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March 28th, 2011 posted by David Finkel (Taxloopholes.com Advisor)

In today’s world, we must also learn how to be a savvy investor in addition to learning to successful in the domain of business.

Today I wanted to share with you  important tips about building wealth independent of your business. Too many business owners get tunnel vision and think about their financial goals and their business goals as one and the same, but they’re not.

What’s your financial plan above and beyond your business or job? What is the wealth model you’re following? And most importantly, are they enough to help you reach your financial goals?

Here are 3 specific tips to get you started on this subject of building wealth independent of your business:

One: Invest a portion of your time and energy (at least 10 percent) to creating and executing your wealth plan. Building a successful business is obviously going to be a big part of that plan, but it cannot be the only leg to the plan. Why? Because there will be a day you may no longer have the business. Either you may sell the business, then you’ll need the skills of how to invest the cash from the sale to generate the passive and passive residual income you need. Or the business could fail, in which case it will be even more important to have “run some of your money from the table” and have this money invested wisely in a way that ensures your financial future.

One of my friends Kevin is a successful business owner. Kevin’s financial plan calls for him to build a great service business, but he doesn’t stop there. He also invests a portion of his time and financial resources in building his family’s investment portfolio. He allocates his portfolio into three equal buckets: one third equities, one third fixed income investments (which for him is primarily hard money real estate loans he makes), and one third commercial real estate.

While this allocation is specific to him and his situation, what is important is that you as a business owner have a wealth plan bigger than just running your business.

Two: Leverage your strengths when looking for investment opportunities. There is a learning curve in mastering any investment vehicle, which is why it is so valuable to leverage the advantages you already have.

Do you know a specific industry and have a network of contacts that give you information advantages? (NOTE: If you are investing in publically traded securities you have to be wary of trading on “insider information”, that is information that is not publically available. Which is one of the reasons I like investment vehicles other than publically traded securities since I not only get paid for my “insider information” but in these other areas it is totally ethical and legal to trade on this privileged information!)

Take the example of Stephanie Harkness, another of the Maui Advisors. She invests in tech start ups located near her company in northern California. She can leverage her experience, her network, and her symbolic capital to supercharge her returns and access some great investments.

What are your advantages? What contacts, expertise, and experience do you have that you can leverage?

Three: You must become your own most trusted investment advisor–no one can do it all for you. Too many people make the monumental mistake of thinking that investment success is a matter of choosing the right investment advisor to handle your wealth for you. It costs them dearly!

No one–I repeat, no one–will be able to manage your wealth like you can. Yes you need good advisors, but you need to have the sophistication to filter and use the best of your advisors.

This means you’ve got to invest the time, energy, and money to master the skill of managing your own net worth. I’ve watched countless business owners spend 10 years building a multi-million business which they then sell and through dumb investment decisions they lose all the money they had made with their businesses and they are forced back to Level One to start building over from scratch.

In fact I have a friend who five years ago sold his company for just over $4.5 million cash, and he lost over $4 million of that money through bad investments that in retrospect he realizes he never should have made.

Investing your money is a totally different skill from making your money originally.