As you finalize business plans for the upcoming year, don’t forget to review your personal finances. Which goals need to be modified? Which actions have been neglected? What steps can you be taking now to lessen the impact of inflation and uncertainties about potential tax hikes?
Here are some questions to consider:
General Questions
- Have you experienced any major life transitions during the past year (e.g. births, deaths, divorce, retirement, business or home sale)?
- Are you getting the most from your employee benefits?
- Have you discussed how potential tax law changes could impact your financial health?
- Are you familiar with the age requirements for applying for Social Security and the services that will be available through Medicare?
- Have you reviewed your will, healthcare directive, and revocable trust documents sometime during the past three years?
- Do you know the average return on your investments over the past five years?
- Do you have a succession plan in place? If so, when was the last time you reviewed it?
- Do you plan to buy or sell your business over the next 3 to 5 years? If so, what steps are you taking now to prepare?
Specific Areas for Review
Financial experts at my bank recommend reviewing key issues related to your credit, benefits, insurance, investments, philanthropy, planning, and taxes.
- Loan Positions: Should you consider refinancing?
- Commercial Floating Rate Debt: Should you lock in the current rate?
- 401(k) and Defined Benefits: Have you maxed out your allowable contributions?
- Flexible Benefit Accounts: Will you be using all of the balances in your flexible spending accounts?
- Stock Option/Restricted Stock Execution Strategy: Have you analyzed your strategy with your financial advisors?.
- Open Enrollment Periods: Do you plan to make adjustments during open enrollment periods for health, life, and disability insurance?
- Insurance: Should you fill any risk gaps in your property, casualty, life, or long-term care insurance?
- Medical Procedures: Do you need to accelerate or postpone any treatments due to the status of your insurance and medical savings account contributions?
- Investments: Are you prepared for the tax impact of any sales of property, investments, or other assets? Should you evaluate your tax-loss carry-forward positions? Do you need to confirm the goals and allocation strategies of your current investment pools? Should you make contributions to 529 plans or gifts?
- Philanthropy: Can you reduce your tax obligations by making cash gifts to charity? Have you considered establishing a donor advised fund?
- Retirement Account Assets: Should you consider pooling your retirement accounts? Would you benefit by converting your IRA accounts to Roth IRA accounts? Is the information about your beneficiaries still accurate?
- Spending Patterns: What changes should you make in your yearly spending patterns to improve your cash flow? Can you reduce or eliminate subscriptions or miscellaneous fees on your credit card accounts?
- Living Trusts: Should you establish living trusts for your heirs? If you have already done so, are there changes in the law or in your life that might affect the exemption limits?
- Lifetime Gifting Exemptions: Should you take advantage of existing gifting exemption limits or wait to see what happens in the new year?
- Tax Deductions: Are you taking all of the deductions you are eligible for with regards to medical expenses, charitable donations, and certain interest payments?
- Tax Withholding and Payments: Do you need to change your withholding due to changes in your marital status or number of dependents? Should you accelerate or defer year-end bonuses or sale of capital gain property?
What Challenges Lie Ahead?
The last two years have been incredibly challenging for all types and sizes of businesses. If 2021 was the year you started thinking seriously about selling your company, call me at 561-543-2323.
The experienced team of advisors at LaManna Consulting Group can help you prepare for all phases of the growth-exit-sale process.We also know a lot about today’s strategic buyers and the types of companies they are seeking to buy.
Once you have the peace of mind that your personal financial affairs are in order for the 2021 tax year, we can help prepare you for the many questions and financial issues that will arise if you start looking for the right buyer for your business in 2022, 2023, or 2024.
Even in an era of uncertainty about the future, the time to start planning your exit is now. When you start thinking about transitioning your business sooner (rather than later), the likelihood of a successful outcome rises exponentially.