South East Business Magazine Feature Article – April 2008
This is a question you should ask yourself on a regular basis and review your money and where it’s presently at. I am not just talking about what funds your pension is invested in, I am asking you to check how much money you have in your current account, what interest rate you are getting on your savings, how much do you owe on your credit card and how long is the balance outstanding?
All too often, people tend to forget their own finances, this goes doubly for the self employed as they are usually more focused on the finances of the business, be it a Sole Trader or a Limited Company.
Our financial needs change as our lives evolve and therefore we need to change as time & circumstances dictate.
Furthermore people tend to still be ‘old fashioned’ when it comes to their finances leaving everything with one or two financial institutions regardless of whether they are competitive or not. The day and age of leaving everything with one financial institution is gone. Fear not the wrath of the financial institutions! Some people worry that a bank will think less of them for having their business fragmented. I would disagree. In fact it will show that you are in tune with what’s available across the market.
When it comes to setting up a business, some individuals may have signed personal letters of guarantee or provided other personal security such as house deeds, savings/life policies for facilities. If your business is now standing on its own two feet, review any personal security you may have given and get it back if you can. In relation to Limited Company Directors, it would be standard practice now that they may have to sign a personal letter of guarantee for Limited Company facilities so this may not be negotiable.
If you are a self employed person or Company Director it is vital that you have sufficient cover in the event of death and also more importantly in the event you are unable to work due to accident illness etc. There are numerous options available that can be tailored to suit your needs, and more importantly that can be legitimately paid through the business. All too often individuals who become self employed forget that they do not have the four times salary in life cover they had when they were an employee and defer taking out sufficient cover citing the business can’t afford it! What they fail to realise if they can’t afford not to have it.
In relation to Pensions, this is something that self employed people tend to defer unless their Accountant mentions a tax bill. Pensions are an extremely tax efficient means of saving for your retirement and they are an excellent means of taking money legitimately from your business. I believe this should be started as soon as possible and you should consider it as a regular expense of your business from day one; it’s a good habit to have. The premium can be commenced at an affordable level and increased as time progresses.
For further information contact foh@foh.ie