As a business owner, your relationship with your accountant, advisor, or financial coach is a critical one. With the right preparation, conversations with your chosen financial professional can give you control of your financial future. At their best, these visits will include strategizing investment growth, managing your taxes, and planning for retirement. I have found that to have these conversations effectively, it is essential to ask the right questions and thereby get the most out of your time and money while avoiding the most devastating setbacks—like having to take out high interest loans to resolve cash flow challenges.
Below, I have listed some of my favorite questions to encourage my clients to ask their financial mentors and coaches about business asset management and tax planning (and provided a few details on why they are important); I have also given you some financial topics and ideas to take the conversation deeper. Like they have helped my Money Mastery Coaching™ clients, I hope these questions and financial topics will help you in your next CPA visit too.
What should I know about the investment agreements I am getting into?
When it comes to financial planning, it’s critical to fully understand the agreements and instruments (IRA, 401K, CD, stocks, bonds, life insurance, and savings) you’re committing to. Your accountant should be able to provide you with a clear explanation of any agreements or contracts that you are considering. Each is different and leads to my next suggested question.
What should I understand about the limitations with the possible advantages of investments?
It’s essential to understand the limitations of any financial products or strategies you are considering, along with their potential advantages. Your accountant can help you weigh the pros and cons of different financial products and strategies so you can choose the ones that are best suited to your immediate and long-term needs. In my experience, locking money up in an investment may not always be the best choice because as a business owner it is possible to reinvest directly into your business. So the next question is critical.
Should I be willing to accept not having access to my money?
Some financial products may require you to give up access to your money for a substantial time. It’s important to consider this before committing. Your accountant can help you evaluate the benefits of these products against the potential limitations that they can impose on your ability to grow your business. Sometimes paying taxes upfront and keeping liquid capital is the best decision, so the answer to what is best for you can be impacted by the next questions.
What should my retirement objectives be, and how much do I want to have set aside in the future to meet them?
These critical questions are important for setting clear goals for your retirement. You can’t plan effectively without clear goals. To plan in this way, you must know how much money you want to have set aside when you want to retire and have your savings goals broken down into manageable steps over time. Your accountant can help you identify the amount you need to save each month to achieve your retirement objectives. If you can’t save that much now, you can also plan for growing your income until you can hit your goals. If you can reach your monthly savings goals now (or plan to get started where you are), you will need the next question.
What resources and strategies should I use to store my money?
This is perhaps the most important question, and it is where I will focus the rest of this article.
It’s essential to consider the resources you have available to store your business money, cash, and retirement savings. Your accountant can help you evaluate different options for storing your money (and helping it to grow it most effectively), such as savings accounts, investment accounts, life insurance, and retirement plans.
Often before receiving Money Mastery Coaching™, my clients have been stuck in stock investment products.
Commonly, people tend to get mired in financial products that are not well-suited to their needs because they follow the advice of a money manager who has a vested interest in selling them financial products that benefit the manager. As you go through your options with your CPA, make sure to discuss and not neglect cash savings.
Savings are a critical component of any financial plan.
Your accountant or your financial wealth coach with Money Mastery Coaching™ can help you develop a savings plan that is tailored to your needs and objectives. Investment in stocks regularly is often touted as the best way to build wealth for retirement, but it’s important to be aware of the risks and emotional trauma that come with the volatility of the market. Your accountant or Money Mastery Coach can help you understand the risks involved and provide guidance on how to manage those risks. After all, usually people think of investment as the way to satisfy one main objective: save money in retirement.
I have learned, however, the thought that, “we have to have it invested,” to be prepared for the future can be a trap. Putting profits into an investment account can lead to high interest loans when your business hits a down quarter or needs working capital for an expansion. Then the investment account becomes more of a liability than an asset. For this reason, it is important to visit with your accountant or your financial wealth coach with Money Mastery Coaching™ about when to, and the best ways to, keep money and not invest money. Avoid the liquid situation that puts you in debt. Keeping some of your money in savings or other low-risk financial products can be an effective way to manage risk and ensure that you have the resources you need, when you need them. Your accountant or your financial wealth coach with Money Mastery Coaching™ can and should help you balance your investments and your savings objectives.
Once you find a good balance of saving and investment, you will probably ask, “does interest rate matter?”
The answer is, it depends. The interest rate on your savings or investments can have a significant impact on your financial well-being, so it is important to consider. However, it’s equally important to understand the role that strings attached to interest rates might play in your financial plan and to choose products that offer competitive rates for the type of service they are providing (such as keeping money liquid and available to you in a savings account).
Along with interest rates, you must consider saving on taxes.
Reducing your tax burden can free up more money for savings and investment. Your accountant or financial wealth coach with Money Mastery Coaching™ can help you identify tax-saving strategies that are best suited to your business and financial situation. This should always be a focal point of your conversation. Along with helping you save money on taxes, consider making your chosen financial mentor an accountability partner for your savings and investment goals.
As your business grows, having an accountability partner will prevent you from falling prey to lifestyle creep. This is the tendency to increase your spending as your income increases. This is critical to avoid, and your accountant or your financial wealth coach with Money Mastery Coaching™ can help you develop a budget and spending plan that is sustainable and ensures that you are putting enough money toward your financial goals even as you make more and want to spend more, sometimes on things like cars.
Your Accountant or financial wealth coach with Money Mastery Coaching™ can also help you think about choosing the right car and financing it effectively.
Because vehicles can be a tax write off, a car (truck, van, or SUV) can be a critical component of your financial plan. Like picking the right car, part of this accountability with spending will lead you into reducing debt. Managing debt is a critical component of financial planning, and your accountant or financial wealth coach with Money Mastery Coaching™ can help you evaluate your good debt, like a house, and develop a plan to pay it off or manage it more effectively.
Owning a home, and eventually additional real-estate, can be a great investment, but it’s essential to evaluate the costs and risks involved.
Your accountant or Money Mastery Coach can help you weigh the pros and cons of owning a home and develop a plan that is best suited to your needs. Don’t end up with millions in debt and millions in 401k, retirement plans. Don’t end up funding your retirement with debt by accident because you are losing liquidity and not managing expenses well.
This should be more than enough to fill up your next visit with your CPA. Now that you know how, ask the right questions. By carefully considering these key topics, you can ensure that you are making informed decisions about your financial future and building the foundation for long-term financial stability. Remember, it’s never too early or too late to start planning for your financial future.
If you don’t have a good accountant that you trust, please reach out to me and I can provide you with several vetted accountants that I trust who abide by these principles. Click the link below to get in touch—I’d love to hear from you.