AC Interpreting

Archive for the ‘Finance Plan’ Category

Although most of us know we should be saving money “for a rainy day,” in reality many of us never quite get around to developing a personal savings plan. It can be difficult to make this a priority with so many other financial obligations, but the longer we wait, the less opportunity we have to accrue a sizable financial amount.

One obstacle that many people have is thinking they have to start big. Because they are unable to put what they consider to be the “proper” amount into a savings account each week or month, they end up not putting anything at all into savings. It’s important to remember that even small amounts add up, and that because of interest, the sooner you save the money, the more money you will make on it over time.

Tracking your monthly spending can be a great first step towards creating a savings plan. Especially if you never seem to have enough money left over to save, understanding how you spend your money can help you make better decisions. After tracking your expenses for one month, you will be better prepared to create a budget for yourself that will include setting money aside for savings.

Most experts agree that you should be ideally saving between ten and fifteen percent of your income. If this is difficult to do, at least in the beginning, start smaller. Then, by working with your budget, find ways of reducing your non-essential expenses so that you can increase the amount you are able to save.

Having a goal for your savings can also be helpful. This can include short-term goals such as a vacation, or long-term goals such as a new home or early retirement plans. You might also find that different savings strategies will work best for different goals, such as a CD or money market account for short-term goals and mutual funds and stock investments for long-term goals.

Once you have a savings plan in place, monitor it on a regular basis to make sure you are on track for your goals, and adjust if necessary.

Alan Kelly has been writing articles about saving money for the past two years. He also likes to write about wireless networking, including the benefits of a wireless modem router and how to find a good VoIP router.

An emergency fund is a fundamental part of any sound financial plan. Its primary role would be to act as a buffer in times of financial despair or crisis. Examples of such crises include structural unemployment and unforeseen critical expenses. For some people, emergency funds are used to partially or fully self-insure. This is usually not by conscious decision, but arises through their unwillingness or inability to finance other protection products.

i) How large should it be?

The recommendation for emergency funds is 3 to 6 times your monthly salary. Six times your monthly salary is highly recommended. More is not necessarily better with this reserve fund. There are exceptions however. For those who do not have access to health insurance for medical reasons, self-insurance is compulsory. In that case, the E.F. should be at least two times your annual salary. Other than extenuating circumstances, this reserve should not be used to cover insurable risks.

ii) Where the E.F.should be kept

An emergency fund must be in a fund or account that is highly solvent. This means that the fund could be accessed on demand and liquidated easily. A 24-hour access savings account with a commercial bank is a suitable place for this fund. A savings account would be the most solvent of all savings plans. Fixed deposits and CDs are far from ideal emergency fund vehicles. Money market funds generally have high solvency and offer better rates of return.

Even though money market funds (MMF) do not offer 24-hour access, they are a good trade-off between solvency and accumulation. It is important that your fund keeps pace with your salary and the fair returns from a MMF would assist with that. Depending on your salary increase, it may be necessary to make occasional contributions to your emergency fund to maintain it.

iii) How to develop your emergency funds

It is not expected that you would have six months salary readily available to deposit into a MMF or savings account. You may have to gradually develop your fund by making regular deposits until the threshold is reached. The value of your E.F. should be your target and you could use a financial calculator to determine what payments you need to make to develop your fund. The time period in which you develop it should not exceed two years.

Not having an E.F. can cripple your plan. Without it, you may be forced to surrender annuities or other long-term investments. Having too large an emergency fund is also financially debilitating. There was an instance where someone kept a fund worth $300,000.00 to guard against risks and emergencies. This was kept in a money market fund at 5.5%. The better course would have been to acquire health insurance for the family and invest the majority of the fund in a high-yield CD or mutual fund. Maintaining an E.F. is only effective in the context of other protection products and holistic financial planning.

If you are a successful person, chances are you’re too busy being successful to put any serious time into analyzing and finding investment opportunities, creating and fulfilling personal finance goals, or creating and executing a solid financial plan for your life. The paradox is, successful people are the ones that need financial plans!

That is why you should have a personal financial planner… someone who can take away the time burden necessary to create and execute your financial plan on a day-to-day basis.

So what should you expect with a financial planner? When you hire a financial planning firm, or a financial planner, they will assume responsibility for handling and coordinating your financial affairs. They will balance your investments, plan for your retirement, manager taxes, plan your estate, in some cases handle your insurance, and most of all – protect your assets.

They will need you to take an inventory of your current assets and gather up just about every kind of financial paper that you can think of. We’re talking financial records here…

When you get together all of your records, your planner will analyze it and create a sort of financial profile of you from which they will create a comprehensive plan for achieving the goals that you have set. This plan is not set in stone, but merely a recommendation and an organizational structure for you to follow. They will also give you periodic reports of your financial situation in case you need to adjust certain things over time.

Everybody is different, every financial plan is different, therefore every planner will act differently based on your exact situation. There is no one-size-fits-all, and that’s why you need a planner who will take your specific circumstances into account and work with you to reach your goals.

What should you look for in a planner? Well the first thing to look for is professional expertise. What kind of credentials do they have? The best credentials for a planner to have are the chartered financial consultant credentials (ChFC), and the certified financial planner (CFP) credential. There are also certain attorneys and also accountants the specialize in financial planning, look for these as well.

The second thing to look for is resources. Your planner should work closely with other financial professionals. People like attorneys, accountants, tax experts, investment specialists, and people of this nature so as to cover all of the bases in your financial planning needs. The more contacts they have the better off you will be.

The third thing to look for is affiliation with a major institution. Are they affiliated with a certain major bank? That may be a plus. Are they affiliated with a major investment bank? That could be a plus. Are they affiliated with a major law firm who specializes in taxes and financial matters? That could certainly be a benefit. Who your planner is affiliated with can be very important, especially if the company they are affiliated with has a long-term reputation.

I hope you understand now the importance of using a planner and I hope you have a better understanding of how to find and select a financial planner. It may just be one of the most important decisions you ever make.

You had to do it. You had more staff than work, and your cash flow was not going to be able to support everyone you had hired for much longer. You gear yourself up and let some of your closest friends and colleagues go. Then you realize your most difficult job still lies ahead – retaining your remaining staff and their morale!

After reading several blogs and articles about how to manage employees after a layoff, I thought about the many companies that have laid off or will need to lay off employees. There has been and will be a lot of material written on how to communicate with the remaining employees after the layoff. But far too little is written on the need to formulate a financial plan to survive the layoff and return to prosperity.

Does the CEO really see how the layoffs will solve the company’s cash flow and profitability issues? Can he/she confidently explain to the remaining staff why these cuts were just deep enough but not so deep that the company’s hallmark way of taking care of its customers will not be in jeopardy?

With a sound and reasonable financial model that accounts for the “before” and “after” effects of the layoff, a business owner, entrepreneur, or CEO will be able to communicate with honesty, transparency, and confidence. A leader should have the financial model/plan in hand when he/she meets with the remaining employees. The leader should be able to say something like this: “If we can realize at least $50,000 per month in sales for the next 12 months, we will not have to make any more changes in staffing.”

Such communication will begin to rebuild the trust of the remaining workforce who just saw their friends and colleagues escorted from the building. If the leader fails to communicate specifics and refers to the future performance of the company in vague terms, the employees will continue to lose their trust in the company. Productivity and morale will drop and the company’s chances for survival become much less realistic.

After discussing this topic with with many others who serve in CFO careers, they all confirm that the following two things happen. First, when a company has a sound financial plan for rebuilding the company after a layoff, the productivity and morale of the remaining staff actually increase. Second, this improves the firm’s chances for success and helps its comeback as a leaner, meaner, and more nimble firm that adds even more value to its current and future customers.

Business plan help is on the way. Use these tips when you’re coming up with your business plan financial projections.

Don’t make the assumption that the reader can understand your business plan assumptions.
By the time you are finished with your projections, you will be very familiar with the assumptions you used to construct your financial models. A first time reader of your business plan will not. Are you certain that you made it easy to follow your logic?

The best projections for your business plan are well-rounded ones.

Telling the investor that his projected return is 52.444% is not any More impressive than saying you project a return of roughly 50%. Many entrepreneurs come down with a bad case of spurious exactitude when doing projections. This seems to be a highly contagious disease.

Hold the Scenarios

Many people think that the more complex their financial models are, and the more “what if” scenarios they concoct, the higher their chances of being funded. A variation of this is the business plan that has projections seemingly for decades. Fifty pages of imaginary numbers are not better than five. Particularly in this age when technology is evolving so quickly, it is impossible to accurately forecast 3 years out, let alone 7. Concentrate instead on answering these questions: How fast are we going to use the investor’s money, when does the company’s cash flow turn positive, and what margins can this company earn?

The Hard Truth About Software

There are a number of business plan software packages that sell thousands and thousands of copies. Software can be very helpful in developing financial models and preparing projections. But they are not going to write the narrative sections of the business plan for you, so you may be disappointed in the results you get from using a computer program in building your business plan. How can the programmers of “Super Duper Hot Business Plan Whizzo” or whatever the software is called, possibly know how your plan should look since they have never met you and do not know anything about your company?

Incidentally, for the average cost of these software packages, you can take a family of four out to dinner, and at least two of them can order dessert.

Hopefully these tips were a help for your business plan.

Estate planning addresses lifetime needs like permanent mental or physical disability and post-death arrangements.

The objectives are unique to the individual but generally include:
- Distribution of property in accordance to one’s wishes
- Sufficient liquidity to pay off debts
- Appointment of executors
- Security for dependents
- Contingencies

The 4 step process:
(1) Determine goals
(2) Preparation of plan
(3) Implementation of plan
(4) Reviewing of plan

Determine Goals
A lot depends on one’s attitude towards security, philanthropy, risk, work and money. Important areas to consider are:
- Any known problems with a particular property (Do not leave the burden behind)
- Unresolved family issues (Relationship problems, children from other relationships, etc)
- Financial security for dependents
- Views towards chartiy
- Attitude about extraordinary life sustaining medical treatment
- Contingencies in the event of mental or physical incapacity

Preparation Of Plan
The following tools are used for the plan.

(1) Wills
A Will has to be in writing and signed together with two disinterested witnesses.
Important provisions in the Will:
- Appointment of Executor
- Maintenance for Spouse or Child
- Avoid uncertainty (eg, wording of “equal distribution to ALL grandchildren”, the eventual number of grandchildren cannot be determined conclusively)
Failure to provide the above will may result in the Will being invalid or contested.
Other areas to note:
- Where should the Will be kept
- Ensure the Will is most current by clearly dating the Will and destroying earlier originals
- Designation of Guardians
- Residuary estate acquired in the future
- Tax apportionment as to which beneficiaries’ assets to bear the burden of outstanding debt
- Contingent Beneficiaries and Executors

(2) Trusts
It is created by a trustee having the legal ownership to manage a property for the benefit of someone else.
Advantages:
- Protection from creditors
- Privacy
- Bypass the Probate process
- Professional management of institutional trustee
Disadvantages:
- Irrevocable
- Professional trustee fees

(3) Insurance
- Creation of Statutory Trust through Section 73 of the Conveyancing and Law of Property Act
- Provision of liquidity
- Financial security for dependents
- Long term care (Eldershield) and Disability Income Insurance in the event of mental or physical disability

(4) Powers Of Attorney
To authorize another party to act on behalf of the donor.
- For property: So that the property may still be sold if necessary to raise funds in the event of mental or physical incapacity
- For healthcare: An enduring power of attorney allows another to make decisions in relation to medical issues

(5) Advance Medical Directives
It is a legal document signed by a person in advance of his suffering a terminal illness that he would not wish to be subjected to extraordinary life-sustaining treatment.

(6) Charity
Leave a legacy by giving directly or creating a trust for relief of poverty, education, religion or community benefit.

Implementation Of Plan
It is recommended and in some case necessary to engage professionals to implement the plan.
- Lawyer: To advise on the legal issues, validity and enforcement of the arrangement.
- Insurance Specialist: The available types of insurance to best suit the needs and advise on the claiming process.
- Trust Service: To act as a trustee or executor.
- Accountant: To provide tax advice and information with regard to assets in the estate.

Reviewing Of Plan
The plan will need to be reviewed with changes in personal and financial circumstances as well as changes in the the law affecting estate matters. An outdated plan may no longer be valid.

Other Areas To Note

(1) Use of joint ownership with survivorship
Jointly held property will be passed on to the surviving owner. It will not need to wait for the probate process and will not incur administrative transfer cost. Examples are joint bank accounts and joint ownership in real property.

(2) Domicile
The place an individual considers his permanent residence. That country’s law will determine if the Will is valid, the tax laws and where to file the probate. Owning properties in other countries may be subjected to the laws there.

(3) The Interstate Succession Act
Passing on without a valid Will will result in the estate being distributed in accordance with this Act. The process takes longer as the letter of administration needs to be applied, Administration Bond filed, sureties appointed, Renunciation and Consent Form may need to be completed, etc. This is a lack of Estate Planning and it is not the recommended approach.

Reasons cited for failing to plan include:
- The subject of death is difficult to deal with
- Other priorities in life such as career
- Unconcerned what happens to their estate after death

Overcome the obstacles and ensure estate planning objectives are met. Do not leave an unnecessary burden.