Most business owners I work with know their company's numbers well. They can tell you last year's turnover, what the rent is and roughly what is in the bank. Ask them the same questions about their own money and the answers get vaguer. That is not carelessness. The company has an accountant and a year end; the owner's own finances usually have neither.
Three things to write down
A plan starts with where you stand, and where you stand fits on one page:
- What you own and what you owe — personal and business together, because for an owner the two are rarely separate.
- The cash that comes in and goes out each month, including what you take from the company.
- Your goals, each with a date and a number. "Retire comfortably" is a wish. "Stop working at sixty on a set monthly income" is something you can plan for.
Most people find the third list the hardest to write, and the most useful once it is written.
Retirement, roughly
Almost everyone in work in Hong Kong has MPF, and many owners assume it will be enough. For most it is a foundation, not a plan. It is worth knowing roughly what your accounts are likely to provide, when you can draw on them, and how wide the gap is between that and the life you have in mind. A rough figure now is more useful than a precise one at sixty-four.
How money leaves your company
For an owner, the way money moves from the company to you is part of the plan, not a separate question. Salary, dividends and a director's current account each carry different tax results and different paperwork. Deciding the mix once a year, with the accounts in front of you, is better than deciding it by habit. The tax side and the planning side should be looked at together.
Look again every year
A plan is not a document you file and forget. A sale, a marriage, a child, a new venture or a bad year all change it. I suggest a review once a year, ideally just after the company's accounts are finished, when the numbers are fresh. If you would like to go through your own, the wealth management page explains how we work.
General information, not advice on your own position. Every case turns on its own facts.