This past week I met with three different prospective clients, and the same theme repeated in each meeting. They all have businesses that are going through a rocky patch at the moment and their remaining assets are invested in property. The Covid pandemic has had such a massive impact on all of us, and while we are trying to stay safe and healthy, it is hard when your business is also at risk.
Dave and Donna are in their early seventies and ran their own business until a few years ago. They lived an extravagant lifestyle, put all their profits back into the business and bought properties as investments. Unfortunately, they made some poor business decisions and that, coupled with the depreciating value of the property market, resulted in them not having enough to fund their next chapter. Dave is also critically ill, and it’s hard for them to sell their family home during this difficult time. Their options are limited: either sell their home or ask their children for help.
Claire and John’s service contracts dried up during the devastating first two waves of Covid. Now, in their early sixties, their monthly expenses exceed their income, and they are struggling to stay ahead of the debt curve. They have invested all their funds in properties, and unfortunately, the rentals they receive do not cover their expenses. They only have one available option: accept below-market offers and sell their properties in a hurry.
When business slows down due to factors out of your control and you have no accessible investments or emergency funds, things can become difficult. Rebecca and Martin find themselves in the unfortunate position where their expenses exceed their income. They love their home but desperately need to downscale, limit their spending and manage their debt. Regrettably, getting into debt often leaves you with no choice but to sell your home.
It has been a tough week helping these potential clients plan for their future years. Let me share the top three money tips that I’ve learnt from clients.
Lesson # 1
If you are an entrepreneur, do not invest all your assets into your business. So often, entrepreneurs run their businesses and personal expenses as one entity. When you mix your personal and business funds, it becomes hard to assess the profitability of the business.
It is in our nature to invest all our efforts to ensure the success of our business ventures, but you have to spot the early warning signals. It is a good idea to invest money in other asset classes, not only in your business.
Lesson # 2
Property is a good investment, but only if you have a diversified portfolio. Investing in properties alone will not help when you quickly need to access funds to cover your expenses.
Lesson # 3
Maximise the value of your business by having a clear succession plan.
We’ve all heard the adage: don’t put your eggs into one basket. The same goes for your money; it is important not to concentrate all your focus and resources on one area. Good financial planning means diversified assets.
Always remember, when it comes to your money, be inspired, be brave and be on purpose,