Tag Archives: scott plaskett

9 Strategies to Protect Your Personal Credit Score

There are a variety of unknown factors that can affect your personal credit score. For example, most people don’t realize the importance of and the difference between two key dates for paying off their credit card debt: the due date and the statement date. The latter is the date on the credit card statement, and refers to the date your balance is reported to the credit card bureau. As a result, even if you pay your balance on time each month, it may not be reflected in your credit score.

Here are 9 more tips and tricks to protect your personal credit score.

1. Know your score

In Canada, the credit score range is between 300 and 900 – the higher your score is, the better. This number reflects a person’s credit history over the past six years. Only 5% of Canadians are known to have a score of 850 or better, so make sure that you keep up to date with repaying your debts from all sources, including banks, governments and credit card companies. Checking your score regularly will alert you to mistakes and credit fraud as well. To check your credit history, you can consult the major credit-reporting agencies in Canada, such as Equifax Canada or TransUnion Canada, and receive a copy of your credit file for free.

2. Pay your bills on time

Being even one day late with your payments will hurt your credit score. In order to prevent this from happening, always allow extra time for online transactions to be processed. For example, make your payments at least three days before the due date to avoid any possible delays. Consider setting up an automatic payment each month to ensure that you never forget to pay the minimum.

3. Never exceed your credit limit

If you’re close to being maxed out, take precautions and pay more than the minimum. Otherwise, the interest due could push you over your limit. Going over your limit, even by as little as $5, can mean costly charges from your credit card company and will hurt your credit score.

4. Don’t apply for store credit cards

Many stores offer one-time discounts for signing up for their store credit cards, but don’t be tempted by the offers. Most store credit cards have interest rates as high as 29%, which are viewed in a negative light by the credit bureau and can lower your score.

5. Spread out your spending

The percentage of available credit you have is important because this will affect your score. Distribute your spending more equally so that you don’t have one charge card that’s nearly maxed out while another card has no balance at all. Spread it out so that both cards are at 50% capacity.

6. Prioritize your payments

You must decide which payments take priority and pay those first. For example, mortgage payments are important, but they are not usually shown on Canadian credit reports. Instead, you should pay more attention to your credit card, loan and lease payments, and make those on time.

7. Beware of closing accounts

If you’re preparing to close an account, ensure you make all your payments on time, even if you’re not completely satisfied with the lender. Missing a payment will show up on your credit report, can hurt your score, and is very difficult to fix. When closing an account, ask for written confirmation that the account was closed with a zero balance.

8. Don’t close unused credit cards

If you have low interest credit cards that you don’t use, keep them open and use them every so often. It is actually an advantage to have a zero-balance credit card, since this helps to improve a low credit score.

9. Don’t apply for too much credit at once

Be careful of taking on too much credit at once because the credit bureau views this as a sign of financial trouble. For example, don’t lease a car, sign up for a new cell phone and apply for a loan all at the same time; this will raise questions about your ability to fulfill your financial commitments. Also, beware of being preapproved by multiple lenders before you’re ready to buy. Even though you can check your own credit rating, preapprovals will affect your score negatively.

Related Links
Understanding the Basics of Credit Scores
https://www.ironshield.ca/media/understanding-the-basics-of-credit-scores/

Rebuilding Canadian Credit after Living Abroad
https://www.ironshield.ca/media/rebuild-canadian-credit-after-living-abroad/

Equifax Canada—Get a Free Credit Report
http://www.consumer.equifax.ca/home/en_ca

TransUnion Canada
https://www.transunion.ca/ca

Did you miss the perfect time to sell your business?

Republished with permission from Built to Sell Inc.

August was a rollercoaster ride for stockholders. Triple digit wins followed by even larger losses left the average investor reeling and were a good reminder that markets move in both directions.

Valuations of privately held businesses have also been somewhat turbulent of late. The average offer extended to users of The Value Builder System was 4.2 pretax profit in Q1, 2015, but dropped to 3.9 in Q2.

Does that mean you have missed the opportunity to sell your business at the peak?

Maybe. But should you care? Probably not.

The thing many of us forget is that when you sell your company possibly your largest asset and the biggest wealth-creating event of your lifetime you have to do something with the money you make.

These days, that means you’ll have to turn around and invest your windfall into an asset class that is arguably somewhat bubbly in historical terms. The stock market has more than doubled since 2009. The price of residential real estate has been growing at a rate of 1 percent per month in many major centres. The same trend can be seen in many markets that offer exclusive beach houses or ski chalets.

Who Is Richer: Samantha or Scott?

Indulge us in a hypothetical example. Let’s look at two imaginary business owners, each running a company generating a pretax profit of $500,000. Let’s imagine that Samantha sold her business into the teeth of the recession for three times her pretax profit back in 2009. She would have walked away with $1.5 million pretax to invest in the stock market.

Now let’s imagine business owner Scott, who decides to try and time the market. Scott waited out the recession and sold his business last month for four times pretax profit, walking away with $2 million before deal costs. At first glance, Scott looks like the winner because he sold at the peak and got four times profit instead of Samantha’s three times. But when we take a closer look, Samantha would probably be better off today. Assuming she had invested her $1.5 million in the stock market back in 2009, when the Dow was trading below 7,000 points, she would now have more than $3 million, or a third more than Scott, who waited and sold at the “peak.”

Timing the sale of your business on the basis of external markets is often a zero-sum game, because unless you’re going to hide the proceeds of a sale under your mattress, you’re probably buying into the same market conditions from which you’re selling out.

A better approach is to optimize your business against the eight things acquirers look for when they buy a business, regardless of what’s happening in the economy overall.

For more free information on Creating A Business Owner’s Dream Financial Plan, you can listen to a free, eight part series we did exclusively for business owners. The show is also available to subscribe to for free via iTunes.

How Life Insurance Can Save Your Family – Stories from the Heart

At IRONSHIELD, it is important for us to help you make the best decisions possible when it comes to your everyday finances. Life insurance is a tool that can greatly improve your life and provide your family with financial stability. In today’s blog post, I want to show you some examples of how a proper insurance policy can be an excellent security tool in the event of a terminal illness diagnosis or the death of the insured. For five individuals, life insurance significantly changed their lives forever. Be inspired by their stories below and discover how life insurance can make an impact on you and your loved ones.

Victoria’s Story

Nancy was a widow whose husband had died at a young age. His small insurance policy was not enough to support his wife and their two daughters, so Nancy decided that she wanted to purchase additional comprehensive insurance in case anything were to happen to her. Sometime later, Nancy was diagnosed with cancer and was able to use the terminal illness portion of her insurance, which allowed her to receive 75% of the policy’s face value. Nancy used this money to finance a home for her daughters, purchase a car for her parents, pre-pay her funeral arrangements, and pay for expenses such as clothing. In addition, she saved some of it for her daughters’ college tuitions. Described by her insurance agent and friend, Victoria, as “an advocate for life insurance,” Nancy loved her family enough to take action while she was still alive to protect them. Her greatest wish was to help her daughters live comfortably and have the lifestyle she would have given them, and with the money from the life insurance policy, her wish was granted.

Irene’s Story

Irene’s client, Susan, had stayed at home with her children and did not have life insurance since her husband, Mark, was the family’s main source of income. Irene initially set up an insurance policy only for Mark because the couple didn’t feel that Susan needed any protection if she was a stay-at-home mom. However, Irene convinced them to buy insurance for Susan, citing the argument that Mark could not just give up his job to stay at home and care for his family if something were to happen to his wife. Susan passed away in a speeding accident some time after they purchased life insurance; Mark also suffered injuries, lost his income due to a disability, and needed to stay home with the kids. Irene said, “the life insurance continued to provide the opportunity to keep a roof over their kids’ heads.” With that money, their daughter was able to attend college and accomplish her goals. While he still misses his wife dearly, Mark said, “to buy an insurance policy is the best thing I did in my life.”

Mike’s Story

Mike’s client, Anne, and her husband wanted a big family and adopted five children within a few years. As their family continued to grow, Mike suggested that they needed more “life insurance for protection,” since Anne wanted her family “to be taken care of.” The family then purchased term for both Anne and her husband; more for him, since he was the one bringing home the money, but also enough for her because she was a stay-at-home mom who took care of the children and the household. When Anne passed away suddenly, her husband and their kids were able to adjust and live comfortably with the extra money, which can actually help you find the strength to get through the grieving process. Mike offers this advice to his clients: “Do not forget about the stay-at-home mom.” It is vital to consider how valuable her contributions are to the family.

Larry’s Story

Larry’s client, Dan, was the president and manager of a small company. Larry discussed insurance programs with him that would help fund a buy-sell agreement between Dan and his business partners, as a means of protecting their company’s name and employees. They decided to buy “key person insurance,” which is essentially life insurance for the key persons in the company – usually the owner, founders or employees that are crucial to the business. In the event of a death or departure of a key person, the money comes straight into the company and is used to find a replacement for the empty position. When Dan passed away in a plane accident, the infusion of capital from the life insurance policy enabled the company to find a replacement for him and maintain the efficiency of their business. Dan’s former business partner and the current president and CFO of the company advises that all business owners should be responsible for their employees, and to “make sure there is some succession planning,” as well as insurance for key persons, in order to protect their company’s legacy.

Helen’s Story

Helen’s client, Alice, worked at a country club that offered its employees a comprehensive medical plan and a small insurance policy. The club believed that all employees should have the option of purchasing additional life insurance. Alice made the decision to buy life insurance not only for herself, but more because her husband was going through an organ transplant. Helen suggests that, often, people don’t realize the need for insurance until they are going through a real-life situation. In this case, Alice also wanted to make sure that their young son would be taken care of in the future. When Alice passed away unexpectedly, their family lost her income and had outstanding medical bills from the transplant. The money from the life insurance policy that Alice had initially bought greatly assisted her husband and son in their time of need. Alice’s husband calls the insurance money “a gift that [Alice] left me.”

* Some names and identifying details have been changed to protect the privacy of individuals.

Related Links
The IRONSHIELD Insurance Plan
https://www.ironshield.ca/services/insurance-plan/

Long-Term Care Insurance 101—Part 1
https://www.ironshield.ca/articles/long-term-care-insurance-101-part-1-the-basics/

Long-Term Care Insurance 101—Part 2
https://www.ironshield.ca/articles/long-term-care-insurance-101-part-2-the-dos-and-donts/

4 Steps To Finding Your Sell-By Date

Republished with permission from Built to Sell Inc.

Most business owners think selling their business is a sprint, but the reality is it takes a long time to sell a company.

The sound of the gun sends blood flowing as you leap forward out of the blocks. Within five seconds you’re at top speed and within a dozen your eye is searching for the next hand. Then you feel the baton become weightless in your grasp and your brain tells you the pain is over. You start an easy jog and you smile, knowing that you did your best and that now the heavy lifting is on someone else’s shoulders.

That’s probably how most people think of starting and selling a business: as something akin to a 4 × 100-metre relay race. You start from scratch, build something valuable, measuring time in months instead of years, and sprint into the waiting arms of Google (or Apple or Facebook) as they obligingly acquire your business for millions. They hand over the cheque and you ride off into the sunset. After all, that’s how it worked for the guys who started Nest and WhatsApp – right?

But unfortunately, the process of selling your business looks more like an exhausting 100-mile ultra-marathon than a 100-metre sprint. It takes years and a lot of planning to make a clean break from your company – which means it pays to start planning sooner rather than later.

Here’s how to backdate your exit:

Step 1: Pick your eject date

The first step is to figure out when you want to be completely out of your business. This is the day you walk out of the building and never come back. Maybe you have a dream to sail around the world with your kids while they’re young. Perhaps you want to start an orphanage in Bolivia or a vineyard in Tuscany.

Whatever your goal, the first step is writing down when you want out and jotting some notes as to why that date is important to you, what you will do after you sell, with whom, and why.

Step 2: Estimate the length of your earn out

When you sell your business, chances are good that you will get paid in two or more stages. You’ll get the first cheque when the deal closes and the second at some point in the future – if you hit certain goals set by the buyer. The length of your so-called earnout will depend on the kind of business you’re in.

The average earnout these days is three years. If you’re in a professional services business, your earnout could be as long as five years. If you’re in a manufacturing or technology business, you might get away with a one-year transition period.

Estimate: + 1-5 years

Step 3: Calculate the length of the sale process

The next step is to figure out how long it will take you to negotiate the sale of your company. This process involves hiring an intermediary (a mergers and acquisitions professional, investment banker or business broker), putting together a marketing package for your business, shopping it to potential acquirers, hosting management meetings, negotiating letters of intent, and then going through a 60 to 90 day due diligence period. From the day you hire an intermediary to the day the wire transfer hits your account, the entire process usually takes 6 to 12 months. To be safe, budget one year.

Estimate: + 1 year

Step 4: Create your strategy-stable operating window

Next you need to budget some time to operate your business without making any major strategic changes. An acquirer is going to want to see how your business has been performing under its current strategy so they can accurately predict how it will perform under their ownership. Ideally, you can give them three years of operating results during which you didn’t make any major changes to your business model.

If you have been running your business over the last three years without making any strategic shifts, you won’t need to budget any time here. On the other hand, if you plan on making some major strategic changes to prepare your business for sale, add three years from the time you make the changes.

Estimate: + 3 years

Figuring out when to sell

The final step is to figure out when you need to start the process. Let’s say you want to be in Tuscany by age 50. You budget for a three-year earn out, which means you need to close the deal by age 47. Subtract one year from that date to account for the length of time it takes to negotiate a deal, so now you need to hire your intermediary by age 46. Then let’s say you’re still tweaking your business model – experimenting with different target markets, channels and models. In this case, you need to lock in on one strategy by age 43 so that an acquirer can look at three years of operating results.

It certainly would be nice to make a clean, crisp break from your business after an all-out sprint, but for the vast majority of businesses, the process of selling a company is a squishy, multi-year slog. So the sooner you start, the better.

This Sellability Score you instantly receive is a critical component to any business owner’s complete financial plan and is something that, until now, we have made available only to existing clients.

However, we recognized that there is value in knowing in advance of working with a financial planner whether or not your largest asset is ready to be exchanged for your retirement nest egg. Our view is that it’s better to learn more about your businesses sellability today, and find out how your business scores on the eight key attributes, so that you can ensure you obtain full value.

If your business part of your retirement plan, finding out your sellability score will be the best 10 minutes you could ever spend working “on” your business.

For more free information on Creating A Business Owner’s Dream Financial Plan, you can listen to a free, eight part series we did exclusively for business owners. The show is also available to subscribe to for free via iTunes.

An Investing Principles Checklist With Charles Wilton

Charles Wilton

A new interview with Charles Wilton, Portfolio Manager with the Private Investment Management Group at Raymond James. In today’s episode, we talk about the discipline process that Charles follows in order to make the proper decisions in making good quality investments.

IRONSHIELD Financial Planning’s “Fly On The Wall” update call.
These calls are recorded by Scott Plaskett and allow you to get a behind-the-scenes look at one of his professional update calls. Watch and listen as a “fly on the wall” and get some of the most valuable information you will find on the Internet.

How To Scale Up Your Service Business

Republished with permission from Built to Sell Inc.

Increase the value of your company by training others in your area of expertise.

It can be tough to grow a service business. Clients are typically buying your expertise, and if all you have to sell is time, the size of your business will always be limited by the number of hours in your day.

One way to scale up your service business is to launch a training division to teach others what you know. That’s what Nancy Duarte did when she found herself run ragged trying to grow Duarte, a Mountain View, California-based design studio.

Duarte’s specialty was creating high-impact presentations (her firm created the slides Al Gore used in the movie The Inconvenient Truth), but the work was tough to scale. She found herself spinning various plates and hoping none of them would fall to the ground. Finally she realized she was exhausted and no longer enjoying her job. She still loved the business but hated the constant demands on her time and energy.

In an effort to pull herself out of individual projects, she sat down and documented her methodology and from there created an internal training course so her employees could learn the Duarte way of creating presentations.

Once she had taught her own staff to handle the development of the presentations, she turned her philosophy and her approach into a book that was published in 2008 under the title Slide:ology – The art and science of creating great presentations. Her most recent book, Resonate: Present visual stories that transform audiences, was published in 2010). Having created a platform with the books, Nancy launched her training division, which offers corporate on-site workshops—her facilitators go to large companies to teach the employees how to make better presentations.

Due in large part to the training division, Duarte has scaled up her service business to the point where she now employs 82 people.

As business owners, we all know we should be documenting our systems for others to follow, but somehow writing our owner’s manual always takes a backseat to serving the next customer or fighting the next fire. Maybe what we need to do is stop thinking of writing down our process as an internal chore and instead focus on launching a training division. That way, the job of documenting our system goes from a textbook-boring task to the raw material needed to launch a revenue-generating business division.

For more free information on Creating A Business Owner’s Dream Financial Plan, you can listen to a free, eight part series we did exclusively for business owners. The show is also available to subscribe to for free via iTunes.

Lower RRIF Withdrawal Minimums—More Flexibility for Seniors

The annual federal budget revealed in April 2015 brought along changes that have a profound impact on the financial industry. Along with the decision to raise the contribution limits of TFSAs, it was also announced that the government has proposed new rules for Registered Retirement Income Funds (RRIF) and lowered the mandatory withdrawal minimum for seniors significantly. In today’s blog post, we will take a quick look at how the new RRIF rules will affect seniors and their retirement savings.

Currently, seniors that have reached 71 years of age are required to withdraw the minimum amount from their RRIF each year. Up until the federal budget of 2015, this amount was 7.38% of an individual’s RRIF. The new changes will decrease the mandatory withdrawal significantly to 5.28%, but will continue to increase at a slightly faster rate per year. However, instead of capping off at 20% by the age of 94, the cap will now be reached at age 95.

Reasons for the Change
Living in Canada has changed dramatically since 1993, the year when the former 7.38% withdrawal rate came into effect. Since then, the average life expectancy in Canada has improved from about 77 years to 81 years by 2012; it is certainly even higher today. The proposed RRIF rules are meant to reflect the change in the Canadian way of life and “reduce the risk of people outliving their savings.”

Investment industry groups, including CALU, and seniors’ organizations, such as CARP, have been active over issues regarding an individual’s retirement savings for years. They have often voiced their concerns about eliminating or pushing back the age at which the mandatory withdrawals began. Now, seniors can accumulate their savings longer and have more flexibility when it comes to managing their money in a tax-efficient way.

Useful Tips and Advantages
The new withdrawal minimum in RRIFs allows almost 50% more capital to be preserved by the age of 90. It is estimated by the federal government that the RRIF changes will save seniors $670 million in taxes over the next five years until 2020.

For wealthier Canadians, it is best to remember not to leave too much money inside your RRIF because this will lead to a higher tax liability upon death. While withdrawing a certain amount of money will trigger some taxes, it will correspond with your marginal tax bracket at the time. Therefore, the longer you accumulate your money, the more likely it is for taxes to be triggered in an estate and pushed to a higher tax bracket.

Related Links
New TFSA Limit
https://www.ironshield.ca/articles/new-tfsa-limit-reaches-close-but-not-quite-to-proposed-11000/

Four Mistakes to Avoid When Creating a Retirement Plan
https://www.ironshield.ca/articles/four-mistakes-to-avoid-when-creating-a-retirement-income-plan/

Investing Teaching Moment: What is the Margin of Safety?

Charles Wilton

A new interview with Charles Wilton, Portfolio Manager with the Private Investment Management Group at Raymond James. In today’s episode, we talk about what is the margin of safety?

IRONSHIELD Financial Planning’s “Fly On The Wall” update call.
These calls are recorded by Scott Plaskett and allow you to get a behind-the-scenes look at one of his professional update calls. Watch and listen as a “fly on the wall” and get some of the most valuable information you will find on the Internet.