When it comes time for you to step back and enjoy your hard-earned success after the sale of your business, you will face a significant transition — from managing the success of your company to achieving your personal goals. This transition is usually rewarding but not without its own set of challenges as you seek to make optimal financial decisions.
At that time, you may wonder:
While no two business owners’ post-sale situations are the same, we have found that the following steps — many of which reflect similar concepts applicable to running a company — provide a framework for preparing for this new stage of life. And keep in mind that you should take these steps well in advance of retiring, so it’s worth reviewing them even if you don’t plan to step away from your business anytime soon.
Understand your post-sale priorities
To effectively manage your personal wealth, you need to understand how much you want to — and can afford to — spend. This may seem obvious, but business owners are often so busy running their company that they haven’t had the chance to step back and reflect on what matters most to them — priorities versus habits or “nice to haves.”
If you have a partner or spouse, we recommend sitting down together and identifying your goals, including:
These personal priorities should serve as the foundation of your financial plan and guide your financial decisions going forward.
Build a personal cash flow statement
Just as it is when running your company, cash is king when overseeing your personal finances. To manage your cash flow effectively, you need to understand it — expected inflows and outflows during the years ahead. And having identified your priorities as part of the first step mentioned above, you will be in a good place to do this, with the help of an advisor.
Align your investments with your cash flow
Once you understand your future cash flow you can work with your financial advisor to identify the level of investment risk that aligns with your spending goals and risk tolerance. Through this process, you may find that you need to adjust your spending plans — either because you won’t have enough money or would need to take an intolerable level of risk. Or, you may discover that you have a high probability of having a surplus of wealth, providing you the confidence to accomplish more than you knew was possible, such as gifting more to loved ones or charity or buying a family vacation property.
Optimally allocate investments and make withdrawals
Make sure you incorporate investment taxes into your planning decisions. Generally, this means placing less tax efficient assets (e.g., bonds that generate taxable income) in tax-favored accounts (e.g., IRAs) and placing more tax efficient assets (e.g., no/low dividend stocks) in taxable accounts. As another general rule, you should make withdrawals from your taxable accounts before dipping into your tax-favored accounts, with the goal of allowing as much of your assets as possible to grow tax free for as long as possible. But these are just general guidelines. You should carefully consider them with your financial advisor in the context of your unique situation.
Plan for state taxes
Make sure to factor in state taxes and domicile requirements if you are deciding whether to relocate or spend more time in another state. Taxes and residency rules (e.g., how many days you must reside in a state to qualify for that state’s taxes, proof of residency requirements, etc.) vary from state to state and can have a significant impact on your overall tax bill. Also, keep in mind that no state is “tax free.” Estate, property and sales tax should be considered in addition to income tax.
By being more strategic with your charitable dollars, you can make a bigger impact, including by allocating more to the causes you care about as opposed to taxes. Examples of strategies you may want to consider with your financial advisor include:
You likely find considerable value when running your company in delegating certain responsibilities to trusted individuals who have the right experience to best accomplish the task at hand. The same can be true when managing your personal finances. Delegate to (or find) a financial advisor to serve as your quarterback. Your trusted advisor can coordinate with your estate planning attorney, accountant and any other advisors, keep a close watch on your financials, and continue to uncover new opportunities to protect and preserve your wealth.
To learn how our team can help you, please reach out to us. Helping business owners fully realize the value they have built for themselves, their loved ones and the causes they care about is one of the most rewarding parts of what we do.
VWG Wealth Management is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC, member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC. All information referenced herein is from sources believed to be reliable. VWG Wealth Management and Hightower Advisors, LLC have not independently verified the accuracy or completeness of the information contained in this document. VWG Wealth Management and Hightower Advisors, LLC or any of its affiliates make no representations or warranties, express or implied, as to the accuracy or completeness of the information or for statements or errors or omissions, or results obtained from the use of this information. VWG Wealth Management and Hightower Advisors, LLC or any of its affiliates assume no liability for any action made or taken in reliance on or relating in any way to the information. This document and the materials contained herein were created for informational purposes only; the opinions expressed are solely those of the author(s), and do not represent those of Hightower Advisors, LLC or any of its affiliates. VWG Wealth Management and Hightower Advisors, LLC or any of its affiliates do not provide tax or legal advice. This material was not intended or written to be used or presented to any entity as tax or legal advice. Clients are urged to consult their tax and/or legal advisor for related questions.
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