Resolutions for Revenue

Advice on making financial goals a reality
Illustrations Jrcasas

With the ringing in of the new year comes declarations for improvement on myriad fronts. Financial fitness is one of the top three most popular New Year’s resolutions after losing weight and getting organized. But much like the confetti that is swept away after the parties, resolutions often get brushed aside before the end of January.
A 2015 University of Scranton Journal of Clinical Psychology study found that as many as 92 percent of resolutions fail. The reason is that resolutions require a change in lifestyle and stick-to-it-iveness that most people won’t follow through with.

Several New Orleans area financial planners and advisors, wealth managers, and bankers offered advice for businesses and individuals on setting and keeping financial resolutions in the New Year.

Plan of Action

Don’t just make resolutions; make a plan, says Richard T. Romano, a financial advisor with Northwestern Mutual.

 “Like binge diets, taking a short-term view of your finances often leads to inconsistent results,” Romano says. “People who create a plan to reach their goals are much more likely to achieve success. You can resolve to spend less and save more, but the best way to achieve lasting results is by creating a plan that’s tailored to your financial picture and unique goals.”

Being as descriptive and realistic as possible in establishing the plan is crucial to success, says Jeremy Jacobson, president of the RBI Group.

“Investing, paying down debt, saving for retirement is a process,” Jacobson says. “Picture where you want to be at the end of 2016. Working the process backwards, what are some things you can do throughout the year to accomplish that goal? Put the end result in mind and find ways to accomplish it.”
He encourages clients to take their time, take baby steps and always move forward.

“Someone may have a goal of contributing 20 percent, and we’ll help them reach their goal, but we don’t want them to call back in three months from now saying things are tough and they need to cut back to 10 percent. Why not start at 8 percent, see how that goes, and two or three months from now increase it to 10 percent and up from there? That way there is a feeling of success and accomplishment in reaching a goal rather than missing one,” he says.

Downsize Debt & Shore Up Savings

Certified financial planner Patricia Besselman, of Besselman & Associates, says eliminating debt is one of the first steps to take to establish solid financial footing. She encourages analyzing debt, calculating how much money can be applied toward it monthly without wrecking the rest of the budget, and determining how soon the entire debt amount can be paid off.

“If someone is just randomly putting some money toward it, they’re not going to be as motivated as if they know when the end date is,” Besselman says. “If you know what you’re trying to accomplish and you have a plan, it becomes manageable. You can see that you can do it.”

“If you know what you’re trying to accomplish and you have a plan, it becomes manageable. You can see that you can do it.”
– Patricia Besselman, Besselman & Associates

It’s important to know where your money goes. She says monthly cash flow sheet can help you see where your dollars are actually going.
“A lot of people don’t realize how much the little things add up and where they tend to waste money the most.”

For businesses, she recommends reviewing established practices to see if they can be improved. If the ultimate goal is to increase job profits, Besselman advises tracking project expenses and process inefficiencies that drive up costs and make changes to maximize income.

Regarding Retirement

When planning on retirement, advisors say the goal is to understand what it will ultimately take to create the lifestyle you want after you retire and determine what income you need to help ensure sustainable financial security and the realization of your dreams for the future.

As a rule of thumb, many retirement experts and financial advisors recommend saving enough to replace at least 70 percent of one’s pre-retirement income to maintain the standard of living. With so many questions about the future of Social Security, retirees need to save enough to last 20 to 40 years once they stop working. But few Americans are saving enough for retirement and face living their golden years with a lower standard of living than they currently enjoy.

A May 2015 study by the U.S. Government Accountability Office found most American households approaching retirement do not have enough saved to maintain their current status in retirement. The GAO found about half of households age 55 and older have no retirement savings and few other resources, such as a defined benefit (DB) plan or nonretirement savings, to draw on in retirement. Among those with some retirement savings, the median amount of those savings is about $104,000 for households age 55-64 and $148,000 for households age 65-74, equivalent to an inflation-protected annuity of $310 and $649 per month, respectively. As a result, workers age 55 and older expect to retire later, and a higher percentage plan to work during retirement.

“A lot of advisors say you need to save 20 percent a year, but sometimes people just can’t do it,” Jacobson says. “Money is a lot harder to come by today, but we don’t want people to be discouraged.”

The United States Government Accountability Office found about half of households age 55 and older have no retirement savings and few other resources.

Many people reach age 50 before they can afford to save for themselves, he says.

“At that point, their kids are out of school and gaining independence. So that’s when they can really put their foot down on the gas on saving for themselves,”

Jacobson says. “Financial health is a lot like physical health. The earlier you can start maintaining it, the better, but if you’re just starting you have to focus on what you can do going forward.”

If you work for a company that offers a retirement program via pension or 401(k)-type savings program, check to see if it will benefit your strategy. If your company offers a dollar amount match to your contribution, definitely take the free money. With compound interest, these accounts can build quickly, depending on the investment portfolio you choose.

Target Talent

A company’s workforce is crucial to its ability to succeed. Therefore, the ability to attract and retain the best talent is vital to the long-term success of any business. One of the most effective ways to keep employees engaged and motivated is by offering them a carefully crafted benefits plan including focused educational and training programs and a viable career path for key employees.

“Along with salary, it’s what employees look at most carefully when deciding whether to join and stay with a firm,” Romano says. “This is especially true for millennials. When you give your employees the benefits they value, they’ll likely be more productive, miss fewer work days and have a higher commitment to helping you build your business.”

Once a benefit plan is created, it must be effectively communicated to your employees. Ensure the employees understand and appreciate their benefits and continue to evolve the plan over time with your business.

Create a Succession Plan

Continuing normal business operations in the best of times can be extremely challenging but can come to a halt in the event a business owner should become incapacitated. A business may face significant cash-flow problems and internal strife should an owner unexpectedly leave. A well-crafted buy-sell agreement helps ensure the smooth transition of business interests.

“If a co-owner retires, gets divorced, or suddenly becomes disabled or dies, you might, for example, need to quickly raise money to purchase a retiring owner’s interests; or, in the case of an owner’s divorce, disability or death, they could suddenly find themselves in business with his or her family,” Romano says. “Because you have the best selection of options for creating a desired exit strategy before you or another owner leaves, now is the best time to begin planning.”

The agreement should clearly define what happens if you or another owner retires, gets divorced or becomes disabled or dies. Several types of buy-sell agreements are available to accommodate variations among businesses, including organizational structure, number of owners, whether the owners are related and who the purchasers will be.

Moving Forward

By setting realistic goals and establishing achievable benchmarks it’s possible to eliminate debt, build wealth and get to the point when life may be enjoyed without work. Even if you are just starting to improve your financial position or well on your way to reaching your objectives, today’s technology and automation there are many tools to help you reach your goal.



Categories: Banking, The Magazine