It’s Business … And Personal

Last summer, Anthony Harris, the 32-year-old owner of Popular Demand clothing store and Popular Demand Unisex Salon in Cleveland, decided he just couldn’t pass up a third business opportunity. Banks had foreclosed on the building that housed his businesses, and Harris figured that if he could find a way to balance his current cash flow needs against the up-front costs and monthly payments of a commercial mortgage, he could stop leasing space and gain the five apartments above his shops at a bargain price. Unfortunately, his financial picture was far from perfect. His daughter, Angel, was only 6 months old, and he had no medical coverage, no retirement accounts, and only $35,000 in personal savings and business capital spread among several bank accounts.

So Harris took a colleague’s advice and sought out Warrington “Skip” Eggleston of American Express Financial Advisors. Eggleston helped Harris find personal medical coverage through Kaiser Permanente, but he also recommended that Harris buy insurance to protect his current income and to assure that his daughter would be provided for after his death. “Having a child, a fiancée, and a business with a net worth over $200,000, he needed coverage,” says Eggleston.

But when Eggleston recommended that Harris begin investing for retirement, Harris began to worry about tying up too much cash in unfamiliar places. “I put the money in bank accounts because I figured it was better than keeping it under the bed,” says Harris. “I was kind of skeptical about the stock market. I wanted to see how my money was performing and not spend too much until I buy this building.” Eggleston pointed out that retirement planning is part of any successful business plan. “Business owners believe they are going to work forever,” the financial adviser says. “But you want to have a picture in mind of when and how you want to exit the business.”

The two decided to form a $10,000 retirement portfolio by shifting money from Harris’ savings accounts into a brokerage account and spreading the money evenly among American Express’ Diversified Equity Income, Large Cap Equity, and Short-term Duration Government Bond Funds. Now that interest rates are expected to rise, Eggleston has moved most of Harris’ investment in the bond fund into American Express’ Threadneedle Emerging Markets Fund. Harris also began placing $50 a month into a Roth IRA that will grow tax-free.

As soon as the building loan is approved, Harris plans to reallocate the remaining money in his savings accounts, bump up his Roth deposits to the maximum $3,000 a year for people under age 50, and begin buying disability insurance to replace his personal income if he’s injured.