Entrepreneurial Money Matters: Mastering Personal Finance for Success

Episode 183

On today’s episode we dive deep into personal finance strategies for entrepreneurs and those that are living the self-employed life.  We will be covering some strategies and tactics that Ken and I have employed over the last few years as well as share with you some of our mistakes or shortcomings in the hopes that you can avoid these! 

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00;00;24;02 – 00;00;44;15
Speaker 1
Welcome, everyone to the Firing the Man podcast. On today’s episode, we dive deep into personal finance strategies for entrepreneurs and those that are living the self-employed life. We will be covering some strategies and tactics that Ken and I have employed over the last few years, as well as share some of our mistakes or shortcomings in hopes that you can avoid these.

00;00;44;16 – 00;00;45;23
Speaker 2
Ken What’s going on, man?

00;00;45;24 – 00;00;55;25
Speaker 3
David, How are you doing? I’m excited to be in the podcast studio today, you know, sharing some personal finance tips, sharing some of our experience with all the listeners, just super excited. What’s on the table?

00;00;55;25 – 00;01;16;25
Speaker 2
Absolutely. Well, certainly when you go I had gotten used to a W-2 job for eight years and that steady paycheck coming in when we both fired the man. We learned that that steady paycheck doesn’t necessarily come in every two weeks. It’s lumpy. There’s things that you should plan for. Taxes are a whole nother conversation. We’ll get into that.

00;01;16;25 – 00;01;27;08
Speaker 2
There are certain things that definitely caught me off guard, and so hopefully we can provide some value to anyone who is either currently self-employed or would like to be self-employed.

00;01;27;09 – 00;01;51;26
Speaker 3
Yeah, yeah, absolutely. Just to reiterate what David mentioned, I’ve been a W-2 employee most of my life and transitioning to self-employment, entrepreneurship, lumpy, a rocky road and you got to you have to figure it out. It’s kind of a transition. And so today we’re going to share with you a lot of the stuff that we’ve learned and some of the stuff that we’ve learned from other people, some of the mistakes or lessons learned that we’re going to share with you so you don’t make those mistakes.

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00;01;51;27 – 00;01;53;12
Speaker 3
David, what’s number one?

00;01;53;13 – 00;02;13;11
Speaker 2
Absolutely. So first thing I would recommend is first thing I would recommend is get a business checking account and to keep that separate from your personal checking account. And that is for several reasons. One, when it comes tax time, it is going to be a lot easier to have everything segregated for your business coming in and out of one account.

00;02;13;12 – 00;02;33;13
Speaker 2
And so when we start businesses, generally, one of the first things we do is we get an in number from the IRS. We set up a business checking account by the URL and check and see if there’s any trademarks. And so it’s it’s something that I think everyone, when they start their own business for the first time, they generally run everything out of their personal account.

00;02;33;13 – 00;02;46;03
Speaker 2
And I know I did in unwinding that it was actually expensive because you have to pay somebody to come through that and sort out what’s what’s personal and what’s business. And so, yeah, I think that’s a pro tip that that’s really helpful.

00;02;46;04 – 00;03;05;21
Speaker 3
Absolutely. The next one on our list here is we kind of hit on it earlier. It’s budgeting for a regular income. And so what this means is like, let’s say, you know, your business is generating, you know, X amount of cash flow and then one month you have a large inventory order or Q force coming out and you have to spend three in your seasonal brand.

00;03;05;21 – 00;03;33;19
Speaker 3
You have to spend three times more, more capital or cash on inventory than you normally would. And your and you only have a certain baseline of cash flow coming in. And so this is one thing that we’ve learned over the last several years, is that cash flow is very, very tough to manage as you’re as you’re growing an e-commerce company because ecommerce is growing rapidly and you can grow yourself out of cash very easily, you know, budget for that.

00;03;33;20 – 00;04;02;19
Speaker 3
It’s not a perfect science. It’s there’s no perfect way to do it to start budgeting for it. If your business is seasonal, build that into your budget. If you pop in the summertime, if you if you’re a swimwear business or something, just know like, hey, plan that out for the year. No, you should be getting this amount of cash flow each month and budget that accordingly as well as you know paying yourself and your team if you have a team and you’ll know otherwise if you do try to do something like a W2 job where it’s steady all year long, there might be some months where you’re short, some months you’re going to have extra.

00;04;02;19 – 00;04;06;08
Speaker 3
And so just plan for that irregular lumpiness and income.

00;04;06;08 – 00;04;24;12
Speaker 2
Absolutely. No, I would agree with that. And that was something that I knew that businesses were seasonal, but it still kind of caught me off guard when I was experiencing that. And so that’s something I think like planning out a year. Like I will be cash rich in the summer, I will be cash poor in the winter, I’m going to plan accordingly.

00;04;24;14 – 00;04;49;17
Speaker 2
Is a good, good thing to think about and plan for. So next one on the list is track expenses diligently. And this is something that I would say not to brag, but I do a pretty good job of this. My wife and I, we sit down once a month and we go through all of our credit card statements, How much we spent and we have a rule on subscriptions is if we’re on the fence about canceling it, well, cancel it because we can always sign up again.

00;04;49;17 – 00;05;12;26
Speaker 2
And I’ll tell you what, HBO Starz like to be the Hulu Plus. Those seem to get us. But then there’s sneaky ones that maybe renew once a year. We’ve started using rocket money, Rocket Money.com. We’ll post a link to that in the show notes, but it will scrub your credit card statements in your bank statements and find all the recurring charges, both monthly and annually.

00;05;12;26 – 00;05;36;22
Speaker 2
I can I can think of a couple annual expenses that every year when they show up I think blow wrestling dot com is it is what I’m talking about every year when I see it on my credit card statement, I’m like, needed to cancel that, but I’m going to enjoy it for the next year. Another thing that I think helps with this is programs like Mint.com syncs up with into it, and it really is helpful for budgeting and at least understanding what cash you have coming in and what cash you have going out.

00;05;36;22 – 00;05;53;03
Speaker 3
Yeah, absolutely. That’s definitely something that I don’t do a good job at it I can get better at and I’m going to try that that rocket money because those those annual ones hit me and I’m like, do I really want to call and try to try to get a refund that or anything. But if you can kind of catch it early and decide, like you said, if I’m on the fence or not doing that.

00;05;53;03 – 00;05;54;07
Speaker 3
So I think it’s a great tip.

00;05;54;07 – 00;05;55;05
Speaker 2
Absolutely.

00;05;55;08 – 00;05;56;21
Speaker 3
What about taxes, David?

00;05;56;21 – 00;06;15;03
Speaker 2
Yes. So this is going to be completely different than when you were W-2 employee. So traditionally when you’re a W-2 employee, you’re going to be assigned a certain number of allowances and money’s going to be withheld from your paycheck. You know, come April, when you file your tax return, you’re either going to get a refund or you’re going to owe.

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00;06;15;03 – 00;06;50;09
Speaker 2
But it generally is not a huge amount in either direction. This is something that is kind of a it’s nice that they do it for you, but also when you get a giant refund, it’s you should not be excited about it because you gave an interest free loan to the government for an entire year. And so planning for taxes is something that I think is really important having, especially like if you’re firing the man and going to work in your company, having that set up as an LLC or an S Corp and talking to an accountant is very helpful here and will ensure that you don’t have any surprises at year end.

00;06;50;09 – 00;07;08;06
Speaker 3
Yeah, absolutely, Definitely, definitely a lot different. And I’m not a tax CPA and so seek out I would recommend seeking out a tax CPA if you’re starting your own company, just getting into it, get out in front of that. That was something that hit me quick and I was like, Oh wow, what do I do now? So definitely talk to a tax CPA.

00;07;08;06 – 00;07;26;22
Speaker 3
But everything you said was was excellent. David Next one on the list here is build an emergency fund. And this one kind of ties into the one I covered earlier about irregular income. And so having an emergency fund, this is something David and I both covered years ago when we when we fired the man. This is on our list of things to have done.

00;07;26;22 – 00;07;46;23
Speaker 3
You know, depending on what your situation is, this is different for everybody. Some people have a 90 day emergency fund, some people have a 12 month emergency fund, some people have six. It’s all it’s all all over the place. Depending on on what your situation is. Everybody’s probably different. But definitely 3 to 6 months could be a sweet spot, but you need to have something there.

00;07;46;23 – 00;08;09;22
Speaker 3
Emergency fund where if you have that massive inventory purchase for Q4 and you don’t have enough money to pay yourself, you have an emergency fund to lean into. If a catastrophe happens, you know, you maybe you get sued, maybe there’s a fire in your warehouse, you lose all your inventory. You know, you never know. Being an entrepreneur, it’s you’re going to get curveballs all of the time, guaranteed curveballs all the time.

00;08;09;27 – 00;08;32;00
Speaker 3
And having emergency fund does two things. One, it allows you to put food on the table for your family. And two, it gives you peace of mind knowing that, okay, well, I have this emergency fund. And so if, you know, whatever whatever whatever catastrophe happened to my business, I’m going to be okay. And so this is this is crucial not only to help you survive, but mentally to help you stay in the game.

00;08;32;00 – 00;08;53;12
Speaker 2
Absolutely. I would say if you this may come as a shock to somebody that hasn’t run their own business. But I would say that if you set aside an emergency fund, there is a 100% chance that you will use it. At some point you’ll tap into it. And that is because businesses, they they run in cycles. No matter how good you are, something’s going to come up, something unexpected.

00;08;53;12 – 00;09;12;16
Speaker 2
And it’s nice to be able to make decisions not from a place of scarcity where you’re like, Do I pay my mortgage dry by inventory? That’s a that’s a tough situation to be in. And so, yeah, I would I would definitely agree with that. Just as a recap, Ken, before you and I fired the man you and I had set aside, six months was what I targeted.

00;09;12;16 – 00;09;36;01
Speaker 2
What about you? Yeah, same. All right, well, onto the the next Protip. So this is payment plans and financing things. And I, before I dive into this, I’m going to share a short story. No, somebody that is a very good business man, meaning they have grown companies. Well, however, I don’t think of him as a good person. He’s a little slimy.

00;09;36;01 – 00;09;54;09
Speaker 2
Okay. And you’re going to see why. So he told me, he said, when when I hire somebody, I give him a $5,000 bonus. Do you know why I didn’t? I was like, Well, nice guy. It’s just a nice perk. It’s a recruiting tool. He said, No, it’s so they go make a down payment on a car, a new car, and that way they need me.

00;09;54;09 – 00;10;13;20
Speaker 2
And he said, You know what I do when they make manager? I give him a $25,000 bonus. Do you know why? So they buy a bigger home and they need me in. That is like I never thought of it that way. But the number of sign on bonuses, I mean, that’s a that’s a thing. I mean, sign on bonuses are you know, I’ve seen it how I did it to myself.

00;10;13;20 – 00;10;37;23
Speaker 2
When I graduated college, I bought a great big lifted truck. It was brand new off the lot, financed it, and the down payment was from my signing bonus. So I guess the joke’s on me. But the reason I mention this is with irregular income, it seems like having regular payments, whether that be, you know, really whatever you finance, it’s kind of like a wolf at the door every month and it’s going to show up there consistently in in bad months.

00;10;37;23 – 00;10;54;03
Speaker 2
It kind of stinks to have that wolf out the door. And so I know I will say that lifted truck that I purchased almost a decade ago, I’m still driving because it is bought and paid for and I’m only going to make that mistake once. I don’t know. It does that when I share that story. Does that register as I don’t know?

00;10;54;03 – 00;10;54;23
Speaker 2
What do you think of that?

00;10;54;23 – 00;11;08;24
Speaker 3
I’ve never heard of that, but it makes sense. But yeah, it’s lifestyle, I think choice of of, of keeping up with the Joneses and the mindset. Everybody has shiny object syndrome and it bite you. And so I definitely I definitely feel your pain on that one.

00;11;08;25 – 00;11;22;06
Speaker 2
Definitely. Definitely. So again, I’m really interested in your thoughts on on this this next one. And I and I think this particular topic is what keeps people at their job, a job that they don’t like for way too long.

00;11;22;06 – 00;11;44;24
Speaker 3
Yeah, absolutely. And so next topic is insurance coverage. So what kind of talk talk about it into two ways. One is business insurance, which I think is a much easier to digest for people. The other one is health insurance for you and your family. And so business insurance that probably David, I think that took us 30 minutes to an hour to kind of comb through and figure out what kind of coverage we needed, get a policy and set up payments done.

00;11;44;24 – 00;12;01;22
Speaker 3
Health insurance was much more complicated. And I, I have a suspicion that companies create this like fallacy on it’s impossible to get health insurance is because they want you to come work for them and kind of grab you by the balls, if you will. Like, Hey, we got you. You can’t get that anywhere else. So it’s not true.

00;12;01;25 – 00;12;18;08
Speaker 3
Dave and I have been working for ourselves for two, three years now and we’re doing just fine. We have health insurance, we’re just fine. But it was a huge roadblock as we were planning to exit our jobs. And so, as I can tell you from being on the other side of this, it’s it’s not a it don’t let it stop you.

00;12;18;08 – 00;12;35;20
Speaker 3
It’s not a huge of a roadblock now looking on the other side of it. But so what I did personally and everybody’s going to be different. You maybe you’re married, maybe you have, you know, five kids, maybe you’re single. It’s going to be different for everybody. And so what I did was I went to, I think it was healthcare.gov and signed up.

00;12;35;20 – 00;13;01;16
Speaker 3
You apply you put all your you put all your information in there. And they, I think, reply back within 30 minutes of if you’re eligible, you’re not eligible. And then when you go through the next steps, they’ll show you all the plans. And it’s essentially a marketplace where you can shop all the different plans from different providers. You can go super high, end a little bit more expensive, you can go bare bones, whatever, you know, maybe you’re in bad health, maybe you’re in great health, You pick what you want.

00;13;01;16 – 00;13;20;00
Speaker 3
There’s health, there’s dental, all of the insurance is on there. And so I think it took it took me maybe an hour and a half. You can also you can you can put your current doctors in there and see if they’re cut, which ones are covered. It’s pretty slick. And so once I were found this, I was like, oh, my gosh, Like, that’s way easier than anything else I ever did.

00;13;20;00 – 00;13;35;26
Speaker 3
And the cost of it, I’ll I’ll throw out some rough numbers because it’s going to be different for everybody. But I would say like some of the smaller plans for me, I just I just have insurance for me. And some of the smaller plans for health insurance were as low as like 250 a month, up towards about 700 at the peak.

00;13;35;27 – 00;13;48;27
Speaker 3
And so that kind of a range in there. Obviously, if you’re married and have children, it’s going to be a little bit more or a lot more. But that’s the range for for what I for what I found and David’s right, that was like one of the things on our list of like, Oh, how do we overcome this?

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00;13;48;27 – 00;14;03;06
Speaker 3
But it’s but it’s pretty easy. So the route we chose was healthcare.gov. You can also go a private insurance route. You can go out and get quotes from private insurance is now I’ve never done that. I don’t know what that what that looks like, but I know it is viable. David, anything to add?

00;14;03;06 – 00;14;22;27
Speaker 2
So we’ve done this two different ways. The first year we did healthcare.gov, that worked just fine. And then most recently we went through Anthem Private Company just to give the listeners a data point, asked covers this year, it covers my wife, myself and two kids, and that’s 900 bucks a month. And so we got it’s called an HSA plan.

00;14;22;27 – 00;14;42;03
Speaker 2
So a little bit higher deductible. But you get an HSA which means everything you pay towards that deductible is tax deductible. Say that ten times one thing. Just an overarching thought I have on insurance is some people would look at that and say, oh gosh, almost a thousand bucks a month for insurance. That’s really expensive. I get mine for free at work.

00;14;42;04 – 00;14;58;25
Speaker 2
It’s not as expensive as giving a majority of your waking hours to somebody else to achieve somebody else’s dream in. So like when you compare those, it is bananas to me that people will stay in a job for insurance while they sacrifice their most important asset, which is their time.

00;14;58;26 – 00;15;00;25
Speaker 3
Absolutely. Any final thoughts?

00;15;00;28 – 00;15;11;10
Speaker 2
I hope you found this episode valuable. If you have any other pro tips that you’d like to share with us, please leave a comment in and we’d love to hear from you. Otherwise we’ll see you next week.

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