AGE: 39, 38
Profession: Solo Entrepreneurs
Primary Goal: Continue to build wealth, Create additional Income Streams, Avoid Unnecessary Taxes
Background: Kendall started a business online three years ago. After a wildly successful first year, Joe quit his job to help run the business. The two entrepreneurs have grown the business to annual gross revenues in the high six-figures. Because it is an online business with no employees other than themselves they bring home a good portion of that revenue. It is more than they ever imagined.
Joe and Kendall have three children under the age of ten and love to spend time fishing the Chesapeake Bay with them in the summers.
Because their business grew so fast they haven’t been able to give the level of attention to their personal finances that they know they should. They know they are paying too much in taxes and are looking for strategies to reduce their tax bill now and in the future. They also know their cash flow could be managed better to save more of what they earn. Because they don’t really understand the financial markets, they are looking for a financial advisor who can help them navigate the investment world to create a portfolio for long-term growth.
Joe and Kendall have accumulated over six figures in both their business checking account and their personal savings account. They know it earns nothing but are not sure what they should do with it or what their options are.
They previously worked with a financial advisor who is Kendall’s father’s advisor. The advisor was described as a very nice person who was smart but didn’t really understand their business. He had been in business for thirty years and they felt he didn’t really understand what was important to them.
They opened SEP IRAs because as the advisor put it, “That’s what business owners do.” Joe and Kendall contribute every year at tax time and are in a portfolio of stock mutual funds and some stock index funds. When the stock market sold off during the COVID pandemic they panicked. Even though they knew the funds were for long-term growth they ended up selling half of them in the downturn thinking things were going to get worse. Joe and Kendall are more than willing to take risk with their business but feel that with the savings they take from the business they may not want to be as aggressive.
It was important to Joe and Kendall to find someone with the Certified Financial Planner™ designation so that they knew the advisor would put their interests first and was well versed in all aspects of financial planning as well as investment management. Additionally, they wanted an advisor who wasn’t on the cusp of retirement who could help them grow their wealth along the way. Lastly, they wanted someone who understood the challenges business owners faced and could help them navigate their financial world.
The first step was to take inventory of their current situation. Joe and Kendall created an Asset-Map using software provided by Celestial Wealth Management. The Asset-Map visually organized all of their finances in a clear graphical layout.
Next, they reviewed how the business was set up and how they managed cash flow at the business and the personal level. Joe and Kendall hate budgeting and they have always thought financial advisors judged how other people spent their money. They were able to map their cash flow showing the inefficiencies in how it was currently managed without the scrutiny and judgement of their individual spending.
After modifying their cash flow, they reviewed the current debt they had, including their mortgage, some business loans, credit cards, boat and car loans and some student debt they still had. By restructuring and paying down some debt they further increased their cash flow.
Joe and Kendall then created a plan to use the new cash flow to save and then pay for their young children’s college education while also maintaining access to the funds for use if they go to private schools.
Next, they tackled the SEP IRA retirement plan. After reviewing the different types of plans available to them, they restructured them into a plan that allowed more contributions via salary deferrals and profit sharing contributions. Further, because the business was consistently growing, they were able to create their own pension plan allowing them to supercharge their retirement savings and get large current tax deductions.
They created an investment strategy for the funds that matched their risk tolerance. Even though they were young, Joe and Kendall didn’t like the large fluctuations and uncertainty in the stock market. They took risk in their business and didn’t want to take as much risk with their investments. Celestial Wealth Management used software called Riskalyze to create an individualized Risk Number® for Joe and Kendall and created a portfolio to match that score.
The portfolio balanced long-term growth with stability using low-cost, exchange-traded funds (ETFs). Because they understood how the portfolio was structured and it better matched their risk tolerance they felt more confident they would be able to stick to it through the ups and downs of the markets.
In addition, Joe and Kendall put their inefficient savings to work by taking advantage of the tax-code. They were worried about increasing tax rates and wanted to shelter the funds they saved from future taxes while creating a legacy to protect their children. They were able to put together a strategy to do just that.
Joe and Kendall were excited they had a partner who was helping guide them through all aspects of their financial lives. While it was a lot of work to get things set up, they had a new found confidence in their financial future. They don’t feel judged about their previous decisions and are excited for what their future holds.
Joe and Kendall worked with Celestial Wealth Management to:
Joe and Kendall are now able to better focus on growing the business because they know their finances are more organized, streamlined and efficient. Because they are reducing waste, they are keeping more of what they earn. This has allowed them to be more selective about their business growth opportunities and spend more time fishing on the Chesapeake Bay with their family.
*Please Note: The above Case Study is hypothetical-not involving an actual Celestial Wealth Management Client. Case Studies illustrate the hypothetical experience of a fictitious client based on a scenario that an actual client might experience. The Case Studies are designed to generally illustrate how we may provide our services to our clients. Keeping in mind that no two clients, situations, or experiences are exactly alike, the Case Studies are not to be construed as an endorsement of Celestial Wealth Management by any of its past or current clients, nor any assurance that we may be able to help any client achieve the same satisfactory results. To the contrary, none of the Case Studies should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results or satisfaction if Celestial Wealth Management is engaged, or continues to be engaged, to provide advisory services.
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