As a corporate executive, your days are typically full of demanding leadership responsibilities and the relentless pursuit of your company’s goals. These stresses often leave you little time to manage your wealth, resulting in significant oversights in your financial plan that may place your long-term financial security on the line.
We at Tencap have seen firsthand the challenges of financial planning for executives. But we have great news—it’s not too late to address those points you might’ve overlooked and ensure your financial health is as strong as your corporate strategy. Let’s explore some of them in this blog.
8 Items That Executives Overlook in Their Financial Plan
Addressing these aspects helps secure your future and fortify your wealth against potential challenges down the line.
1. Not taking cash flow and cash management into account
Cash flow and management are critical components of a solid financial plan. However, it’s easy to get tunnel vision on building wealth and neglect your cash flow when you’re already earning a sizeable amount. This oversight could lead to liquidity issues that might make it challenging to cover immediate expenses.
So, start tracking your wealth’s movement as soon as possible. Build a budget that outlines your income and spending so you’ll know where your money comes from and where it goes. You could also use a spending tracker to make this task more manageable.
2. Having too many assets tied to the employer
Do you get equity compensation from your employer? While receiving stock options or restricted stock units (RSU) is a lucrative perk, it also means a substantial portion of your net worth will depend on your company’s performance—the opposite of a sound investment risk management strategy.
Diversify your portfolio by selling at least a portion of your company stock and reinvesting its proceeds into a healthy mix of assets with different risks and time horizons. Also, be mindful of tax implications and equity compensation vesting schedules, which can help streamline your sell.
3. Not protecting assets from lawsuits
As a high-net-worth individual, you’re more vulnerable to lawsuits due to your role’s high-stakes nature. Your personal wealth could be at risk of legal action without proper asset protection. Given the increasing litigiousness in the corporate world, safeguarding your assets is necessary.
A straightforward way to do it is by setting up a trust to hold your wealth, putting your assets out of reach from most creditors. Likewise, review and update your liability insurance to ensure it adequately covers your hard-earned money.
4. Not keeping track of the required annual IRA distributions
It’s easy to overlook your IRA’s required minimum distributions (RMDs)—the lowest amount you must withdraw from your accounts annually. However, missing your RMDs results in penalties that reduce your retirement savings.
Avoid these penalties by creating a system to track your RMDs. Start by calculating your RMD amount each year based on the IRS guideline that applies to your situation:
- Uniform Lifetime Table
- Table I (Single Life Expectancy)
- Table II (Joint Life and Last Survivor Expectancy)
These tables can be unwieldy, so contact a financial advisor to help you understand them more comprehensively. Then, set reminders well before your RMD deadlines to help you make timely withdrawals.
5. Not taking advantage of tax deductions and credits
Tax planning is an essential component of a sound financial strategy. Otherwise, you might miss valuable deductions and credits that reduce your liability, leading you to pay more taxes than necessary.
Stay on top of current tax laws and regulations to take full advantage of available deductions. For instance, you may have made charitable donations or business expenses you could write off in your tax returns.
Also read: A Complete List of Utah Rebates, Incentives, and Tax Credits for 2024
6. Not updating beneficiary designations
Who receives insurance and retirement account payouts in your absence? Beneficiary designations are crucial for estate planning since they eliminate the risk of your assets going to people against your wishes. However, you’d be surprised that 67% of Americans don’t have them.
Establish your beneficiary designations, especially after significant life events like marriage, divorce, childbirth, or the death of one of your beneficiaries, before it’s too late. Ensure all accounts have beneficiaries that align with your estate planning goals.
7. Not having a Rule 10b5-1 plan
A Rule 10b5-1 plan lets you set up a preset trading system specifying the number of shares you want to sell or buy, the time periods you wish to transact in, and your prices. As a result, you can reach your investment goals without the risk of insider trading violations.
Your company should direct you to a broker who will execute your plan on your behalf. You’ll work with compliance officers to ensure your observance of regulatory requirements. They’ll also help you navigate SEC regulations and industry best practices, enabling you to maximize your plan without breaking any rules.
8. Not building a team of professionals
Financial planning for executives is daunting, considering the high stakes. Relying solely on your personal knowledge or a single advisor might cause you to miss out on opportunities and fail to address risks.
Consider building a team of professionals, including a financial advisor, tax advisor, estate planner, and lawyer, to provide you with comprehensive financial guidance. Each professional brings specialized knowledge to help you navigate different aspects of your financial plan.
Many of our clients come for financial planning, but they stay because of the excellence we showcase in financial planning and tax planning. Consider that every executive we have worked with ends up on the higher spectrum of tax liability. Tencap works hard to ensure that each year, based on your comp, we do all we can to guard your income from high levels of taxation! When was the last time your advisor reviewed your tax return?
Maximize Your Financial Plan
Financial planning is critical for executives, given the unique complexity and responsibilities that come with your role. What’s more, overlooking certain aspects of it has significant repercussions on your financial well-being. So, proactively address these areas to establish a fortunate future for yourself while leading your company to success.
You don’t have to do it alone. Our team at Tencap Wealth Coaching specializes in working with high-net-worth individuals, offering tailored financial planning strategies to meet the unique needs of executives like you. With our help, you ensure your financial plan is robust, resilient, and aligns with your long-term goals.
Learn how our services can benefit you by checking out our article, 7 Reasons Why Our Advisory Services Are Worth The Fee.
Interested? Contact us today.
Nick Carrigan
Nick trains and develops families in creating, maintaining, and growing wealth. This includes educating clients on the science and academics of investing, comprehensive financial planning, and ongoing coaching to ensure discipline for a lifetime. Nick has seen this create incredible levels of freedom, fulfillment, and love for the families he works with.
