A Small Owners Guide to Divorce

A Small Owners Guide to Divorce

No one gets married planning on an unhappy ending, yet the reality is that approximately 40 percent of marriages in Canada end in divorce.

For small business owners, this can pose a challenge: how can you protect your business if you end up getting divorced?

Despite how common it is, many small business owners are unprepared for the possibility of a divorce. Whatever your current situation, here are some things to keep in mind to help mitigate the impact of a divorce on your business.

Protect your business early

If you own a business, there’s a good chance it’s your most important and most valuable asset. And like any big asset, it should be protected.

A divorce can have a major impact on a business if it’s included in a settlement. The overall divorce process can also make it difficult for you to focus on the day-to-day running of your business.

The importance of protecting your small business before initiating (or even considering) divorce cannot be overstated – and the earlier, the better.

Ideally, protective measures should be in place well before marriage. Once divorce is on the table, if your business isn’t protected, it’s probably on the table, too.

Prenuptial agreements

The most common way to protect your business is with a prenuptial agreement, often called a prenup.

A prenup is a binding contract signed by each partner before their wedding outlining what happens to all assets, property, and income in the event of divorce, separation, or death.

A prenup is the fastest, easiest, and least expensive way to protect your small business in the event of a divorce. If one or both partners in your marriage are small business owners (either together or with different businesses), the complexity is multiplied, so a prenup is strongly advised.

Business-specific agreements

Shareholder, partnership, LLC, and buy/sell agreements offer different types of protective measures. Each of these agreements can include provisions that protect the interests of the business owners – including you and any co-owners – if one of you ends up getting a divorce.

For example, your agreement can require that unmarried shareholders implement a prenup if they plan to marry. Your agreement can also require a waiver from an owner’s fiancé that removes them from any future interest in the business.

Another option is to impose restrictions on the transfer of shares. For example, your agreement can prohibit the transfer of shares without approval from other partners or shareholders.

Alternatively, the other owners(s) can be given the right to purchase the shares or interest of any divorcing parties, which gives the existing owners the option to maintain control of the business.

Mitigate risk with holistic financial planning

Whether you’re running a business or building a loving, enduring marriage, real life is hard work, and it doesn’t always go as planned. With divorce, being a fact of life for many Canadian couples, planning for this possibility is an important step for any small business owner.

At Rubach Wealth, we help business owners plan for an uncertain future and mitigate risk as part of a holistic approach to wealth management. This means looking at your life in its entirety and bringing everyone to the table – including lawyers, accountants, and investment specialists – to help you make the best decisions given your unique needs.

Divorce is not an easy topic to address. However, by having frank conversations and asking tough questions now, we can help you minimize the financial harm that sometimes accompanies the heartbreak of a divorce.

If you have questions about protecting your small business in the event of a divorce, please contact us at 647.349.7070 or info@rubachwealth.com. for a confidential conversation.

4 Financial Lessons to Emerge Stronger from the Pandemic

4 Financial Lessons to Emerge Stronger from the Pandemic

It’s probably fair to say that most Canadians will be happy to bid farewell to 2020, and there are still three months to go until the end of the year.

The pandemic has taken a heavy toll, from the loss of lives and jobs to the disruption of schooling and retirement. Financially, countless individuals and families across the country have been negatively impacted.

While it’s easy to focus on the negative, we believe there are lessons to be learned from the pandemic that will help us emerge stronger in the years ahead. Here are four of them.

Lesson 1: An emergency fund is essential

This year, countless Canadians have lost jobs, struggled with collapsing businesses or faced sharp declines in their investment returns. For many, this has resulted in a major cash crunch and enormous financial stress.

The current pandemic may be a once-in-a-100-years event, yet we can be confident that other crises will emerge during our lifetime. That’s why a key takeaway from this pandemic is the importance of establishing a financial safety net.

Whatever your financial situation, setting aside enough money to cover at least 3–6 months of your living expenses is not just a good idea – it’s essential.

Lesson 2: We can all reduce wasteful spending

Amid the financial fallout from the pandemic, many Canadians have been reviewing their spending with a more critical eye. With incomes squeezed or disappearing for many, it’s no surprise that people have been looking for ways to trim their monthly expenditures.

From rarely used subscriptions to frequent dining out, it’s up to each of us to decide what we consider essential versus frivolous. Yet for most of us there are opportunities to reduce unnecessary spending.

You work hard for your money, so you owe it to yourself to ensure you’re not wasting it needlessly.

Lesson 3: A portfolio loses value more easily than it gains

The global spread of COVID-19 rocked stock markets in early 2020, with the TSX Composite Index plunging by 21.6% in the first quarter of 2020 compared with end-2019. Although the sharp drop has been followed by a relatively rapid rebound, the index is still short of its February 2020 peak.

For investors, this fluctuation during the pandemic has provided an important reminder for investors: if your portfolio drops by 20%, it will take more than a 20% rise to return to the level it was at before. Why? Because a 20% drop in a $1,000 investment takes you to $800, but a 20% rebound takes you only up to $960.

The lesson here is that it can take longer to rise than to fall. So if you’ll need money in the short term to buy a house or for retirement income, your portfolio should generally favour low-volatility investments.

Lesson 4: Regular portfolio rebalancing should be a priority

Aligning your portfolio with your risk profile is an investment best practice, but it shouldn’t be a one-off event. Without regular portfolio rebalancing, a portfolio that was meant to be 70% equities may have risen to 90% in the pre-pandemic bull market.

The problem here is that when stock markets plunged earlier this year, this portfolio would have been exposed to much higher volatility and risk at 90% equities versus the intended 70%. With regular rebalancing, the portfolio would have locked in gains gradually during the bull market and faced the crash with only 70% equity exposure.

Rebalancing your portfolio regularly can mean forgoing some potential gains when markets are strong, but it also means you’ll be at a more comfortable risk level when tough times hit.

Translating lessons into action

The pandemic has shown us how difficult it is to plan for all eventualities. Yet is has also reminded us of the value of financial planning best practices.

To discuss how to apply these lessons to your situation and get on track to a better financial future, contact us contact us at info@www.rubachwealth.com or at 647.349.7070.

 

 

 

Smart Financial Planning for Business Owners

Smart Financial Planning for Business Owners

Being a business owner can be stressful at the best of times. Amid mandatory lockdowns, unpredictable stock markets and a widespread economic slowdown, the past few months have dialed up the pressure and uncertainty even more than usual.

Every business owner has their own unique challenges and requirements, yet some concerns are relatively universal: managing cash flow, growing asset values and maximizing tax efficiency while balancing business and personal financial needs.

Amid today’s complex market conditions, going back to basics can offer a profitable path forward.

Meet Mike

At 48, Mike is in the prime years of his career. He runs a profitable consulting firm, which had seen revenues growing steadily up until the start of the pandemic. While business has slowed downed sharply during the past few months, Mike is optimistic that he’ll be able to bounce back as the economy picks up again.

However, Mike is less confident about his personal finances. With no employer pension to fall back on, he knows it falls on his shoulders to save for retirement and meet his family’s long-term financial needs. Although he regularly puts aside money for savings and investments, he’s not sure whether it’s enough and whether it’s optimized.

Ultimately, Mike is focused on efficiency and results. With a business of his own to run, what he really wants is someone with the expertise to guide him toward a financially secure future so that he can be free to focus on growing his business.

Smart yet effortless financial planning

Mike’s time is valuable, so he needs financial planning solutions that can drive results without taking up too much of his time or mental energy. He has no use for needlessly complex financial structures; instead, he’s looking for a simple, clear path to a secure financial future.

If you see similarities between Mike’s situation and your own, here are three things that may help you balance running your business with managing your personal finances:

  1. Understand your situation. It’s hard to save for retirement without a clear understanding of how much you’ll need to maintain your desired lifestyle. A clear business plan is a crucial starting point for any successful venture, and a clear financial plan is similarly critical for charting your path to retirement. A bit of effort up front will pay huge dividends in terms of clarity and peace of mind.

 

  1. Optimize for tax efficiency. You don’t leave money on the table when running your business, and it also doesn’t make sense to do so in your financial plan. As a business owner, you have opportunities to make smart use of various tax structures to minimize your tax bill. The key is knowing what they are and how they work so you can do more with every pre-tax dollar.

 

  1. Create an effortless plan. You already have one business to run, so you don’t need a financial plan that also demands ongoing time and effort to keep it progressing smoothly. Once you lay a foundation of sound strategies, repeatable processes and thoughtful diversification, your financial plan should be able to work hard in the background while you get on with growing your business.

Financially efficient strategies for business owners

The unprecedented economic disruption of the pandemic has provided business owners with a stark reminder of the need for contingency plans. And when your personal finances are tied closely to your business performance, optimizing both is important for ensuring long-term financial security.

At Rubach Wealth, we help business owners optimize their financial position both personally and professionally. If you’d like to discuss your financial situation, contact us today at www.rubachwealth.com.

Together, we got this.

This blog post is part of Rubach Wealth’s Back to Basics series highlighting how focusing on financial planning fundamentals can help you stay on course toward your long-term goals during these uncertain times.

 

Simple Steps for Gaining Financial Confidence

Simple Steps for Gaining Financial Confidence

The pandemic has changed many things, not least of which is thrusting parents – especially mothers, it seems – into the role of homeschool support teacher. This is just one more responsibility being placed on the shoulders of working women who already had plenty to worry about.

Even before the pandemic, many working women in Canada lacked confidence in their financial situation. Now with increased economic uncertainty and a precarious employment environment, it is more important than ever for women to take control of their financial future.

The best place to begin is by going back to basics.

Meet Eve

At 42, Eve is thriving professionally as a partner at a law firm. Although her career progression was slowed down by two maternity leaves, Eve’s expertise and hard work are currently opening doors to exciting new opportunities.

On the home front, however, Eve is having a rough time. Having recently emerged from a messy divorce, she is doing her best to create a stable new home life for her two children. This is no easy task as she’s also juggling a heavy workload and strained relationships.

Given the recent upheaval in her life, Eve has become increasingly stressed out regarding her finances. In particular, she is concerned about whether she is saving enough for retirement and her family’s future needs – especially in light of the recent divorce. Although she is well paid by her law firm, Eve doesn’t have a good sense of whether she’s setting aside enough for the future and whether she’s doing it in a safe yet efficient way.

In her ideal scenario, Eve would like to have a clear yet hands-off plan for managing her finances so she can focus her thoughts and energy on excelling at work while building a new, happier home life with her children.

Gaining financial confidence

For Eve, gaining clarity and confidence regarding her finances would help take a weight off her shoulders. With a career and family to balance, she wants to ensure that her money is working hard for her and putting her on track to a secure future.

If you can relate to Eve’s situation, here are three actions that could help you take charge of your financial future.

  1. Make a plan. At its core, financial planning is about identifying where you want to go (in terms of finances, lifestyle and peace of mind) and making a clear plan for how to get there. It doesn’t have to be complicated – in fact, it’s better to keep things simple. What it does require is getting organized, reflecting on your priorities, and finding a trusted advisor to listen and provide guidance.

 

  1. Safeguard your finances. One of the main causes of financial stress is all the ‘what ifs.’ What if I lose my job? What if I fall ill? What if I need to financially support my parents? Financial planning can’t eliminate all the uncertainty, but it can help you achieve safer financial footing. What this looks like will depend on your unique situation, but it could include things like building up an emergency fund or topping up your group benefits with personal insurance coverage.

 

  1. Ask questions. This is your money and your life, so you deserve clarity in order to make informed decisions. If you’re uncertain about something related to your finances, simply ask. And if the person you ask won’t listen or can’t provide a clear answer, find someone else who will and who can. Life is way too short to waste on uncertainty or self-doubt – especially when your financial future is on the line.

Moving fearlessly forward

As we slowly return to a life resembling pre-pandemic days, one thing we should aim to ditch is the financial uncertainty that many working women grapple with. By going back to basics, women can boost their confidence that they’re on track for retirement – and any surprises life may throw at them.

If you’d like to discuss your financial situation and gain insights to help you move forward fearlessly, Rubach Wealth can help.  elke@www.rubachwealth.com

Together, we got this.

This blog post is part of Rubach Wealth’s Back to Basics series highlighting how focusing on financial planning fundamentals can help you stay on course toward your long-term goals during these uncertain times.

 

How can we use this crisis as an opportunity to grow stronger?

How can we use this crisis as an opportunity to grow stronger?

If you’re like me, the days are definitely blurring one into the next. I certainly recognize that the current stay-at-home measures are in place for good reason, and my heart goes out to all the people struggling with the medical, financial and emotional toll this crisis is taking.

At the same time, I’m not great at sitting around and waiting. I like making plans and taking action. So as we all put in the effort now to beat this virus, I’m also looking to the future and asking an important question from a financial planning perspective: how can we use this crisis to grow stronger?

Long-term thinking

The current crisis is the best reminder in a generation of how important long-term thinking is in financial planning. When financial markets started to drop sharply in recent months, we saw a lot of panic among investors. With stock prices falling, many people rushed to sell investments, driven by an acute sense of self-preservation. This is understandable, but it was also quite harmful, resulting in significant losses for some.

How we grow stronger: By reaffirming our commitment to long-term financial planning. Resisting the impulse to react to short-term shocks and instead remaining focused on long-term goals will prevent emotional responses from disrupting our sound investment strategies.

Diversification

Diversification has long been a foundational aspect of financial planning. However, as the stock market soared in recent years, it was easy to be lulled into a false sense of overconfidence. Lower-risk investments like bonds and life insurance were seen as less attractive when equity markets were offering sky-high returns, yet the current crisis has provided a stark reminder of why a diversified investment portfolio is beneficial.

How we grow stronger: By acknowledging the important role of diversification in creating a resilient financial plan. With diversified investment portfolios, we can strengthen our ability to maintain balanced growth in different market conditions.

Preparedness and protection

With the exception of infectious disease experts, few among us could have anticipated the current crisis, yet here we are in the thick of it. For many, this has been a painful reminder of how unexpected events can disrupt our lives. It is impossible to prepare for every eventuality and to mitigate every risk, but the better prepared we are, the easier it becomes to adapt to challenging situations.

How we grow stronger: By taking proactive steps to protect ourselves against risks. Setting aside emergency funds, ensuring some of our investments offer principal protection and putting in place robust insurance coverage are all important steps we can take to prepare for the next crisis.

Growing stronger together

The ongoing pandemic has provided a clear reminder that no one has a crystal ball offering all the answers. The scale of the current crisis and the disruption it has caused have been a shock to everyone.

At the same time, the upheaval we have seen is a good reminder of the enduring importance of financial planning fundamentals. Having thoughtful conversations, seeking out expert advice and remaining committed to long-term strategies will help us learn from this crisis and grow stronger.

Although we’re still in the midst of one crisis, that shouldn’t prevent us from taking action to prepare for the next one.

 

Moving mountains together: An opportunity for impact

Moving mountains together: An opportunity for impact

Eliminating hunger and poverty. Curing diseases. Building a just society. These are just some of the big, audacious goals that charities are trying to tackle within Canada and around the world.

But much like gazing up from the base of a mountain and imagining the climb to its peak, achieving these goals can seem like impossible tasks. And indeed, they can be if we focus only on our own capabilities or push ahead without a strategy.

However, when we work together with a clear, well-informed plan, we can not only scale mountains, we can push them aside and achieve a positive impact that shapes the world for the better.

Driving change with intentional giving

As an individual, you may wonder how giving $100 or $200 to a charity can possibly make a difference. But imagine what we can achieve across Canada by working together as a team.

According to Statistics Canada, approximately 19 million people had a job in Canada in September 2019. If we all donated a few hundred dollars per year on average – perhaps 1% of our annual income – that’s billions of dollars to put toward solving important social challenges and achieving real impact.

What’s needed to make this happen? Intentionality.

Canadians are happy to donate here and there when someone comes knocking on behalf of a charity, but often not much thought or planning goes into our giving. As a result, our dollars can end up having less impact than we’d hope, or we end up giving less than we can.

Fortunately, we can overcome this by adopting a more intentional approach to giving and working together as Canadians to more effectively drive change.

Overcoming barriers to giving

Of course, the reality is that Canadians already contribute generously to charitable causes. However, together we have the potential to do even more to build up our social infrastructure and achieve those big, audacious goals. Two things that can help us boost our collective impact are clarity and confidence.

  • In the Thirty Years of Giving in Canada report, 69% of donors said they did not give more because they could not afford to do so. While it is undoubtedly true that many Canadians already give as much as they can, there are also many for whom uncertainty about their finances is the true barrier.

If you feel uncertain about your ability to give more, a trusted advisor can help you gain a clearer picture by assessing your current financial situation and helping you map out a financial roadmap. With more clarity on what you can afford to give, you’ll be in a better position to achieve significant impact.

  • The Thirty Years of Giving in Canada report found that 29% of donors cite concerns about inefficient or ineffective use of money as a barrier preventing them from giving more. A degree of scepticism is certainly warranted: some charitable organizations are less professional than others, and sadly charity scams can sometimes cast a shadow over the entire sector.

 Rather than limiting your giving due to pessimism, however, you can also seek out options for giving with greater confidence. For example, accreditation initiatives such as Imagine Canada’s Standards Program can highlight organizations that are committed to high standards of governance and accountability. When you are more confident that your money will be put to good use, you’re more likely to give more.

Joining forces to shape the world

Achieving transformative social change requires us to dream big and join forces. None of us can eliminate hunger and poverty, cure diseases, and build a just society on our own. But working together with a clear, intentional plan, we can move mountains and create a better Canada for the benefit of everyone.

Elke Rubach is President of Rubach Wealth, a Toronto-based firm that helps established professionals and business owners support the people and causes they care about through comprehensive wealth and retirement planning. Contact Elke at 647.349.7070 or by email at elke@www.rubachwealth.com.

Bruce MacDonald is President & CEO of Imagine Canada, a national non-profit organization that creates programs and resources to strengthen charities, promote corporate giving, and support the charitable sector. Contact Bruce at bmacdonald@imaginecanada.ca