Avoid Bankruptcy & Find "The Right Place

"How did this happen?"

As reports of economic recovery increase, financial experts are quick to discount rising bankruptcies as expected delayed reactions and expected casualties. To those directly and indirectly involved in a bankruptcy, "How did this happen?" is a common reaction to the unexpected nightmare of financial collapse.

Bankruptcy is not an automatic sign of poor business judgement or weak money-management skills although both can contribute to financial problems. Factory shutdowns, shifting consumer trends, fraud, unscrupulous marketing tactics and client insolvency are just a few of the 'wrong time' or 'wrong place' happenings that can drive a business or a family into a financial tail spin.

"The key to success, at the end of the day, is being in the right place at the right time," said Junior Achievement (JA) Business Hall of Fame, inductee Anthony S. Fell, O.C., Past Chairman of RBC Capital Markets, during the recent induction ceremony. "I think a lot of [success] is random -- as I say, being in the right place at the right time. Obviously, you have to be there and putting your life into your work, but there are a lot of people who work hard, who are very smart and, because of ill-health or bad luck, don't get to where they could have."

These annual JA Business Achievement Awards acknowledge leaders chosen for significant contributions to Canada's economy and its citizens, and for the examples they set. The Junior Achievement mandate is to "inspire and educate young Canadians to experience free enterprise, understand business and economics, and develop entrepreneurial and leadership skills." Consider JA, and those it honours, as excellent inspirations and resources for business improvement.

A significant theme of this column is well expressed in Louis Pasteur's words: "Chance favours a prepared mind." How can you be sure that your mind is prepared to see opportunities that protect your business, your family and your real estate from financial threats, that is, that put you in the right place? Looking forward, which steps are you taking to understand what "the right place and the right time" mean in your context? This clear intention is as valuable in career planning and business development, as it is in buying and selling real estate.

Bad news bears examination. For too many months, statistics have tolled sobering financial loss:

• In August 2009, a Toronto Star headline reported that "Canadian bankruptcies skyrocketed in Canadian bankruptcies skyrocketed in June": "The number of bankruptcies rose by a staggering 51.6 per cent in June compared to the year before, as more Canadian consumers and businesses were unable to pay their debt … . The number of proposals, a last ditch effort to pay creditors a portion of what they are owed, also jumped by 49.5 per cent."
• In November, a September high in bankruptcies was announced and we learned that "debt levels and job market weakness trump low interest rates," according to Derek Holt and Karen Cordes of Scotia Capital.
• Amid reports of "rebounding business and consumer confidence," statistics reveal a bumpy road ahead. For instance, The Toronto Real Estate Board Commercial Council Chair Garry Lander recently stated: "While the commercial real estate market remains softer than last year, leading indicators are pointing toward better results as we move into 2010. Business confidence is increasing, suggesting that many firms will be looking to increase output over the next year." In the same release, The Council reported statistics for 2009 leased commercial space that stated the October level was down 64 per cent from October of 2008.

The significance of these statistics and observations lies in your interpretation of opportunities and challenges, relative to your life and work. This is where the global impact materializes as local repercussions for families and individual businesses. What's really happening in your community and what are you going to do about it?

Where does my personal turnaround lie? Heightened awareness and observation are important defences against the unexpected. Pay attention to where your money is going. Pay attention to how individual clients are faring or failing. Pay attention to the foresight -- and lack of it -- from your politicians, bankers and those who may have more control over your career, real estate and income than you do.

The Ontario Association of Credit Counselling Services (OACCS) cautions consumers and business owners to watch out for tell-tale signs of money troubles. Are any of the following financial symptoms familiar to you or visible in those around you?

• Relying on credit for daily living expenses?
• Taking out loans or cash advances to pay old bills?
• Arguing over money?
• Putting off paying bills?
• Losing track of how much you owe?
• Worried that you'll never get out of debt?

OACCS suggests that if you answered "yes" to any of these questions, you'll benefit from proactive solutions. Contact one of the Ontario Association of Credit Counselling Services online, or call 1-888-7-IN DEBT (1-888-746-3328) to access the Ontario Central Referral Service. Google for comparable services in other provinces. Credit Counsellors are trained to help you financially return to "the right place."

Taking a different proactive approach, Carol Bezaire of investment management firm Mackenzie Financial suggests one way to move forward is to tackle year-end tax planning before the December 31 deadline. Bezaire's Year-End Tax Strategies list represent a comprehensive set of straightforward approaches to reducing tax bills and "whipping" investment portfolios into shape. For instance, pay off items that qualify for income tax credits or deductions since you can't deduct unpaid property taxes, tuition fees, medical expenses, child care bills, child support, or otherwise-tax-deductible fees for legal, accounting and other services.

Perhaps you'd like to share my slogan for progress in the face of reality: "Onward &amps; Upward -- the only directions that matter!"