As we enter a new year, we suggest all small business owners create a habit of conducting a “board of directors” meeting to review their personal finances. In order to understand the big picture of your financial life, you must fit the pieces together. Here are the pieces of your financial life that are most essential for reevaluation on an annual basis:

1. Budget/Savings – The general financial planning rule is that you should save AT LEAST 10% of your income on an annual basis. You should also review short-term and long-term goals to ensure you are saving enough to meet your objectives.

2. Maximize Contributions to Retirement Plans – Depending on the size of the company and number of employees there are many different methods to save for retirement. On an annual basis, business owners should work with their accountants/advisors to determine the most appropriate savings vehicle. Retirement plans include: 401(k)s, Individual 401(K)s, IRAs, SEP IRAs, ROTH IRAs, Defined Benefit and Defined Contribution plans. This will not only help achieve the goal of saving 10% of your income, but it also can help minimize taxes.

3. Create/Review Estate Planning Documents – It is important to create wills, medical and financial Power of Attorney documents, and living wills. These documents should be reviewed annually as your personal goals and estate laws change.

4. Life Insurance – There are various types of life insurance including whole life, variable life, universal life, universal variable life and term policies that provide a death benefit when the owner of the policy passes. It is important to review your policies on an annual basis to ensure the coverage is adequate to protect your loved ones. Also, financial situations may change, and you may no longer need the full amount or type of coverage you own.

5. Disability Insurance – Statistically there is a greater chance of premature disability than premature death. Therefore, it is very important to own adequate coverage to provide for you and your dependents if you are not able to work. Annually, you should review your policy for the type and amount of coverage.

6. Business Insurance – As a business owner, it is important to own insurance that will allow your company to run if you are unable to actively participate in its daily operations. This insurance may be used to hire a person to replace you or replace income from your business if the company no longer exists.

7. Long-Term Care Insurance – Due to the increasing costs of health insurance, long-term care insurance policies are evolving to meet these costs. Many older policies have become more expensive to maintain or no longer provide coverage commensurate with long-term care expenses. Considerations must be taken annually for the costs and necessity of these policies.

8. Education Planning (529, Coverall, UGMA, UTMA) – Much like health care costs, college education expenses have increased well beyond average inflation levels throughout the past decade. Several college savings vehicles have been invented to provide tax advantages and an array of investment options for people saving for college. These savings plans require thorough annual review of performance and expense levels.

9. Tax Planning - Annually you should meet with your accountant to discuss tax-planning strategies especially as a small business owner. Tax laws frequently change. In addition, there may be changes to your business that could affect your taxes both at the business and individual level.

10. Investment Allocation – Once you have reviewed topics 1-9 it is very important to review your entire investment portfolio to ensure it is allocated to meet your current and future goals. As your goals and needs change, your portfolio allocation should be readjusted accordingly.

Submitted by: Carin Wagner & Mike Sullivan, GHP Investment Advisors, Inc.