It is understandable why entrepreneurs and business owners would have a higher tolerance for risk. After all, some of the biggest thrills in business come from high-risk, high-reward situations.
While boldness in business has tremendous upsides, there are some downsides to taking too many risks with your broader financial future. For example, counting on your success in business to make up for a lack of financial planning, personal saving, and investing is one such risk that many business owners might take.
The thinking is that if I work hard enough and grow my business I will build enough wealth for my retirement. While that may pan out, it is too risky to call this a good retirement plan. You need a plan that considers all of the possibilities, not just the desirable ones.
Decide to Own Your Financial Future
Everyone has a financial plan, whether it has been carefully and thoughtfully planned out, or it is just happening by accident. Deciding to own and be intentional about your financial future is the first step to having greater peace of mind. Once you make that decision, we can help you get on the path toward making your goals a reality.
You are the only “you” there is. Your financial plan has to be as unique as your fingerprint.
Start an Ongoing Conversation
Even the most high-achieving among us needs a good sounding board. Having someone to really listen to you and ask the right questions can help bring your financial goals into sharper focus.
We realize that revealing your entire financial life to another person is not something you do every day, so it is reassuring to know that the guidance and clarity your Bridgeworth advisor provides comes with zero judgment and zero pressure. And, you can be confident in the fact that your advisor is bound ethically to act solely in your best interest.
As the conversation continues, you will make all of your financial decisions. Our role as your financial advisor is to keep you focused and informed on the choices available to you so that you understand how every financial choice you make impacts your goals.
Financial Personal Trainers
To put it plainly, our role is to listen to you to understand what you want your future to look like, and then, coach you all the way there. In fact, that is the best way to think about our role. We are personal trainers who encourage and coach you into a better financial future.
Case Study Download
This case study reflects the combined experience working with hundreds of clients over the past 20+ years. It does not represent any one Bridgeworth client, but serves as an example of the benefit of planning. As Dwight D. Eisenhower said, “plans are useless, but planning is indispensable.”
Bruce and Sarah own a family business that makes pet toys. Bruce started the business 25 years ago and has done everything from sweeping floors and taking inventory to making sales calls and hiring employees. He now serves as President/ CEO and is beginning to think about retirement in 3 years at age 65. The business is Bruce and Sarah’s largest asset and they want to understand how it fits into their personal financial plan.
Bruce received some preliminary valuations that the business is worth between $3 million and $5 million. As we prepared their financial planning projections, we were able to show them how they should be able to maintain their current standard of living until age 100 if they received $3 million for the business. If they received $5 million instead, they would have the financial strength to increase spending/ giving by funding college savings accounts for their grandchildren and establishing a donor advised fund at their local community foundation for charitable giving.
We also reviewed the financial implications if Bruce were to die before the business was sold. Under that scenario, Bruce estimates that a “fire sale” price might be closer to $2 million. He has a “gentlemen’s agreement” with the owner of another pet company that spells out how that company would buy Bruce’s business in the event of Bruce’s death. Sarah should be able to remain financially independent if she received $2 million, but might not be able to maintain both their primary home and their lake house. It’s important to Sarah to keep the lake house in the family for the next 10-15 years while their grandchildren are younger and enjoy spending time there. To give Sarah some additional financial flexibility in the event of Bruce’s premature death, we recommended that Bruce maintain a $2 million life insurance policy. We will re-evaluate the need for life insurance after the business is sold.
Sarah does not need life insurance, but is concerned about long-term care as her Mom has Alzheimer’s. Sarah’s Mom is 86 and lives in a memory care facility that costs about $75,000/ year. Her Mom does not have long-term care insurance and Sarah has seen how quickly the cost of care is depleting her Mom’s savings. A long-term care insurance agent prepared quotes and Bruce and Sarah decided to buy policies that would provide benefits for 5 years of assisted living (approximately $48,000/ year) for each of them. They recognize that this insurance may not cover the full cost of long-term care, and agreed they would sell both of their homes if one of them needed more expensive care.
As part of the financial planning process, we asked a property and casualty insurance agent to review Bruce and Sarah’s home, auto and umbrella insurance coverage. The agent noted that the dwelling coverage on their home needed to be increased to reflect their recent renovation to enlarge their den and add a bedroom on the main level. In addition, they did not have an umbrella policy, which provides additional liability protection above the home and auto policies. Bruce and Sarah made these changes to protect their property and themselves better.
Sarah and Bruce recently updated their wills, powers of attorney, and advance health care directives. They had not changed beneficiary designations on Bruce’s life insurance or their retirement accounts, which pass outside the will, though. We worked with the estate attorney to update those primary and secondary beneficiary designations to coordinate with their wills.
We then developed a plan to invest Bruce’s tax deferred, defined contribution plan, Sarah’s individual retirement account, and their joint taxable investment account in a balanced portfolio, which has 50% in stocks and 50% in bonds. Once their portfolio was fully invested in the balanced portfolio, they could access information online at any time to see how the portfolio was performing. These online reports are in addition to the Bridgeworth investment reports that Bruce and Sarah receive semi-annually.
We will review the financial planning projections annually to make sure Bruce and Sarah remain on track to accomplish their goals. We will also continue to review how their investments are performing and whether Bruce or Sarah’s ability or willingness to take risk has changed.
Bridgeworth can be a resource to provide objective information and analysis to give you peace of mind about your financial condition.
Bridgeworth, LLC is a Registered Investment Adviser.
Advisory services are only offered to clients or prospective clients where Bridgeworth, LLC and its representatives are properly licensed or exempt from licensure and a client advisory agreement is in place. Bridgeworth advisors do not provide tax or legal advice. We suggest you seek advice based on your own particular circumstances from an independent tax or legal professional.
This Case Study is for Illustrative Purposes Only. Bridgeworth, LLC, including your advisor, may have issued materials that are inconsistent with or may reach different conclusions than those represented in this Case Study, and all opinions and information are believed to be reflective of judgments and opinions as of the date that material was originally published. Bridgeworth, LLC is under no obligation to ensure that other materials are brought to the attention of any recipient of this Case Study. To determine what is appropriate for you, consult a qualified professional.