8 ways clients can manage finances

By James Dolan | March 20, 2013 | Last updated on March 20, 2013
3 min read

The contract has been signed. The cheque has been cashed. Your client’s business has been sold or she’s been given the golden handshake. Now what?

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Give her these eight tips to help manage her money for the next stage in life.

1. Build a team

Owners and executives are used to working with a team in business. That shouldn’t change now. Chances are you’ll need to revise your financial and legacy plans with your wealth manager, accountant, and tax lawyer. If your current crew doesn’t have the experience required for your new found needs, then reevaluate and change up your forward line.

2. Determine your wealth involvement

When it comes to your wealth, what kind of client are you—strategic or tactical? Do you want to be involved on a big picture level, or make day-to-day portfolio decisions yourself? Neither one is right or wrong, but if you’re leaning toward the latter, be honest with yourself about your capabilities: The skills of a successful business owner are very different from those of a successful money manager.

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3. Pay off debt, then invest

Making your money work for you is all well and good but don’t do it at the expense of paying off the mortgages on your home or cottage, or car loans. This is important advice for Type A achievers, who can sometimes value the “game” of investing over the often smarter (but comparatively mundane) move of paying off debt.

4. Spread the wealth

Owners and CEOs are usually comfortable holding the bulk of their wealth in a single company—their own. After the sale, many take the same approach with their portfolios—especially if a large block of the acquiring company’s stock was part of their purchase deal. Big mistake. After the sale, the focus should be on keeping what you have, not striking it rich. That means diversification and conservative growth.

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5. Assess and control spending

Pre-sale, you could earn more income to cover expenses—by bringing on a new client, giving yourself a salary bump, or declaring a shareholder dividend. Once you cash out, growth will be a little harder to come by. Rather than allocating more money to riskier investments, it’s better to understand your post-sale spending— taking into account it may be higher than before—and control it before you burn through your nest egg.

6. Explore income-splitting opportunities

Will the post-sale portfolio be your primary source of income? If so, and you haven’t already, take advantage of income splitting. It’s often possible to use a shell corporation to split investment income with adult children and your spouse in certain situations. (See “Pay for the grandkids’ educations” for more info.)

7. Learn to say no

In the Internet age, it’s hard to sell a business quietly. Unfortunately for the seller, this means unsolicited calls from friends, family, charities, and business associates for seed money, loans, you name it. Learning to say no can prevent a lot of stress and hassles.

8. Revisit and reassess

Selling a business or divesting stock options is a one-time event. Wealth and estate management isn’t. So revisit your financial plans and life decisions on a semi-regular basis to assess what’s working, and what’s not. While the exact schedule for such reassessment should be based on personal circumstances, most professionals suggest 24 months is a good initial target.

James Dolan is a freelance business writer based in Vancouver.

This article was originally published on capitalmagazine.ca.

James Dolan