Planning for Financial Freedom

By Larry Galler

February 03, 2012

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Here we are in the first part of the year, the time that you start making good on the New Year''s resolutions from just a few weeks ago.

I''ll bet one or more of those resolutions had to do with your personal and businesses finances — savings, college finance planning if you have children in school, retirement planning, your IRA and other investments.

And then there is tax preparation and tax planning for this year. It can be a daunting task and one that hangs heavy over the heads of many people as they procrastinate, adding stress to their lives and expensive errors when they rush to meet a deadline, which can cause expenses to accumulate in the form of tax penalties and interest.

You will be receiving, if you have not already received them at this time, tax documents that inform both you and your friends at the Internal Revenue Service (IRS) about how much revenue you have received from companies in the past year. And don''t forget the other documents which show interest and capital gains paid from various business and personal financial institutions (banks, insurance companies, investment firms, etc.).

At the same time, you are also working on your other business and personal resolutions, and I''m not talking about exercising more or losing weight. I''m talking about the resolutions like keeping up with your new marketing plan or making improvements in your business.

So, how do you keep it all on track and still have a life? The answer, like the answer to most business issues, is planning and getting expert advice.

Get help now

As a businessperson, you are probably working with an accountant. Most businesspeople should also be working with a financial planner.

These two professionals should be working together for your personal and business financial security and success. Just as it is important for your clients to use someone who is certified to do various cleaning tasks, it is important for you to use certified professionals for various tasks in your financial life.

These professional certifications are "Certified Public Accountant" (CPA) and "Certified Financial Planner" (CFP).

Your accountant will prepare the financial documents for your business and income taxes. But if they are to be helpful in your financial success, they should be more, much more. They should be advising you on the health of your business and helping you strategize to legally minimize your taxes.

When you receive your profit and loss, balance sheet and cash flow statements, make sure you understand what they mean and what they tell you about your business. If your accountant can''t explain them to you, speaking to you in layman terms, look for another accountant fast. This is not an area where you just nod your head and then wonder what you just paid for.

Good accountants should be good communicators in addition to their technical accounting and tax skills.

Your financial planner should help you budget to accumulate assets for the future, such as college expenses, possible health expenses and retirement. Together, these two professionals should guide you through the many complex and specialized issues that can make a huge difference in your personal and business life.

I''ve found it helpful, as I coach my clients who own small businesses, to think of business and personal financial planning in "time segments." Here are six to consider.

Segment one:
End of year documentation

Get your sales and expense information to your accountant as early in the year as possible so they have enough time to work on them without rushing. If they have a question or request more information, answer them immediately.

Segment two:
Personal financial assessment

While your accountant is working on your end-of-year statements, take a little personal time and assess where you are financially.

How far from college expenses or retirement are you? How has all the turmoil the past few years in housing prices, mortgage issues and big swings in the stock markets affected you?

Make a list of your financial assets and long-range concerns to discuss with your accountant and financial planner after the tax season.

Segment three:
Tax preparation

Many people use tax preparation software to fill out their tax forms and it works for those who are comfortable with doing it themselves but, for most businesspeople, their accountant will do a better job.

Segment four:
Talking to your advisors after tax season

So the past year is officially over and it is time to take charge of this year. You''ve made some estimates of your business earning expectations and other income. You''ve assessed your assets and long-term debt situation as well as your future needs and goals. Now it''s time to plan both your short-term and long-term financial future and you will want to talk to your professionals.

Talk to your accountant about tax-saving strategies, both for your business and personal life, that you can take advantage of this year and in the future. Do this as early in the year after their busy tax season as possible so you can implement these strategies easily instead of in haste.

Talk to your financial advisor about these strategies because, in most cases, you will need a financial planner or investment advisor to implement them. They have the financial products available you will need to purchase, such as insurance, annuities and many different types of investment products to help you achieve your goals.

Be aware that some financial plans will be done for you at little or no cost, while there will probably be a fee for more complex plans. Discuss your advisor''s fee schedule before making a commitment.

Segment five:
Review and modify

Realize that situations change. The income you estimate at the beginning of the year can substantially change because of many factors.

There may also be life changes, such as births, deaths, divorces, marriages and critical illnesses that can make those estimates invalid. Adjustments can and should be made, so schedule yourself to review your financial situation periodically throughout the year.

If you find much variance from your earlier estimates, consult with your professionals before it is too late to make changes.

Segment six:
Ongoing implementation

Throughout the year, you will be paying estimated taxes, making payments to the various investment entities, receiving and filing account statements. Systemize these tasks as much as possible and constantly continue your review process.

The future can be bright

Once you have all this systemized, you will be well on your way to meeting your financial challenges for today and through retirement, so the earlier you have it all in place, the better off you will be.

Your stress level will go down and you can concentrate on running your business more successfully… or you can procrastinate and be stressed about your financial future.

It''s your choice but, if you haven''t done it yet, why not make one more New Year''s resolution? How about this one: I will start, right now, to consult with my advisors and plan my financial future!