Tag Archives: Financial

Estate planning for young adults

A2It is very important for you to plan your estate, which could include a living will, a last will and a living trust. This can help families prepare for difficult times when you are no longer around to assist or advise them.

Our lives get busier and more complicated by the day, so estate planning for young and old becomes increasingly important. Young people should consider preparing certain estate planning documents, and in particular financial powers of attorney and living wills.

At the age of 18 a young man or woman officially becomes an adult in the eyes of the world. This means that you are entitled to make important financial, legal or health decisions about your lives. But what if something happens and you are unable to make these decisions at a critical time? Such situations can range from a small inconvenience to a life-threatening crisis, but if your estate is in order, it can speak on your behalf. Consider the following: 

Financial power of attorney

A financial power of attorney allows you to appoint someone you trust, like another family member, to make financial decisions on your behalf. This document can be activated when you are incapacitated or right after it has been signed, and it will remain effective until you can resume charge of your own decisions again.

A financial durable power of attorney will allow the appointed person to handle important legal and financial matters on behalf of the grantor. In the case of a business or financial situation which involves the young adult, such as a passport or car registration renewal, it is convenient for the power of attorney to act on his/her behalf if they cannot tend to the problem. This arrangement may come in very handy when there is a legal situation which requires quick action and the young adult is unable to attend. Families with a disabled family member can also benefit from the security of a power of attorney. 

Living will

A living will enables you to state specific medical wishes if you are alive, but unable to communicate them. Artificial life support in the case of a coma or terminal illness is an issue often discussed in such a document. Preferences regarding administering of pain medication, artificial nutrition and other treatments can be dictated in this document.

The Terry Shaivo case shows what can happen if this document is not in place. The legal battle between her husband, family and state of Florida lasted for years before she was granted her wish and taken off life support. 

Health care power of attorney

With this type of power of attorney, you give someone else the power to make health decisions on your behalf. These decisions regarding serious health and emotional crises will be made based on instructions which you have given to your power of attorney beforehand. Sometimes a living will is combined with a health care power of attorney, because both of these can be revoked, i.e. it can be cancelled at any time by destroying it, communicating your wishes to your doctor, writing a letter regarding the cancellation or by creating a new living will and health care power of attorney, indicating that the new will revokes all the previous ones. 

Start the conversation

Every family’s legal needs are different, so perhaps you should take the first step in being prepared for the worst. Remember that every time your family composition changes, like when a child is born, you need to adapt your will to include them. Start the process and be prepared.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. 

Red flags: Financial reasons why small businesses fail

A2Many people dream of starting their own business. Few of the dreamers get as far as actually starting a business. Even fewer of the businesses survive in the long-term. Too often small businesses fail due to reasons, financial and otherwise, that could have been managed or altogether avoided. Continue reading to see if you recognise any of these red flags in your business. 

Lack of financial skills, financial planning and financial management

Have you done any financial forecasts for your business? Never?

Do you control spending with a budget?

Do you know how much income (revenue) and profit (no, they are not the same thing) you are making on each transaction? Are you focused on the products that generate the most profit?

Are you aware of the cycles (e.g. seasonal cycles) in the business sector you operate in and do you plan your cash flow according to the effect these cycles will have on your income and expenses?

If you answered “No” to any of the above questions, that could be a red flag popping up. 

Not enough cash reserves/savings

The minute any business starts to struggle with cash flow, a red flag immediately goes up because no cash means no business.

Something bad or unforeseen is bound to happen to your business from time to time – that’s life. The question is, when it happens, is there enough cash available to recover from the setback or challenge? No? There’s that red flag popping up again.

Some other sources of potential cash flow problems worth looking into are:

  • Falling behind on payments of day-to-day expenses e.g. suppliers, rent.
  • Borrowing money without a realistic plan or the means of repaying it.
  • Paying suppliers COD but selling to clients on credit. Does your business have enough cash reserves to pay suppliers immediately and wait for payment from your clients for possibly more than a month? Ideally the business should be able to pay suppliers on time and coordinate these payments with cash inflows from clients.
  • Uncontrolled personal use of business money – in other words: raiding the business’s cash register whenever you need money for private purposes.

Poor accounting

You can’t control and manage your business if you don’t know what’s going on with the finances. Business decisions need to be based on accurate, up-to-date financial information otherwise you are flying your business blindfolded. Remember: you can’t manage what you can’t measure. 

Lack of awareness of the relationship between different functions of a business

Consider the following statement: Without money there is no business and without business there is no money. Or to put it differently: If you neglect sales, there will be no money flowing into the business and if you neglect managing the money, you will not be able to pay for the products or services you need to generate sales.

There is a fairy tale idea that an established business will just run itself. If there were any truth to this idea, there would have been a lot less small businesses going out of business or failing for various reasons. If you want to ensure that your small business will thrive now and in the future, there are certain things you have to do. It is never too late to start doing cash flow planning or draw up a budget. Remember that even a mature plant needs to be watered so keep those forecasts rolling!

If the above article raised any questions in your mind or you need professional guidance on this topic, please do not hesitate to contact a business consultant who can assist you in the planning of your business. 

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or ommissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. 

References: