Lincoln's first step was meeting with a partner and his associate counsel at a law firm recommended by a close friend. "That first meeting, which lasted about three hours, was incredible," she recalls. "It wasn't intimidating or confusing. In fact, they asked me a lot of questions that helped me clarify my goals for the company and where I wanted my money to go."
During that preliminary session, Lincoln explained that she wanted to pass along what she'd built in her company to her husband--and also to set in place a mechanism that would help him learn to understand the business and the responsibilities of managing its profits. "I want to make sure that he doesn't just get all this dumped in his lap before he can learn what to do with it," she says. "That means, in part, choosing someone I can trust to help him make financial decisions."
She doesn't know who that person is yet--nor is she at all certain what type of management-succession mechanism makes the best sense for Cambridge Translation Resources and for her husband. But she's determined to answer those questions during the course of the coming year. In the meantime, she adds, "I've got a first draft of a will. I consider that quite an accomplishment already!"
Your Personal Financial Calendar
January: Set overall goals for the coming year. Consider starting a (small) automatic monthly investment plan.
February: Now's a good time to make some mutual-fund investments (since the funds will have completed their year-end taxable-income distributions).
March: There's still time (until April 15) to make deposits to an IRA.
April: Tax time. Plan how you'll handle your tax refund--or tax bill. Or, file for an extension if you're strapped for time.
May: Schedule a meeting with your CPA to plan this year's tax strategy. Try to negotiate a lower fee, since it's the slow season.
June: Time for a half-year personal finance checkup. Are you on target with savings, investments, and other goals?
July: If your summer vacation proved too costly, consider setting aside a small monthly savings account for next year's treats.
August: Is your personal cash flow healthy? If you aren't putting the maximum into your company's 401(k) plan, consider boosting your contributions.
September: Make your last mutual-fund investments for the year--before funds start distributing taxable income.
October: Trick or treat. If your personal financial picture is a horror show, there's still time to meet with a financial planner and act before year's end.
November: Start planning your own bonus early--while there's time to coordinate corporate and personal goals.
December: Last-minute financial strategies could include boosting charitable donations or buying and selling investments to balance out capital gains and losses.
The Experts Review the Resolutions
Do Lincoln's 1997 personal financial resolutions make the best sense for her, given her company's stage of development, as well as her personal needs?
Jeffrey S. Levine, a certified public accountant with Alkon & Levine, PC, an accounting firm in Newton, Mass.
This is the right time for Lincoln to step back and take a full-fledged, comprehensive approach to goal setting--and she's covering all the obvious bases.
Last year's investment decision has more of a feel of a quick fix, as if she felt she needed to do something. Buying a tax-sheltered annuity when she doesn't own a house--that doesn't make sense.
This owner might want to investigate other alternatives to a 401(k) plan, such as SEP-IRAs, profit-sharing plans, or money-purchase pension accounts. The advantage of those over 401(k)s is that you can exclude certain employees if you want to or permit larger corporate contributions for the owner. They're sometimes less costly and easier to administer than 401(k)s.
Instead of setting up a trustee to help her husband during a succession transition, I think it would make more sense to start some cross training of her husband now, so that he might be in a better position to step in if he had to. And also, to set up a well-qualified board of directors who could help him during the transition if that became necessary.
Steve Enright, a fee-only financial planner based in River Vale, N.J.
This entrepreneur has set some very good and very ambitious goals. The question is, Will her company be able to give her the wherewithal to accomplish all of them within a single year? If not, she'll have to prioritize.
I'd argue that what matters most is retirement planning and insurance planning. Disability insurance, key-man insurance, and life insurance are good ideas; I think she should also investigate office-overhead insurance, which would help her pay rent and staff salaries in the event of a catastrophe. The best way to get started with insurance is to contact an independent, fee-only insurance adviser who will help her work her way through the whole process.
I think she'll be making a mistake if she decides to leave the money for her house payment in the company until she actually needs it. The big downside: What if her company experiences a cash crunch and the money isn't there for her when she wants it? It's a much safer course to remove the money from the company at a steady, gradual pace, so she can be sure it will be there for a purchase as important as a home.
Mary Malgoire, a fee-only financial planner with the Bethesda, Md., firm of Malgoire Drucker
For this year's priorities, I'd make buying disability insurance number one. This CEO should shop for a plan with a "purchase-option rider," so she can increase her coverage as her salary rises.
If she wants to start a comprehensive investment plan--once her purchase of a house is behind her--she needs to do some personal cash-flow projections, going forward a few years. By doing the best job she can of projecting her future family expenses and salary, she can target a monthly investment level and set up some kind of automatic deposit system. I'd recommend doing that through a full-service discount brokerage. Then it would be simple to invest in stocks, bonds, or mutual funds. She also needs a family-emergency account, maybe with $30,000 or so in it.
Here's something worth considering: if this entrepreneur really wants financial security, she should start planning for the sale of her business, especially if she can keep it doubling in sales for a couple more years. If she can walk away with $3 million or so, she'll have all kinds of options for her family's future.
Jill Andresky Fraser is Inc. 's finance editor. Her Personal Portfolio column appears regularly in the magazine.
