Protecting Your Credit

Last week we talked about protecting your assets (link to last week’s article). For this week, we will follow a similar theme. But instead of your physical assets, this week we will focus on your intangible asset:  YOUR CREDIT.

Having assets and having credit are often the two sides of the same coin. How often do we hear of the successful businessperson that had to borrow to get their business to a successful level?

So how do you protect your credit?  How do you protect your credit BEFORE you have a problem with your credit?  Here are some tips:

• Budget:  You need to know where you are spending your money, what can be increased and what can be saved.

• Goals:  if you want to achieve something, write it down. Let it be reasonable and make it obtainable. Celebrate the steps and not the conclusion.  By the time you get to the conclusion you will be on to bigger and better goals.  Reward yourself for milestones on your path to success.

• Tactics: Debt consolidation is a dangerous option, but stepping back and considering it is sometimes necessary.  With business risk, comes risk.  That means that sometimes deals and settlements have to be done.  Do not hide from this.  People generally appreciate a straightforward approach.  You may need an intermediary (not necessarily a trustee or a lawyer, but an authorized middleman to negotiate on your behalf).

• Manage your credit (In particular credit cards):  They are way too easy to use.  How easy is it to go into your pocket, wallet, or purse, and pull it out and spend (spend and spend)?  You need to develop controls to keep this useful tool as a tool, and a not as a weapon of credit destruction

• Save:  When you budget, ensure that you are paying yourself first, second, and last.  First, is that you put money aside towards your savings plan, which should be segregated from your day-to-day plans.  Second, that you have some forced saving plans - such as a loan for business, or investment real estate, which gets paid regularly so that you are paying down the balance and building your net worth. And finally, because you should have something left over at the end of the month (or period), so that you are still building muscle (wealth) and have the ability to treat yourself and loved ones.

• Grow: Plan a business, write a book, and soar.  It is well documented that it is hard to grow wealthy with a job.  So you need to add a "career" to that job.  Like they used to say in the ads:  Go on, be a tiger!!!

Let us know what you think, leave us a comment below.

 

From the desk of Andre M.
At Andion Financial, we shape visions into reality
Copyright © Andion Financial 2010

Asset Protection for All

Asset protection for all... through separation of assets:

• Between family members, but let's be honest, there are rifts there… 
• Between people and corporations... but who are the shareholders...
• Between people and corporations using trusts... but it gets complicated...

 You can have it either Good, Fast, or Cheap... but you can only have two of the three...

We can help you out, but you have to choose which of the two that you want...

One of our sources broke it down out like so (Primarily for an American audience, but the gist is similar for Canadians):
 

FOUR LEVELS OF ASSET PROTECTION PLANNING

1.       $0 - $250,000 in net worth

2.       $250,000 - $1,000,000 in net worth

3.       $1,000,000 - $5,000,000 in net worth

4.       $5,000,000+ in net worth
 
Step 1: Involves the use of a corporation, and it is desirable to have it in another jurisdiction from your home base.  Remember, professional service organizations will typically promote their services, so be wary of this.
 
Step 2: Usually involves a bit more planning, depending on your asset picture.  For real estate investors, this could involve some creative use of ownership, debt in "friendly" hands, and equity stripping to make your properties unattractive to creditors.  This stage also usually includes a living trust and possibly a management company to administer the structure and assets.
 
Step 3: Begins to get a bit more complex.  In addition to steps 1 and 2, you would begin to consider international trusts, more complex entity structures, offshore investment options, and appropriate life insurance and will structure.
 
Step 4: This is where it gets interesting. You would look at the three options above, and the use of an appropriate professional firm to obtain confidentiality.  An important factor would be estate, insurance, and asset planning.  A private family office wealth manager to assist with risk management and asset allocation should also be considered, and the location of the structure becomes more important to consider, with life plans and multi-generational issues.

 

This partial list is not comprehensive, but a guideline to help clarify some options.  There are many options for asset protection planning, but the important thing to do is to find a plan that works for you, and implement it. Better sooner, as opposed to later.  There are more and more people and government agencies that feel it is their mission in life to share YOUR wealth. You owe it to yourself and your family to take the proper steps to protect your assets now.

At Andion, we do not claim to have all the answers, but we have the questions, and know to whom to ask them...


Let us know what you think, leave us a comment below.

From the desk of Andre M.
At Andion Financial, we shape visions into reality
Copyright © Andion Financial 2010

The ABCs of Finance

Have you ever sat in a conversation and wondered: "Are they speaking English?"

It is nice to know what the jargon means when you are discussing with accountant or banker types, but it is even more important to know why these terms became so important that they required shorthand acronyms. 

1.  EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization):

This measures the core earnings of the business before the above noted exemptions.  It is a useful number to get to the cash generating power of a business without factoring in other working capital issues.  It is a powerful number when comparing businesses, and therefore, useful for buying or selling a business.

Note that in pro-forma statements, other adjustments may be made to this number to make it more attractive to investors.  Also be aware that a variation of this term exist, such as the EBT (Earning Before Tax etc.) 

2. BE or BEP (Break Even or Break Even Point ):

While not used as often as EBITDA, the concept may be even more important.  When your banker is asking you what your BE is, he is not asking about your personally well being, but wants to know when your business (or project) will go from the negative to the positive, either in days, weeks or months, or how often, in dollar terms.  Sometimes we also hear the turn "burn rate" associated around BE.  Burn rate is the amount of money you are "using" or "burning" before you get to a positive cash generating position.

3. P & L (Profit and Loss Statement): 

A.k.a. (Also known as) Income Statement or Statement of Operations. This describes the company's overall performance for a specified period of time.  For instance, it could be monthly, quarterly, or annually with a 12-month period being the norm.  (There are exceptions, take FIFA with its World Cup Tournament ever 4 years, reports annually but also in a four year cycle)

The P&L measures revenues earned in a period versus the expenses incurred to earn those revenues.  It is not a cash statement.  You might earn the revenue in one period, but only receive the cash in subsequent periods.

4. CR (Current Ratio):

This measures your ability to meet your obligations when they come due by looking at your short-term assets such as cash, cash pending and receivables, versus your short-term liabilities such as accounts payable and accruals.  People like to see a 2-to-1 relationship here, but it can vary significantly.

5. CGS or COGS (Cost of Goods Sold):

Or sometimes Cost of Sales, or Cost of Revenues.  This deals with the direct costs attributable to the production of goods sold (think of food in a restaurant). It may also include direct production costs such as labor and other direct materials used.

6.  EPS (Earning Per Share):

This is the earnings of the business (usually net of everything including tax), divided by the number of shares outstanding in a company. While usually associated with public companies, it is also very relevant when dealing with companies that have multiple shareholders.

7. BOEJPO

 If you know this one, do not call us for we cannot help you!  But if you feel that there is a lot of mambo-jumble out there, and you want to get some straight answers, perhaps we at ANDION can help you!

Money doesn’t have to be elusive, complicated, or difficult to control!

All it really takes is a commitment to two things:  (1) understanding the relationship between money and your business activities, and (2) creating and implementing—on a regular, ongoing basis—a few straightforward money management tools and strategies.

When you understand how money flows in your business, and you can control your money systems, you will make informed decisions about prioritization, management and investments.

You don’t have to be a finance expert; you just have to understand enough to make the decisions that matter.

Let us know what you think, leave us a comment below.


From the desk of Andre M.
At Andion Financial, we shape visions into reality
Copyright © Andion Financial 2010

The Beautiful Game

The Good; the Bad; and the Beautiful… Game, that is…

On Friday, June 11, 2010, at 9:45 ET, the world will pause, take a deep breathe, and then start to gesticulate, gyrate and glow, as the first World Cup to ever be played in Africa gets underway.  The growls, groans, and moaning come later as teams start to lose, and the hope of them advancing to the next round begins to dampen.  But on Day 1, all the participants are winners and are hopeful of advancing.

It is just a game, some will say (they are or soon will be the minority), but oh, what a game.  Hopes will soar, flags will be unfurled, alliances and calculations will be done like in Renaissance Italy, only to be broken and forged again, even if only in the minds of the fanatical fans.  And yes, the conspiracy theorists will be out with their bold predications:

• It is fixed
• It is not fixed
• They bought the referee
• They bought the players
• They bought the organizers
• So that_______(fill in the blank) would win or that (fill in the blank) would lose.

But the reality is that meetings will be postponed, heroes will be made, and yes goats will grow longer horns (Zidane and Materazzi need not apply), and of course the debates will range from the bars and coffee shops, to the terraces and living rooms across Montreal, North America, South America, across Africa, Asia, Australia and in Soccer Crazy Europe (yes, that little island you once visited off the coast of Greece, there too!!!).

FIFA (The international governing body of Football (soccer)), President Sepp Blatter says that South Africa is ready and that FIFA’s somewhat controversial decision to grant the Games to an African country will be vindicated.  While we are fully expecting that South Africa’s resources will be stretched to pull off this event, there would still be glitches. But you know what?  The fans will not care as long as the games go on in fairness, friendship, and beauty.

Famous soccer player Pele called his autobiography “My Life and the Beautiful Game”.  Pele thus puts into words the passion that so many have felt for the game.  The speed, the simplicity of concept, the tenacious desire of its stars and work horses, the strategic brilliance of tactics and counter-tactics, and you know what… the sheer fun of it.   Drop a ball in a schoolyard, add anywhere from 4 to 36 kids, and the likelihood of some sort of soccer game breaking out is very, very high.

But at this tournament, there will not be schoolboys playing.  Thirty-two very determined nations will be showing up, and they will be determined to play hard, and play to advance (for some of the weaker teams, it might seem that they are playing to tie).  Italy, the reigning champion, is noted for its seeming desire to tie (or to win by just enough to give their fans near heart attacks).  The truth is that Italy has won 44 matches, drawn 19, and just has 14 defeats, while scoring 122 goals, and conceding 69 goals (less than 1 goal per game).  Not bad... but of course, its fans want more.

Complete list of Qualifiers for this year’s World Cup are:

Group A South Africa Mexico Uruguay France	Group D Germany Australia Ghana Serbia	Group G Brazil North Korea Côte d'Ivoire Portugal
Group B Argentina South Korea Nigeria Greece	Group E Netherlands Japan Cameroon Denmark	Group H Spain Honduras Chile Switzerland
Group C England USA Algeria Slovenia	Group F Italy New Zealand Paraguay Slovakia

Yes Greece will be there (their 2^nd World Cup appearance), in Group B, and while they have a shot of advancing past the first round, they will be hard pressed by South Korea and Nigeria.  Argentina should be a lock, but with great footballer, but erratic coach, Maradona in charge, who knows.  Argentina is blessed by arguably the best player currently in the game with Lionel Messi, and it may be Messi’s time to shine for this soccer-crazed nation.

Another team of note is the English squad, seen as regular underachievers. They may be a force to be reckoned with, lead by Italian Fabio Capello as the team manager. It should be noted that the English Soccer is blessed (and cursed) with the most lucrative television contract, and that draws fans, media, and media coverage that can sometimes reach a frothy lather, and be quite unrealistic for a good squad, but not better than other European good squads (especially Spain, Germany, the Dutch, and the reigning champs, Italy).  But hey, a hot striker (like Rooney can be), and the tournament can change.

But Brazil is still the club that is fun to watch and easy to root for (or against). Their success breeds contempt from others, but a samba-dancing bevy of fans that are a marvelous spectacle in their own right. The next World Cup will be hosted by Brazil in 2014, so bring your dancing shoes.

For a list of televised games and the times that they are replayed on TV go to:
http://www.cbc.ca/sports/soccer/fifaworldcup/broadcast.html

But with the fun a week away, we thought that we would also point out some of the business of soccer (Football) in general, and this World Cup in particular:

• Deloitte (Famous Accountancy and Consulting Group), published its annual tables with Real Madrid topping 400,000,000 euros in value.  Barcelona was close behind at 365 Million Euros in value
• Manchester United was third, rated at 327 Million in value.  But there are reports that the current unpopular American owners are asking for well over 1 Billion euros for the club from an interested consortium
• The bottom of the top ten is rounded up by AC Milan at almost 200 million euros
• Spanish La Liga debts total over 4 Billion dollars
• FIFA Revenues topped 1 Billion dollars for the first time in 2009 which did not include the bulk of the television revenues for this year’s event, that will be recognized in 2010
• Ticker sales 400 Million plus are not included in FIFA Revenues as that goes to the South Africa Organizing Committee
• FIFA contributed another 100 Million to the South Africa Organizing Committee to bring training facilities up to par
• Other FIFA events include:
  
  
  • FIFA Women’s World Cup™,
  • FIFA U-20 World Cup,
  • FIFA U-17 World Cup,
  • FIFA U-20 Women’s World Cup,
  • FIFA U-17 Women’s World Cup,
  • Olympic Football Tournaments,
  • FIFA Futsal World Cup,
  • FIFA Confederations Cup,
  • FIFA Club World Cup,
  • FIFA Beach Soccer World Cup, etc.

With the extra money that FIFA contributed that means that South Africa’s organizational budget has increased to $523 million.  Not bad for a month’s activities and a lifetime of memories…

Let us know what you think, leave us a comment below.

From the desk of Andre M.
At Andion Financial, we shape visions into reality
Copyright © Andion Financial 2010