Why families don't talk about money or estate planning decisions.

I've been working with senior clients for the past 31 years, first as an insurance and financial services agent, and for the past 20 years as a financial planner and daily money manager (DMM).  The one common denominator that I have seen among families is a lack of communication about finances and estate settlement decisions between senior parents and their adult children.

As we, or our parents reach retirement age and become seniors, why is it so difficult to talk openly about finances and estate settlement wishes with the family?  Seniors think about the possibility of becoming dependent upon family members, or worse, ending up in an assisted living facility.  Adult children are keenly aware that if something happens to their senior parent(s) someone would need to step in and manage the finances or settle the estate.  Here's where it gets tricky.  My professional experience has been that Mom and/or Dad are not taking the lead and proactively communicating their personal information and wishes with the kids - they just don't want to think or talk about it.  I've also been told countless times by adult children that none of the kids want to be the first to bring the topic up for discussion for fear of being seen as "a little too interested in what their inheritance may be."  Now throw blended families into the mix, and of course a little (or a lot of) dysfunction and believe me, nobody wants to bring up the issues that everybody knows really need to be discussed. 

So how do families overcome these communication issues?  Sometimes getting outside help can make all the difference.  I've found as a professional daily money manager that my senior clients have no problem disclosing all of their confidential information to me; in fact, they like the fact that someone other than themselves has a complete record of everything.  For many clients their greatest fear is that the kids will fight over financial decisions or the estate settlement wishes.  Having someone outside the family to assist their loved ones in managing the estate and carrying out their estate settlement wishes gives them peace of mind.

My best advice is to bring all family members together to proactively discuss the financial and estate settlement details long before any issues come up.  Decide as a family how you will proceed going forward and who will play what role.  Discuss whether or not you want professionals to be involved to provide services or if you will try to handle everything inside the family.  If family members are going to provide services, what should their compensation be for providing such services?  What checks and balance process will be used to assure finances are being managed appropriately?  More often than not providing oversight and care will fall on one person rather than being divided evenly among all of the siblings.  Get everything worked out in advance.  Maintain an open line of communication and review the game plan periodically to keep things current.
  

Three Money Management Tips For Small Business CEO’s

Running a successful business takes more than a good idea. Entrepreneurs must also have good money management skills in order to make their business a true success.

Understand your relationship with money 

I advise you to analyze your behavior and unique characteristics to understand what your strengths and weaknesses are when it comes to managing money. I once read that many rich people remain rich by behaving like the poor, while many poor people remain poor by behaving like the rich, and I think there is a lot of truth in that statement. When it comes to managing money as an entrepreneur you have to separate your personal finances from you’re business finances, and run your business as a completely separate pocketbook. Understanding how to capitalize on your own strengths and manage your weaknesses when it comes to daily money management will be critical to your business success.

Have a daily target and an action plan

You probably wouldn’t get in your car, start it up, and just start driving without a predetermined destination in mind. Golf wouldn’t be much of a game without the hole to shoot for. Even a driving range has yardage markers to provide a reference point. So why is it then that most small business owners show up at their business each day with no real measurable financial objective for the day?  Every day that you start out with no clear goals to work toward is a day that you are getting into your car and taking a trip to nowhere. The most successful entrepreneurs establish simple, clear and measurable goals, and manage company activities to those goals. Developing a financially healthy business does not happen by accident. The two most fundamental financial bench marks for a small business CEO to target and manage to is a break-even point and a pre-targeted profit goal. You might be taking in money each day, but are you really making money?

Run a financially healthy company 

I’ve read plenty of articles and books that advise people to pay themselves first as a mean of getting ahead financially. When it comes to the daily money management of a small business, that advice doesn’t hold true. The #1 reason that the failure rate of small businesses is so high is because most entrepreneurs are under capitalized and they take too much money out of their businesses too quickly. Constantly taking all the money out of the company will sooner or later take you down.  If you want to run a healthy company, know your break-even point, set daily, weekly and monthly profit goals and manage company activity toward achieving those goals. Once you start having financial success remember to keep your eye on the target and your nose to the grind stone.  Remember, rich people remain rich by behaving like the poor. Build company reserves and then gradually start rewarding yourself for the hard work you’ve done by taking more and more profits out of the company while maintaining a healthy reserve.

The Growing Need For Seniors To Protect Themselves Against Elder Fraud

America is aging. Between 2011 and 2050, the United States is projected to experience rapid growth in it’s senior population. The 78-million member baby boom generation (born between 1946 and 1964) began turning 65 in 2011.  Over the next 10 years the older American segment is projected to grow 23%. By 2020, this market segment should be nearly 119 million people and represent 35% of the total population.

The number one fear expressed by many seniors regarding their retirement years, is the fear of outliving their money. Managing financial resources wisely for this generation has become more important than ever before. A rising concern for many seniors and their family members is the issue of elder fraud.  

Seniors tend to be trusting and charitable to strangers making them more likely to fall prey to a solicitation for money. They often live alone, isolated from family and friends who could otherwise advise them.

Con artists, unethical repairman and contractors are aware of the possible effects that age has on memory, and a seniors’ potential lack of financial savvy. These individuals realize that seniors are often poor witnesses. Being victimized or taken advantage of can also make seniors so embarrassed that they are reluctant to come forward or even tell family members.

Seniors are often dependent upon family members and caregivers, making them susceptible to being taken advantage of by these very same people. Children and grandchildren often approach their loved one for a loan. Too often these loans go unpaid creating a financial hardship for the senior later in life when they need that money to provide supplemental income or to pay for long-term care expenses.

One solution that many seniors and their caregiving family members are turning to is to hire the services of a professional daily money manager (DMM) to pay bills, reconcile accounts, maintain records, prepare monthly or quarterly financial statements, and more. 

Studies have shown that DMM services can help seniors to maintain their independence and remain in their homes longer avoiding costly nursing home care. DMMs also provide adult caregivers relief from some or all daily money management tasks while at the same time providing outside financial controls which can reduce or eliminate claims of caregiver fraud.

The best way to start your search to locate a DMM is through referrals from trusted friend, family members, and community organizations. You may also wish to contact the American Association of Daily Money Managers (AADMM). This organization will provide referrals to DMMs in your area. You can visit their website at www.aadmm.com.

Preparing a Personal Balance Sheet

Taking control of your financial future is a process. And, as with any process, it is important to monitor your progress. One of the best ways for you to measure financial progress is to periodically prepare a personal balance sheet to determine your net worth.

Calculating your personal net worth is also the best way to know exactly what your starting point is as you begin to develop a financial plan and set goals for yourself. A balance sheet calculates your net worth by comparing your financial assets (what you own) with your financial liabilities (what you owe). The difference between the two is your personal net worth. Don’t be discouraged if your net worth is negative, keep in mind that this should be an accurate depiction of your financial situation. Setting goals is much easier once you know what your current net worth is.

Before you get started, pull together all of the information that you have available. You’ll need your latest bank statements, as well as the principal balance of any loans you have. Once you have all of that information available, start developing your balance sheet by listing all of your assets (financial and tangible assets) with the values.

• Cash (in the bank, money market accounts, or CDs)
• All investments (mutual funds, college savings accounts, individual securities)
• Home value (the resale value of your home)
• Automobile value (the resale value of your car)
• Personal Property Value (resale value of jewelry, household items, etc)
• Other assets

The sum of all of those values is the total value of your assets. Your goal should be to continually increase your assets.

Next, you can look at your liabilities, which should be everything you owe. Here are some common liability categories:

• Remaining mortgage balance
• Car loans
• Student loans
• Any other personal loans
• Credit card balances

The sum of all of the money you owe is your liabilities. As you start to pay down your debt, your total liabilities will decrease. The difference between your assets and your liabilities is your net worth. You can start to increase your net worth by decreasing your liabilities, increasing your assets, or by doing both! For many people developing a debt reduction plan is the best place to begin taking control of their personal finances and growing their net worth. Remember, a dollar saved is a dollar earned, and reducing debt and interest payments can eventually lead to financial freedom. Make sure you continuously update your personal balance sheet (I recommend quarterly) to ensure that you are tracking the progress toward reaching your financial goals. 

3 Components to Small Business Success

I was recently asked what one thing separates the entrepreneurs who succeed from those who ultimately fail. I thought for a moment and answered with a single word - adaptability. Since that conversation, I've given considerable thought to the question.

I've actually identified three major components to small business success. The first is passion.  If you have a strong enough belief in a product, service or business concept that you are willing to step out from the crowd and publicly stake your claim and begin chasing down your dream, you've got passion.  Passion is energy! It's attitude and belief.  Passion is fuel for the entrepreneurial spirit. If you lose your passion, your out of gas.

The second component is Vision.  You have to be able to look into the future and know where you want to take your company and what it will look and feel like once you get there.  Visualizing a future checkpoint is only half of the equation though.  The big miss for many would-be entrepreneurs is also to have a vision of the hard work, the challenges and the climb to the summit.  If the passion remains strong, then the vision becomes clearer, and the day-to-day climb becomes enjoyable.

The third and final component is determination.  As a small business owner, your commitment to your passion and your vision will be tested regularly.  Randy Pausch, in his last lecture titled Achieving Your Childhood Dreams said this, "The brick walls are not there to keep us out. The brick walls are there to give us a chance to show how badly we want something.  The brick walls are there to stop the people who don't want it badly enough."

Being determined enough to run into the wall harder and harder isn't always the answer.  Sometimes you need to figure out how to get over or around the wall, and that brings us back to adaptability.  Determination and adaptability work together a lot like a teeter-totter.  It's the ups and downs that make it a game and keep it interesting.  

In summary, it's passion that fuels the engine, vision that provides navigation and steering along the way, and your determination to stay on the road until you reach your destination that makes you successful in business.

Using Your Business Plan as a Management Tool

Most small business owners don't understand the value and importance of developing and maintaining a written strategic business plan (SBP). They see taking valuable time out of their business day to develop a written plan as an unncessary task that they don't have time for and don't really need.

I've had many small business owners tell me that business plans are for large companies or for businesses who are approaching a bank to borrow money.  My response to that line of thinking is this:  All companies, regardless of size, should have a written plan.  For small companies particularly, having and using an SBP as a management tool can ultimately make the difference between success and failure.  An effective business plan can save you time and money by helping you prioritize and focus your business activities.  An SBP can give you control over your personnel management, marketing activities, finances and day-to-day operations.

Packaging your business in document form and telling the story of your company in print almost forces you to view your business objectively.  Your plan should clearly present your current position, your vision for the future, including specific measurable goals, and your detailed action plans for realizing those goals and your vision.

As a business consultant, one of the benefits I bring to my clients is that I ask a lot of questions.  By asking questions like why do you ...?, how do you...?, or why not...?, it forces them to not only explain the reasoning behind their process, it challenges them to consider other alternatives.  As a small business CEO, you should constantly be looking at your strategic business plan and asking questions of yourself, and your entire team, as though an outside consultant were asking those questions.

Your written SBP provides a valuable management tool that you can use to clarify and improve every moving part of your company.  It also forces you to measure actual results against written objectives, which, believe it or not, is all too often a key missing link for measuring the financial health of most small businesses.

My challenge to you is to make the commitment to develop or update your SBP over the next ninety days.  I am confident that you will find that the value of getting your entire business operation broken down on paper is well worth the time and energy it takes to do it.  If you decide to tackle the planning process yourself, a good resource is a book by Rhonda Abrams, titled Business Plan in a Day.  This book provides a good frame-work for most small businesses to start from.  Don't be fooled by the title though, you can expect to spend far more than 8 hours developing your plan.

Business Disaster & Continuity Planning

Devastating events like the September 11, 2001 terrorist attacks in New York and Washington D.C. have caused businesses around the world to take a closer look at their business continuity plans.

According to Price Waterhouse Cooper's research:

• An estimated 14,600 businesses inside of and around the World Trade Center were impacted by the disaster.
• The indirect impact to U.S. businesses in the 12-month period of time following the 9/11 attacks was estimated to be $151 billion.

Whether caused by terrorist activity, natural disaster, technical problems or human error, any emergency can force catastrophic consequences and enormous costs onto your business.  The results:  property damage, interruption of operations, lost profits and loss of customers.

In the event of a business emergency, it is critical that you make the right decisions under pressure and bring the immediate threat to your company and your employees under control quickly.  Your company must resume its most important functions in at least an "emergency mode" as quickly as possible.  At the time of a disaster, the one thing that all companies have working against them is time.  Lost time translates into dissatisfied customers, lost revenue and more.


Traditionally, disaster recovery and continuity planning has been driven by the computer and information technology (IT) industry.  Because of the heavy emphasis on computer systems and other technology, larger companies with designated IT personnel on staff are much more likely to have a disaster and continuity plan in place than smaller companies that operate without professional IT personnel.

Small Business (According to the SBA)

• In 2006 there were 26.8 million businesses in the U.S.
• 99% have 500 or fewer employees
• 98% have 100 or fewer employees
• 88% have 20 or fewer employees

That means that out of the 26.8 million total businesses in the U.S. 23,583,000 have 20 or fewer employees.  It's the smaller companies that are most likely to not have a continuity plan in place.

A Business Continuity Plan (BCP) can reduce the effects of a disaster, or in some cases even prevent it from having any visible impact on business operations to your customers.

According to the Disaster Recovery Institute International (www.drii.org), 93% of companies that experience a disaster without a recovery plan close their doors within five years of the event.

50% of the companies that lose critical business functions for more than 10 days never recover.

There are many types of disasters that can affect your company's bottom line.  They include:

• Windstorm, hail, tornado
• Lightning strike, power surge
• Extended power outage
• Equipment failure (refrigeration)
• Roof collapse (weight of snow, ice or sleet)
• Water damage from leaking fire extinguishing system
• Water damage from broken water/steam pipes
• Fire at your business or a neighboring business
• Smoke damage
• Explosion (gas leak, etc.)
• Air craft or vehicle
• Vandalism, riot
• Break-in, theft
• Data breach
• Flood
• Earthquake
• Volcanic action (airborne ash, dust)
• Loss of key employees, suppliers or customers
• And more...

So why do most small businesses neglect to prepare a business continuity plan?  The most common reasons are:

• Lack of time and resources
• Lack of top management support
• Too many causes of disaster to plan for effectively
• Little awareness of potential hazards
• Lack of knowledge in developing a plan

With the future of your business on the line, are you really willing to risk the consequences of not being prepared?

If the obvious reasons for planning, like avoiding financial ruin, maintaining your customer base and market share, as well as minimizing negative publicity, are not enough to get you to take action, consider this:  Protecting the confidentiality and integrity of customer, patient and employee personal information is no longer just a best practice for businesses, it is now a legal requirement.

Basis Considerations

As you begin to prepare your business disaster and continuity plan, keep in mind that the goal is to ensure that you have the following basic elements in place if a disaster strikes:

1. An alternate business location (if needed);
2. Access to vital records and resources during the recovery period;
3. Key people assigned to the recovery effort; 
4. Adequate business insurance (review coverage with your agent annually); and
5. A plan for a speedy recovery.

Planning Steps

1. Write out the objectives of your plan
2. Choose your plan coordinator and develop your team
3. Assign action items, coordinate responsibilities and time frames
4. Complete a risk assessment
5. Complete a business impact analysis
6. Select your recovery team
7. Develop your recovery strategy and action plans
8. Put your plan in writing
9. Distribute your written plan to key team members
10. Test your plan regularly