small and medium sized business owners and managers.

There are a number of reasons that collectively explain why the business financing market can be so difficult to understand and navigate.

But probably the single biggest reason is the lack of useful information about how the business financing market actually works.

Business financing information and education sources predominantly come in two forms: 1) Text books; 2) Major bank advertising.

If you’ve ever read through a educational finance text book or taken a business financing course, you already know how difficult it can be to apply the theories, principles, and strategies to a small or medium sized business.

Our formal education system provides limited information as to how the market place works, how to plan for financing requirements, how to manage periods of growth, decline, transition, start up, etc.

Sure academic books and courses can go through all these areas in great detail, but is the information practical, real world, something you can relate to and apply yourself as a manager or owner of a small or medium sized business?

In most cases, the answer is a resounding NO.

Most finance text books speak to big business financing dynamics that are not easily transferable to small and medium sized business scenarios.

Outside of the formal education system, the next great source of business financing information is the information provided by the major banks, which they tend to make available to you by the boat load through their broad based marketing campaigns.

Unfortunately, the information by itself seldom helps you determine if a particular institution would be able to provide you with financing, or what would be required to qualify for a loan.

The good news is that business financing sources continue to grow in numbers as more and more lenders carve out a particular piece of the market to service.

In order to take advantage of these alternatives, you need to have a solid approach in place when seeking business financing.

Here’s a short list of things to consider

>>> Develop a solid, ongoing, understanding of both your personal and business assets, income, and cash flow.

Regardless of the business financing model, these elements will always come into play to some degree.

Being able to demonstrate a solid understanding of your business financials is also an indication of your ability to manage the underlying business.

>>> Monitor and manage your personal and business credit.

Small and medium sized business financing is focused on both personal and business credit histories.

Regular reviews of both personal and business credit reports from the major credit reporting agencies are important to avoid errors and credit practices that can severely damage your borrowing power.

>>> Develop your marketing position.

Yes, seeking business financing is a marketing exercise.

When applying for business financing, you’re marketing your business to lending sources and they in turn are marketing their business financing programs to you.

Think of the lender as a customer to better understand what they’re looking for. Then, develop a business proposal that addresses all their potential needs and concerns.

>>> Research Lending Sources

There are lots of business financing sources. But there is also lots of variation in the types of business applications each one is prepared to consider.

Broad based lenders rely on credit history and net worth. As you get more specific in terms of financing application and industry, lender programs become more narrow and can be harder to locate.

You need to consider things like industry, sector, and geography when looking for business financing sources.

Financing consultants and business loan brokers can be an excellent source of information to aid you in this process.

>>> Qualify The Lender

Before you make a formal application, find out if the lender has the programs and lending track record to meet your specific needs.

Too often, the lender is doing all the qualifying.

>>> Compare your options

Depending on the scenario, there can be several financing strategies that could work for your business.

Make sure you take the time to compare before making a decision. The extra time spent could save you considerable time and money in the long run.

>>> Start Today

Regardless of what your business financing needs are right now, you should regularly invest time staying on top of your business financials, monitoring your credit, and researching financing sources that fit your industry and potential future requirements.

When the time comes to acquire capital, your proactive efforts can make all the difference in getting the capital you need with terms and timing that are acceptable to your business.

How To Deal With Your Small Business Finance Needs

One of the most challenging and time-consuming tasks for any business owner is to finance even a small business. While it is considered an essential part of running and expanding a business, it should be done properly and carefully so that it won’t hinder the establishment of the business as a whole. Small business finance is basically the connection between cash, value, and risk. Maintaining the balance of these three factors will ensure the good financial health of your business.

The first step that a business owner needs to take is to come up with a business plan as well as a loan system which comes with a well structured strategic plan. Doing this will certainly result to concrete and sound finances. It is of necessity that prior to your financing a business, you figure out what exactly your needs are in terms of small business finance.

In trying to determine your business’ financing requirements, keep in mind that you have to have a positive mindset. As the owner of the business, you should be confident enough in your own business that you will be willing to invest as much as 10% of your small business finance needs from your own pocket. The other 30% of the financing can be from venture capital or other private investors.

In terms of the private equity aspect of your business, you would want it to be around 30 to 40 percent equity share in your company for a period of at least three years and a maximum of five years. But of course, this will still be dependent on the value of your small business along with the risk involved. Maintaining this equity component in your company will assure you majority ownership of the business. As a result, you will be able to leverage the other 60 percent of your small business finance needs.

It will also be easier to satisfy the remaining financing needs of your growing business. You may opt to get the rest from a long-term debt, inventory finance, short-term working capital, and equipment finance. Remember also that as long as you have a steady cash position in the business, many financial institutions will be more than willing to lend you money. In this respect also, it is recommended that you get an expert commercial loan broker who will do the selection of your financing options. This is also a crucial stage as you would want to find the most appropriate financing offer to meet all your small business finance requirements.

These are just some of the important considerations that need to be taken when financing a small business. There are, however, so many business owners who do not pay enough attention to these things unless their business is in crisis. As a business owner, what you should keep in mind always is how you can grow and expand. Therefore, have a small business finance plan as early as possible so that you can make sure that every financial aspect of your business is in good condition.