New Year's Resolutions

Personal Portfolio

In the coming year, this 32-year-old company founder wants to buy a house, start estate planning, set up a succession plan, buy disability insurance, and start saving more systematically. Can you top that?

Why is it so easy for entrepreneurs to set goals for their companies but often so difficult for them to set personal financial goals?

Part of the problem, undoubtedly, is delayed gratification. Given how voracious most companies are--for their owners' time and money--and their unpredictable growth patterns, it can seem unrealistic to the founder of a young business to even think about attempting personal financial planning. Nonetheless, Krista Conley Lincoln, the 32-year-old founder and owner of Cambridge Translation Resources, a four-year-old Boston-based translation service and publishing company, has decided to take the plunge.

In 1992, at the age of 28, Lincoln borrowed $6,000 from her father to start her business in a ramshackle 1,000-square-foot loft. That first year, supplementing her own fluency in Chinese with the skills of a small network of freelancers who were, among them, fluent in 30 languages, Lincoln brought in about $80,000. The next year, with sales at nearly $200,000, she managed to pay off the loan to her father but plowed every other spare dime back into the company. It took Lincoln nearly three years to get to the point where she paid herself a tiny bonus to buy her first car--a Nissan with 90,000 miles on it. But now, with sales at $2 million and most of her company's major corporate expenditures (for computer equipment, expanded office space, and new hires) behind her, the CEO is at a crossroads: the point where her company can start working for her.

Lincoln's set of 1997 personal financial resolutions are these: Buy a house. Make some diversified investments. Put together a comprehensive insurance package to cover personal as well as corporate risks. Investigate a 401(k) plan. Start estate planning and succession planning.

What a way to begin the new year!

Before popping the champagne, though, let's face reality. As every New Year's dieter knows, resolutions are the easy part. And when it comes to financial planning, even setting the resolutions can be complicated. There may be no better evidence of that than a harried drive Lincoln took this past fall with her husband of one year, Benjamin, an artist.

They were driving to a conference with an investment adviser that Lincoln's accountant had recommended. "The adviser had given us one of those long financial-profile questionnaires to fill out, to help all of us understand what our goals were," she recalls. While Benjamin drove to the meeting, Krista leaned on the dashboard, scrambling to fill in the form. "I guess I'd postponed answering the questions because I was afraid it would be incredibly hard and time-consuming...or maybe upsetting. In fact, it was unbelievably easy because we had to leave most of the pages blank," she says, laughing. "We don't own anything. We don't have any children. The only page that was full was the page on my company's value." Of course, that value looked good, with sales for 1997 projected at $3 million to $4 million, a pool of 2,000 freelancers, and a blue-chip list of corporate clients.

But even from that simple starting point, there was room for debate. One question asked the pair to define their tolerance for investment risk, using a scale of 1 through 5. "I was ready to just check off the number 3, but my husband said, 'Hey, we're young. We can handle higher risk,' and he wanted to choose 4 or 5. Now that may be because he's six years younger than me. But my feeling is," Lincoln says, pausing, "it's taken me all this time to get to the point where I finally can feel some stability in my business. I'm not ready to tackle the kind of investments where everything can go up in flames."

Her orientation toward safety may be why last year Lincoln spent her first real bonus to buy a tax-sheltered variable annuity, along with some other small investments. She also paid off a credit-card balance that had perennially bounced between $2,500 and $4,000. This year she wants to broaden her fledgling investment portfolio. Still, the difficulty of finding the right investment and settling on the right investment course has stymied that pursuit for the moment.

"When you're working at your company 70 hours a week, it's tough--even when you're as motivated as I am to tackle those issues--to come home at 9 p.m. and start talking about money all over again," she says. To solve that problem, Lincoln is borrowing some planning techniques from her business: by setting priorities and, where possible, delegating responsibilities.

Although purchasing a home (and with it, acquiring some valuable mortgage tax deductions) is Lincoln's top goal for 1997, she's turned over the task of meeting with real estate brokers and investigating house prospects to her husband.

Planning for a down payment could have become a distraction because Lincoln and her husband haven't yet set aside any savings for it. But she has made a fundamental decision: "It makes sense for me to leave my money in the company for as long as possible. That's where it's got the biggest chance of producing a payoff. So rather than giving myself a big raise and then making monthly payments to an investment that would become our down payment, I'm hoping to wait until we find the house we want. If the company's cash flow and profitability continue to be as strong as they've been since the end of '94, I won't have trouble paying myself a bonus that would cover a down payment."

Lincoln's second goal is to purchase some insurance protection, at least a personal life-insurance policy and a disability policy. Until now, the only insurance she's signed up for has been medical and dental coverage for herself and her 12 full-time employees.

The CEO is the first to admit that so far she's made little headway on that goal. "Insurance is an unbelievable headache," she says. "Where's the rule book that will give me a clear sense of what it is I really need, how I'm going to find an insurance broker that I can trust, and what's the clearest, best path for me to take? How do you set a value on your own life when you're building a business and starting a family?" Despite the uncertainties, she's set herself the goal of comparing brokers, prices, and other issues--and finalizing a purchase--by the end of this year's second quarter.

Meanwhile, Lincoln has assigned looking into a 401(k) plan (along with profit-sharing and key-executive retention plans) to her second-in-command. "If I had to do it," says Lincoln, "it would take three years, minimum. This is the way we're going to get it all done this year."

The one piece of her personal financial plan that Lincoln has already begun to take action on is estate planning. "It may be that I've just gotten to the point that I'm so happy about my company and my husband and our plans to start a family that I've begun to worry, What will happen if I step in front of a bus?"