So many new businesses start every year, only to fail weeks or months later. Sadly, many of the missteps these would-be business owners made could have been presented if they’d followed some fairly simple steps. CPA Michele Cagan not only owns her own small business, she counsels many business owners with their taxes and their business plans. She joins us today to share some of the most essential nuggets new business owners and side hustlers need to know, from her new book, Starting a Business 101.
In our headline segment, Capital One has acquired Discover. What does this mean for Discover and Capital One cardholders and clients? We’ll dive into all of the details and what experts are predicting will happen to the benefits cardholders of each company can expect. Good news no matter whether you’re a Discover or Capital One customer…experts seem to believe things are looking up across the board.
Of course, we’ll also share a TikTok minute AND discuss backdoor Roth IRAs, mega-backdoor Roth IRAs (aka – “Doug’s Mom IRAs”), and much, much more. Of course, we save time to wander out to the back porch and share our favorite films and television shows…and others we don’t care for so much.
FULL SHOW NOTES: https://www.stackingbenjamins.com/how-to-start-a-business-101-michele-cagan-1485
Deeper dives with curated links, topics, and discussions are in our newsletter, The 201, available at https://www.stackingbenjamins.com/201
Enjoy!
Our Headlines
- Capital One’s Discover Acquisition: A Tighter Grip On the Credit Card Market or More Consumer Choice? (CNET Money)
Our TikTok Minute
Michele Cagan
Big thanks to Michele Cagan for joining us today. To learn more about Michele, visit Michele Cagan, CPA – Michele Cagan, CPA (michelecagancpa.com). Grab yourself a copy of the book Starting a Business 101: From Creating a Business Plan and Sticking to a Budget to Marketing and Making a Profit, Your Essential Primer to Starting a Business.
Doug’s Trivia
- Kelsey Grammer is the only actor to have been nominated for an Emmy award for three television series, all for the same character: Frasier Crane on Cheers and, later, Frasier. What is the third show?
Better call Saul…Sehy & OG
- Chris has a question about converting money from his 401(k) to a Roth IRA as a part of his early retirement planning.
Have a question for the show?
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Tune in on Wednesday when you’ll learn how to live your best life as your best self with author and entrepreneur, Guy Kawasaki.
Written by: Kevin Bailey
Miss our last show? Listen here: Community Episode: Crypto vs S&P 500 Index Smackdown – (Earn & Invest REWIND SB1484)
Episode transcript
It’s Monday and sadly, og, I woke up with a cold today.
It’s like 80 degrees outside. Are you sure that it’s, it’s probably allergies. I
actually went to bed with a cold last night too, but just, it just, no, it’s getting worse. Did you take your Allegra like two days ago? Did you take your allergy shot? Is that the little blue pill?
This
one’s purple. It’s, it is a whole different thing. Oh,
that explains a lot, doesn’t it? My mistake. My mistake. But I do feel very happy to see you today sneezing.
But this is new.
All right, we, we should probably just raise our glass. Get on with it, man. We got a week to do. In fact, it’s so great to see you after a week off to see you. It doesn’t
feel like a week off, but
it does not at all. Here’s to the men and women in our military. Cheers. We missed you. Thanks for keeping us safe.
Last week on behalf of the men and women at Navy Federal Credit Union and the men and women making podcasts in mom’s basement, let’s go stack some s together, shall we? Cheers. Here’s the song that we’d like to do for all the younger set of people, the teenagers and what have you. This one’s called Vacation Over
Vacation
Over.
Live from Joe’s mom’s basement. It’s the Stacking Benjamin Show.
I’m Joe’s mom’s neighbor, Duggan. Today you’ll learn how to start a business with CPA and author Michelle Kagan. In our headlines, a big merger is happening in the financial world. What does it mean for your money? We’ll share for our TikTok minute a lesson on making sure you have an answer for everything.
Plus a stacker who realized he’d better call Saul. See hi and og and of course I’ll share some nominated trivia. And now two guys who are the wind beneath my wings. Ugh, it’s Joe and OG. I can’t believe they made me say that.
Oh, the love is strong here on a Monday in the basement. Is that bet Midler? Do you ever look at Doug like he’s bet Midler
uncanny resemblance.
But yeah, it is strange. They’re twins separated at birth. No, don’t give us that. Look. Doug uh, happy Monday. Welcome back. We missed You last week. This is the Stacking Benjamin Show.
I am Joe Sci high average Joe Money on Twitter on x, and across the card table from me, rather, rather, ready to knock out another eight weeks of delicious money. Fun. It’s Mr. Ochi. What’s happening? How are
you man? I’m fantastico. It’s spring. Spring has sprung it’s winter’s over. It’s time for golf, spring golf, spring sports.
Every, you know, it’s
just, do you know how many people north of the Mason Dixon line just gave you a salute? Like a little one, one finger salute. It’s gorgeous here. I remember when we moved back to Michigan, those two years, why is it still cold? And Cheryl, it’s April. In May. Yes, in May. And I was talking to my neighbor, Andy Hill for marriage, kids, and money, and I said, man, it is just, it is just the, the, the weather’s been cold this year, hasn’t it?
He goes, you move back to Michigan. It’s always like this. It may. We got a great show today. You know what, if it is cold where you live, just suggle up. You could go start a business for everybody. Snuggle up and start a business. Snuggle up and work on your business plan. It’s gonna be great. Michelle Kagan here starting Business 1 0 1 later on in the show, but first, a huge merger happened, uh, while we were away.
So let’s get moving. But before that, oh gee, what, what exactly happened at your house last week? Oh, what didn’t
happen? You’ve seen Animal House, right? Oh, well, yeah. Okay. So not the first part, but the second
part. Where, and they were on the roof. How, how did they get up
there? Kinda like pulley or some carabiners and climbing ropes or something.
I don’t know. I mean, it was really frowned upon. HOA was involved. Yeah. What’d you tell the cops? Well, I mean, squirrels have no business on
the roof. Well, I feel bad for the animal control people. Yeah. Well,
they’re not getting in my house. Not that way
anyway. It was not through the back door. Hello? Is
that a blue pill?
Still talking? I can see it’s the purple one, Joe. That’s the one that stops the sneezing. The blue one has a different kind of
sneeze. I always for, I always forget, Michelle Kagan coming up waiting in the wing. She’s upstairs talking to mom. Let’s uh, get moving.
Hello
darlings. And now it’s time for your favor, part of the show our Stacking Benjamins headlines.
Our headline today comes to us from CNET Money. This is written by Dashia Milden Capital One, plans to Buy Discover. You saw this headline, og.
I just find it funny that we got the money headline from cnet. Well tell, you know, out of all the places, maybe the Wall Street Journal, uh, errs, no, no, no. Let’s go to the tech company and their slash finance
page.
Well, our friend Nubi was there for quite a while with with cnet, so they do have a presence in the money area. But I’ll tell you why I picked this one. I picked this one because they dove deeper into what they think might be the changes. Then Reuters just said, Hey, it’s a $33 billion all stock deal. It might happen.
Yeah. Yeah. And by the way, you’re very happy if you happen to own stock and discover before this. You’re high fiving yourself when you heard this,
it’s like a 30% increase over the share price, I think, right?
Yeah.
27% to be exact, but who’s equivalent Over a little 3% when you’re earning that much money.
Credit card expert. Aaron Heard said that in his view, puts a combined company in a good position to compete for major co-branded deals against larger banks. This still has to go through regulatory approval, so we’ll see if this, if this happens. And heard also says federal regulators, appetites for bank mergers is shrinking under the Biden administration.
Smaller deals have been abandoned because of regulatory friction, so might not happen, but if it does, they say this could happen by the end of 2024, early 2025, and then they start talking about what may change. If you are a cardholder with either one of those, basically there’s upsides for different people.
If you’re a Capital One credit card holder, they say don’t expect a ton to change, except you might get better perks because of the fact that Discovers clientele generally are people with really good credit. Yeah. Who don’t use their credit a ton. Just like that big cash back offer and are very happy.
You know, if they walk into a place of like you take Discover, they go, no. They’re like, okay, I’ll pay cash, or you know, whatever The thing is. They also get to play against Visa and MasterCard who largely control the payment space, right? That you’ve got American Express as number three, discover number four, but now Capital One is in that game and they said Capital One really is excited to get to get into the game against Visa and MasterCard.
But in terms of the benefits, lots of benefits on both sides. First of all, they say Discover card holders could have access to Capital One’s extended warranty or travel insurance. If Capital One harmonizes the benefits across its card, I’d expect it would add benefits to Discover Cards, making those cards more valuable for Discover Card members.
Yeah, the, uh,
capital One Travel Perks, especially in their high end ones, are pretty good. I think the Venture X, you get Hertz Presidential car rental, uh, access and travel insurance and the, the Capital One clubs, you know, those are kind of being all the rage with, with airline clubs being changed in terms of who has access to the Delta Lounge or the American Lounge or whatever.
Amex has theirs and now Capital One is having theirs. The biggest benefit is for Capital One folks is that kind of cross pollination around the, around the, uh, payment network. Whether or not you can have both a Capital One card and a Discover Card. That’ll be up to obviously the, you know, the joint, uh, organization I suppose.
But it is beneficial to have one of each in your wallet, so to speak, because, ’cause you’re right, sometimes places have little monopolies on that payment processing. And don’t offer one or the other.
Yeah. Discover it says here, OG has 44 million global merchants, much fewer than the other three networks.
But with Capital One now running that, the huge number of Capital One credit cards out there, all of a sudden merchants might go, oh yeah, we’ll, oh yeah, we’ll, we’ll accept it. Like we, we definitely want to be a part of of of that network.
IT network. Well it be interesting because Capital One is obviously a Visa card, so that’s how they run.
Are they going to kind of blow that up and then basically make all of their Capital One cards discover cards on the, on the Discover Card network and then to your point, since they own that side, that number goes from whatever you said, 40 million to 500 million or something. A lot of changes for
sure.
Jason Steele, another credit card expert, a friend of the show we’ve had Jason on before also noted it’s possible, uh, capital One cardholders could benefit from discover’s cash checkout feature that lets you withdraw cash when checking out at supermarkets at drug stores. The purchase a PR would still likely apply.
I was gonna say that
doesn’t sound like a great idea. No,
I know. Capital One already has partnerships with airline, hotel brands, to your point. Mm-Hmm. I’ve been in the Capital One Club. I know it’s the rage. It’s a, a very chic club. Yeah. I don’t like it that much. The one thing I do like about it is it seems to be a little less busy than like the American Express Club.
Yeah, that works. American Express Club, I think is a, is a nicer experience all around, but except for the fact that it’s always just
packed. They gotta keep the riffraff out. Yeah. Like us. Well, I didn’t say not us, just to, they’re gonna let some riffraff in it. Might as well be us, I suppose. Let’s talk
about this though, og, you know, we talked about these different, uh, credit card perks.
What really is important for people to look at when they’re evaluating their credit card? This is really
timely because we are, uh, in the middle. It’s not, it’s, I mean, some people may not know this, but I, uh, I’m kind of like a credit card collector. Like I seem to, I seem to go, like some people buy stuff on Amazon, you know, when they get bored.
I apply for new credit cards when I’m bored so I can get bonus points and that sort of thing. So I think I’ve pretty much accomplished. I think I have all, all of ’em. I’m, I’m not sure, but I’m pretty sure I have every one available. But we’re going through this right now in terms of like reevaluating the usage and then also the cost benefit.
Obviously Discover Card is, is zero cost. And that’s kind of their claim to fame is, Hey, we give you this cashback deal. You can, you know, send it to yourself as a check, or you can, you can use it to pay off your bill. And you know, and they’ve got little different bonus points along the way, or bonus percentages, but it’s very simple.
It’s clean, there’s nothing too complicated about it. Some of the other ones, you know, it’s like, well this one has this benefit and this has this benefit. And you just have to decide what’s most important to you and are you getting the value out of, you know, out of having it. Because very quickly, you know, if you have two or three credit cards in your wallet that are all kind of the high end travel cards or high end point cards or something like that, you might be paying $2,000 a year in credit card membership fees just to.
You know, just to buy a pack of gum and you know what I mean? Like unless you’re using all of that stuff but a bunch, then it doesn’t make a lot of sense to be writing those checks for, you know, two American Express or two, you know, two Capital One or two whomever, about the flashiness of having the cool card versus just go get your one or 2% cash back and make
it easy.
Yeah. This is a time when it’s a great idea to be tracking your expenses, because if you’ve got some type of tracking system and you can look at how much money do I actually spend on airline travel, or to your point, you know, you get extra stuff for this card if it’s gasoline or groceries
or whatever it might be.
I’ve tried that. I mean, it’s, again, every card has their own little niche that they try to. Shove themselves into, to the point where it’s like, well, this card gives you 5% cash back on the first $5,000 of purchases, and then 3% on the next 10. And you know, and it’s like all these different rules. And I’ve, I’ve tried to play that game of like, I’m gonna keep 10 cards in my wallet ’cause this is my gas card this quarter and this is my grocery card this quarter, and this is my going out to eat card this quarter.
And this is my airline card. Yeah. Who was, it
was somebody put different color stickers on their cards.
It’s like, it’s such a pain in the ass. And then in my family, I’ve got four card members for each thing. So then you’re like, oh, no, no, no. Don’t pay for gas with that one. Use the, use that one, use the red one instead for gas.
And then, oh no, not anymore. Now the second quarter, we have to use that for groceries. It’s like I’m a simplifier or I try to be. And doing that is anything but simple. So there’s nothing wrong with paying for, for a service, right? If you’ve got a American Express card, it costs money to have that. But if you’re using the all the perks and all the benefits and that’s providing value to you, then it’s worth it.
My question is, is it worth it to have 10 of ’em? You know, can you possibly be using all of them? Whittle it down. This is a good reminder to, to go back through all of that stuff and maybe do a little bit of an audit.
We are finally doing this. I’ve been complaining about this for a year. We’re finally doing something about it.
og we are actually canceling subscriptions to some of the different TV providers. I think Cheryl and I have finally realized you’ve watched all of Netflix. No, we just realized we only have one set of eyes. Like we can’t possibly watch all these at the same time. Why wouldn’t we watch all Netflix for a while or all whatever.
And I don’t think we’re gonna, we’re going to, uh, go down to just one, but I think, I think we’ve got the battle down to
going to three. Well, and this is another great example when you’re talking about subscriptions and keeping track of it. This is another thing where other perks, other things provide access to other things.
It’s like some people have the phone plan that gives you access to Hulu, which also, by the way, gives you access to ESPN in Paramount. They’re not gonna stop you from buying ESPN, you know, it’s like, they’re not gonna be like, Hey, wait a second. Are, are you on Verizon? You know, you can get this for free.
Whoa, whoa. That’s on you to kind of make sure you’re taking advantage of all those things. We found this out at our house. You get, I think you get the max, it used to be HBO, but now it’s just called Max. Right? Uh, as part of, at t my kids wanted to watch something, a movie or something that was on HBO. And so they just signed up for it on Apple tv and they’re like, all right, cool, we’ll take over your 15 bucks for the month.
And it just came up in conversation and we’re like, what? Wait, wait, hold on a second. What’s going on here? I’m like, we get this for free. Why we don’t have to pay for it? Oh, we didn’t know. There’s so many different things that are connected with all of these different technology tools. You have to go back through and figure all this stuff out all the time, by the way, because it changes all the time.
It’s like, you know, all right, cool. It’s set up. I don’t have to think about this ever again.
It’s like, well, that’s why like with, uh, our Monarch money, you know, we set up these alerts a couple months ago and now, and I, when we get the alert. That we’re over the budget next area. We don’t just go through the thing that caused the alert.
We go through everything in that area of the budget and it really has been nice to go, do we, do we really need to do that? And that’s what happened. Our, our entertainment budget went over this month for the 47th time, by the way,
for the 55th year in a row. We have exceeded our budget.
Just kidding. The new champion of exceeded budget.
Yeah, good stuff. We’re going to dive more into that in the 2 0 1 newsletter, our newsletter that comes out every Tuesday and Thursday. By the way, a lot of new members to the 2 0 1 in the last few months. Thanks to everybody who has sent us a note about how much they, they like our newsletter. We’re very proud of it.
But stack Benjamins dot com slash 2 0 1 is how you sign up for that time. For our TikTok minute, this is the part of the show where we shine a light on a TikTok crater who’s either doing something brilliant or air quotes brilliant. Doug is, uh, outside working on, uh, getting the lawn ready Spring. So, gee, it’s, it’s up to you.
Is it brilliant? Oh,
I’m in a springy mood, so it’s brilliant today.
Well, you know, you know how you always wanna make sure, like in the, in your back pocket, whenever anything goes the wrong way, you just need a plausible explanation. You always have to just be able to think on your feet, right? Yeah, absolutely.
I mean, this is, we had Charles Duhe gone a couple weeks ago talking about being a super communicator. I think this, uh, news report details a, uh, super communicator. This next one’s a new one for me. A woman claims that high winds blew cocaine into her purse. Kisha Posey was in a car during a traffic stop in Fort Pearson.
Late March during a search, the officer found bags of cocaine and marijuana in Poseys perch. Now, she told police that it was windy and the wind probably blew the bags through a car window and into her purse. She is charged right now with felony drug possession. Yeah, that’s ridiculous. H how can they charge her with that?
It’s gonna be super windy. Just makes sense to me. Yeah, I mean, she’s gonna end up with this fine, maybe some jail time. Just a big misunderstanding. Act of
God. That’s, it’s on your insurance, right? Like we cover your house. Except for act of God, I mean,
obviously, right? It’s could happen to any, and it has for some
of us, probably
looking at you, Doug.
Thanks to Jennifer for sending that to us. By the way, if you’ve got a TikTok minute you’d like us to play head to, uh, not just send it to me. Joe stack com knows
beers
as they say. Michelle Kagan is a force of nature. This woman has written, uh, some of the best books on so many different areas. We’ve had her on talking about 1 0 1 on real estate, 1 0 1 on investing, 1 0 1 on so many things.
Today, Michelle’s helping us start a business and is a CPA who’s written for most of the major publications out there. Michelle has had a front row seat to watching business owners succeed and business owners fail. Plus, her own accounting firm is a small business itself, so she had to go through all these steps herself.
So if you’re thinking about starting a business, or even if you’re not yet thinking about starting a business, but you might in the future, uh, this is gonna be a great segment for all of us, which is why we asked her back, but before that, oh, here he comes, man. Better late than ever, dude. What’s, uh, what’s going on with our trivia?
Hey there, stackers. I’m Joe’s Mom’s neighbor. Doug. Today is National Grammar Day, which I think is just fantastic. I’ve always said that it’s important to make learning fun for kids, and what better way to do that than to celebrate the life and career of former child Kelsey Grammar. A six time Emmy Award winner, Kelsey, or Kels, as I call ’em, was born in the Virgin Islands, although I doubt there were many virgins left after Cheers started airing there.
Kels later lived in Florida where he attended a private prep school before moving to New York City to attend Julliard on a scholarship. You know, hey, not a lot of people know this about me, but I almost went to Julliard, an ex-girlfriend of mine saw me shredding on the key tower one night, and later encouraged me to apply.
I sent my application along with a VHS of me playing kit guitar and singing an original song I wrote for that very same girlfriend. The guy filming it for me had never seen something so breathtaking. After he yelled, cut, I heard him say, what was that? Under his breath? Sadly, for Julliard, I never got a response.
Must not have put enough stamps on that envelope. I mean, how many stamps do you put? No, I never know. Some mail carrier out there has no idea that he changed. The course of the world’s history. Before his sitcom successes, Kelsey’s life reads like a country song. First his father was murdered. Then a handful of years later, probably so they’d have a good second verse of the song, his sister was murdered.
Then just a few years after that, you know, because the hits keep coming, two of his half brothers died in a scuba diving accident. Geez, I’m not marrying into that family. Today’s trivia question is Kelsey Grammar is the only actor to have been nominated for an Emmy award for three television series, all for the same character.
Frazier Crane on Cheers and later Frazier. Duh. But what was the third show? I’ll be back right after I see if I have a copy of the VHS that I sent to Ju.
Hey there, stackers. I’m key guitarist and grammar expert. Joe’s mom’s neighbor, Doug. We all know and love Kelsey Grammar for his work as Dr. Frazier Crane, but my personal favorite role of his is the Rumble from the extremely underrated film Money Plane. It’s an action packed movie about a robbery that takes place in a casino that’s inside an airplane.
I mean, you can’t make this stuff up. Today’s trivia question is Kelsey Grammar is the only actor to have been nominated for an Emmy award for three television series, all for the same character. Frazier Crane on Cheers and later Frazier. We’ve already covered that one, but what was the third show? The answer.
Kelsey Grammer’s third Emmy nomination came from his guest starring role on the single greatest sitcom of the nineties wings. Bonus trivia. Kelsey is also a licensed pilot, like og, the guy loves planes. And now here to teach you how to stop working for the man and start working for yourself. It’s today’s mentor, Michelle Kagan.
We’re super happy she’s back here with us. Michelle Kagan back. How are you? I’m doing great. How are you? Doing well, I’m great. I was super excited when I saw a new 1 0 1 book and this time we’re talking about starting a business. Why was this the next topic? I mean, besides the fact that you’re doing topic by topic, but starting a business, why is a one-on-one book so important on that?
I work with a lot of clients who have small businesses. Generally. They come to me after the fact. They already have a business. They’ve already done a whole bunch of things, and a lot of what we’re doing in the beginning is. Sort of fixing things or improving things that they didn’t really know how to do in the first place.
And I always say like, I wish you had come to me first, but I know nobody’s gonna do that. So I thought if I could put all the information in a book, there’s more chance that somebody will at least read some parts of it and then give themselves like a better starting point than if they had no information at all and just jumped in, which a lot of people do.
As people know that, read your other books, Michelle. There is a lot here. We’re going to, by the way, take stuff for people that are just maybe thinking if you’re driving down the road or you’re walking the dog, you’re like, you know what? I always thought that I might wanna start a business. We’ll cover that here.
And then if you decide, you know what, I really now wanna start a business, well then I’ll link to the book. But you talk about know what it takes to start a business. This is the big thing, Michelle, that I find all the time is people like, I got this great business idea. I wanna start a restaurant. I’m like, oh God, no.
Okay, okay. But people just don’t know what it takes. And you say there are three different factors and I wanted to walk through these. The first one is the time factor. Where do people get the time factor wrong when it comes to starting a business?
I have to say, honestly, I blame social media for a lot of the misinformation people have about starting a business.
A lot of people think. They’ll start a business, they’ll have customers right away. They’ll be making a hundred thousand dollars in the first year and that they’ll just devote a side gig amount of time to it. And I mean, that may happen for a few people, but in general, if you’re building a business, especially a service-based business where you’re, you personally are providing some kind of service or craft, it takes a lot of time.
It takes at least as much time as a full-time job, usually more time than that. So it takes a lot more time, and not even just the time to do the work, but all the planning and the invoicing and the thinking about what to do next. There’s so many pieces involved. And if you don’t have the time to devote to it, it doesn’t mean you can’t start it.
It means it’s gonna take a lot longer to get it to a point where it’s sustainable.
You’ve got some statistics here that go into exactly what you’re talking about. Michelle, New York Enterprise Report found that 33% of entrepreneurs reported working at least 50 hours a week, plus 25% of those 33% of business owners reported working over 60 hours a week.
I remember there’s a joke among entrepreneurs that we would rather spend 60 hours working for ourself than spend 40 hours having somebody else tell us what to do. Yes. So I, and I
don’t disagree with that at all, but when you’re actually working the 60 hours, sometimes it’s more time than you realize taken out of your life.
And that’s what’s funny is especially now, I used a restaurant when I said, oh God, no. And certainly if you wanna open a restaurant, do it. But I know people, Michelle, that have opened restaurants and then they go, I, you know, I guess it never occurred to me that I would be working every Saturday. Yeah. Like my weekend was no longer a weekend.
And then of course I know some people that have tried to open up restaurants and they go, you know, I’m not gonna be open Saturday. I wanna protect that time. Well, guess what? Your restaurant is going to go out of business. Yes, absolutely. Because you’re not open when people want to go out to eat. The second piece people get wrong though, is, is the money factor?
Talk about that.
Yeah. In some cases it doesn’t take a lot of money to start a business at the beginning. Sometimes if you’re gonna be selling a product or you need a physical place of business, it’s gonna cost more. You’re gonna be paying rent, you’re gonna be paying for inventory. It’s a lot of upfront money.
And even if you’re doing something like. Coaching, consulting, freelance writing, which a lot of people think like they can just jump into, it won’t cost them anything. There’s still startup costs involved in that. And then if you wanna expand your business, you need money to make that happen. So it’s not, you can’t start every business for free.
I don’t think you can literally start, and I can’t think of a single business you can start for free. Because at the very least, you need a computer and a phone and access to people and a way to communicate with your customers. So every business is gonna take some amount of money. People tend to underestimate how much money they need, and they also forget that they need to pay themselves.
So the amount of money you need to live technically, maybe not a business expense, but it is an expense for your business. ’cause the point of your business is to sustain your financial life.
It is sad how many people think, oh, I can just, you know, I’ll be wealthy ASAP, and for a few months I’ll just eat ramen noodles.
And that’s not sustainable. But the other piece is the amount of money that it takes. To your point too, I don’t know what you’ve seen, but when I, when I was a financial planner, Michelle, I would, I would tell people to double their projection, like the amount of time the ramp, like take the ramp, they’re like, oh, I’ll be profitable in nine months.
And when they tell me nine months, I said, let’s do 18 months. What do you, is, is doubling it good? Maybe triple whatever your projection is. I think it
depends on the kind of business. Mm-Hmm. I do think that some businesses lend themselves to faster ramp up than others. And either way though, I think I.
Everybody tends to underestimate. So I would at least double, I personally would probably two and a half or three times what they think because it’s better to to think out too far than to not think out far enough. And if you don’t have enough runway to get you to three months, you’re not gonna have enough runway to get you to six months or nine months either.
Right? Plan for the worst and hope for the best. I mean,
the economy right now, a lot of people are losing jobs. A lot of people are getting laid off. There aren’t as many jobs that people want to go to anymore or where they can earn a wage or a salary that actually makes sense for their life. And they think that starting a business is the answer to that.
And it can be, but not as fast as they think it will, and not as profitable as fast as they think it will. And again, a a big thing that they forget to do is forget to include their own. Financial needs in, when they’re doing their projections, they’ll think, you know, I just need, you know, some office supplies and I need, you know, marketing and this and that.
They forget they have to pay themselves 50, 60, 80, a hundred thousand, whatever, whatever they need to pay themselves as part of that. And they, they don’t include that. They’re gonna run short of money a lot faster.
You list that. The place where you’re gonna do all this is in a business plan. And I want to skip ahead for just a second, just talk about the importance of a business plan.
Michelle. People hear business plan and entrepreneurs will tell you there’s two different types of business plan. There is the ridiculous tome that is super thick that the bank wants, and then there’s the business plan that you’re gonna need to operate as an entrepreneur, which you say is super important.
Like a, like having a real use of business plan can help you in a bunch of ways. Tell me what the really important parts of a good business plan are. Well,
first, lemme say one of the most important reasons that I recommend that people do some kind of business plan is because it gives them a chance to see what about their idea won’t work and will give them a chance to change that before they throw money into something that ends up not working.
So for me, one of the biggest reasons for people to start a business plan is it makes them think about what might happen as opposed to when you just kind of jump in or you just get started. You don’t think about every single thing. When you’re writing a business plan, even if you don’t write a 90 page, even if you write a one page plan for yourself, you still, if it’s just an outline, you still have to think, all right, what am I gonna do about marketing?
What am I gonna do about employees? Am I gonna hire contractors? Am I gonna have payroll? What am I gonna do about taxes? What am I gonna do about. Billing customers, what are my policies gonna be on that? How am I gonna get people into my store? How are people gonna know that I’m offering this service? It forces you to think about the things because when, when people go to start a business, they think about the parts that they know how to do or that they want to do, and they tend to kind of shut out the parts that they don’t wanna think about.
Or taxes is a big one that people don’t think about ahead of time, and they don’t realize like 30 to 40% of their money that this they’re bringing in is gonna go to taxes. That’s like their number one business expense sometimes, and it’s important to. At least be aware of how all of these things are gonna affect your business.
I think I didn’t answer your question. No, I don’t remember what it was. I’m sorry. No,
I actually think that you did because you talked about how what a business plan does is it makes sure that you think about all the things that could go wrong because especially, you know this, Michelle, when you work with somebody that has what they think is a great business idea, they’re all excited.
Right? And you need to punch as many holes in that before you start spending real money as you possibly can. And I can give you, actually, Michelle, a great example. I have a friend here that, um, uh, Cheryl and I went to dinner with and she was all excited because she had found in downtown Texarkana, she had found an office space that was for rent.
And she had a great idea for a used bookstore and coffee shop. Yeah. And she was like, this’ll be, this’ll be great. People can hang out. It’ll be this nice space. I can play nice, soothing music and just at dinner. We started going through, she’s like, I wanted to run this by you because I know this is kind of an offshoot of what you do with the show.
And so I said, well, let’s just take the a, a cup of coffee. And she was going to sell coffee for $3. She had read that the cost of goods should be one third of what your prices. So she thought she could get the goods for a dollar and $3. And I said, okay, what is the rent gonna be? The rent was gonna be like $700 a month.
How many cups of coffee do you have to have? Do you have to sell to be able to get to $700 a month? And you’re doing that math, it’s lot of coffee and downtown Texarkana, which is well off the highway, it’s getting a little busier, but it is empty. A good time of the day. Foot traffic is not gonna be that big.
And then we looked at, well, what can the markups be on used books? I. Not that high. She’s gonna have to have a heck of a marketing campaign. Michelle, she, she went from super excited to, not dejected, but just realistic about it. And what was neat was when we got done with that day, she realized that while she can still do use books and she can still do coffee, she needed another income stream.
Exactly. She needed to think of different ways. And then she started thinking about, well, maybe we could host events and charge for events. And I’m like, there you go. There you go. Yeah. And now Michelle, she’s taking this thing. She was excited about making it realistic. That’s what I like about what you said about the business plan.
Yeah. It does it. You don’t wanna take someone’s excitement, enthusiasm away, and you don’t wanna dis their passion. That’s a really important part of what’s going on. You also want them to be aware of just all of the pieces that have to come together to make their business successful or they won’t succeed.
And the whole point of this book is, I want people who start businesses to actually have successful, profitable businesses that they can step back and have a life and have money coming in that’s not dependent on
somebody else. And it’s better for you and it’s better for the customer. I mean, if, uh, Vicki succeeds at this and she has live acts, I mean, how great is that for downtown to have a, just another place to go and it’s well thought out versus a place that’s half thought out.
Like, I can’t tell you the number of business I’ve walked into. And I’m like, whose idea was this? Because somebody, somebody needed to think a little bit more about it. So we went through just briefly the time factor and the money factor. Two things you really need to think about. The third one is what you call the tax factor.
What is the tax factor? Oh, si.
It’s so sad, honestly. And again, social media, especially TikTok, big part of this where people think starting businesses is going to give them a way to generate tax savings. And if you have a successful business, that’s the opposite of what you’re gonna have. You’re gonna have a bigger tax bill because you’re gonna have more money, more taxes.
And what many, many people don’t realize is that if your business isn’t a corporation, which most small businesses do not start out as corporations, it it wouldn’t be financially, it wouldn’t make sense. They also have to pay self-employment taxes on their income. So right off the bat, they’re paying a minimum of 25% taxes on all of their business income.
So that to me is not tax savings. That’s, you know, there’s a tax bill. You can’t run your personal expenses through your business if their business expenses and personal expenses. Sure. If there are a personal expense that makes sense as a business expense. Sure. For example, I washed my hair today, the shampoo for this interview, that, you know, that’s not a business expense.
Right? Right. It’s a personal expense no matter what. My reason for using it is it’s not a business expense. You know, if I’m eating lunch alone at my desk, that is not a business expense. I actually had people and I’m, I’m not trying to make fun of anybody. I’m just saying like the things that people think.
Like I had a woman who had hundreds of dollars worth of dog food and dog toys in her business expenses. I’m like, what is this for? And she’s like, well, I bring my dog to the office. And I’m like, no. I mean, that’s great, but that’s not a business expense unless you’re a, you know, like a vet then
maybe, yeah.
One that people get caught up on all the time. Michelle, I know is clothing as well. Which You’re dressed today? I’m dressed today, yeah. But I do know that if it’s not specialized clothing, you can’t write off your clothes.
Absolutely not. Sometimes if it’s specialized clothing, sometimes you still can’t write it.
Write off is just such a, like a trigger word for, uh, tax professionals because they, people, you know, it just,
I would play it again right now, but we just played it a couple weeks ago. David, in Schitt’s Creek, the character David, that’s what in my brain, of course. Classic. Yes. Yes. A write off. But we literally, we literally just did that.
All right, so we have those factors which we need to take seriously and be conservative with stackers, and then you go through looking at choosing the right business. For you and you. You have a whole section on turning what you love into what you do. But I feel like Michelle, there’s a cautionary tale there, which is, if you like making cupcakes, turning your love of making cupcakes into a business doesn’t mean you’re just making more cupcakes.
You spend a hell of a lot of time actually running a cupcake business and maybe even having to delegate making cupcakes to somebody else. Talk about that for a minute.
Well, there’s that, and then there’s the idea that when you’re making the cupcakes, you get to pick what kind of cupcakes you wanna make.
And that’s not customer. Really true. That’s right. Right? You have to make the cupcakes that sell. And if people wanna buy carrot cake cupcakes, you’re not making chocolate ones because that’s just how it works. And another thing, for example, people don’t think about is you can’t just make 12 cupcakes. You need to make 200 cupcakes and they need to be identical.
So it kind of takes some of the fun out of it when you’re just like assembly line cupcake, assembly line cupcake. It’s something to think about. Like if you’re gonna make a specialty French patisserie where every single thing is unique and they’re gonna cost $11, that’s a different business. Don’t know how well it will do.
But when people come in for a cupcake, they want the same cupcake they had last time because they’re sort of trained by chain places, Starbucks and stuff like to expect the same. I had this cupcake, it tasted like this. I want the same exact cupcake that tasted like that. That’s not always the passion part for people.
So they have to remember that it’s a business side, and if they don’t wanna start hating their passion, they have to find a way to blend the two together, where maybe they, you know, create the cupcake menu and they create like the demo cupcakes or something, and then they leave the business part of it for someone else to work on so that they don’t start hating what
they love, which is again, then you need to note that expense, that you’re gonna have that expense
and it’s part of the planning.
You don’t wanna take the passion away from what you’re doing. You don’t wanna do something you’re not, that you don’t care about at all. You just want to find a, a balance between the two so that it works on both sides. And if you can find a way to do that, that’s a key to
success. Yeah. Big but huge key to success.
’cause
to your point, the last thing you wanna do is go, God, I gotta make another cupcake. And, and then you just spoiled all, all the joy. You talk though about you don’t get to choose the cupcakes. I love that. Because clearly if you’re gonna be successful, you have to, you know, you build a what minimum viable product we call it, and then you find out what sells and what doesn’t sells.
And entrepreneurs are always surprised. Yeah. But your very next section of this book talks about market research. And man, once again, before you start, like with Vicki, my friend with the used books and the cupcakes and the pastries, doing some market research would be next before she opens this place.
What would be the thirst for live events? What’s the thirst for cupcakes? What’s the thirst for used books? We don’t know. Where do we go to begin doing market research? How do I start that process before I invest money?
This was a hard one in my business and literally every customer client I’ve ever had.
Market research is something that people just don’t wanna do. It’s not a comfortable thing to do. A lot of it you can do sort of online, but really talking to people, going to other businesses, asking people, you really need to interact to find out what kinds of things are selling and why, and who likes this and who likes that.
And you may have to talk to, you know, a hundred people to find out. What’s gonna
work? Yeah. ’cause even as you’re talking, Michelle, I’m, I’m thinking if I ask my friends what are they gonna think about? Uh, I’m just gonna keep going with Vicki’s thing. What, what are they gonna think about a bookstore and cupcakes?
My friends don’t wanna hurt my feeling. They’re gonna go, that’s a great idea. Yeah. That is a fantastic, like, your friends are probably not the people you wanna go to unless they can be a little, I guess, um, Simon Cowell ish or uh, Gordon Ramsey ish, where they’ll give you the brutal, here’s what’s gonna suck about that.
Like, that’s really kind of think what you’re looking for, isn’t it?
Well, it’s more that also your friends may not be your target
audience. Good. Oh
yeah. Right, right. You have to think about who is gonna buy what you wanna sell, who’s most likely to buy it. And you may be thinking, oh, it’ll be like these people.
But when you do a little research, you find out actually, oh, it’s actually 24-year-old. Women in professional jobs who buy most of this. So a big part of market research is finding out who your target audience is as opposed to who you want it to be, so that, you know, there, you wouldn’t market something to me the same way you would market it to you.
’cause we’re not, we’re not the same. We have some, you know, overlap obviously, but we’re not the same marketing group. So knowing who you’re marketing to physically, where if, you know, if you’re, if you’re gonna have a store in Texarkana, you don’t really wanna do your market research of your college friends from Philadelphia, like Right.
But I’m saying like, you have to really think about where, and I know, uh, in the business, one of the traps people fall into is they think they should do everything themselves to save money. In the beginning. It ends up costing them so much time, so much money and, and often mistakes and market. Coming up with a marketing plan when you’ve never done it before is one of those places it might pay to have some professional help.
If you can’t force yourself to do it, if you don’t know how to do it, if you don’t know where to start, internet research will get you so far, but it won’t give you the full picture. So that might be a good place to work with somebody who knows
what they’re doing. We get done with everything. I mean, you also talk then about branding.
You talk about how to set up your company about all kinds of stuff, but something that every entrepreneur worries about when they start to see these numbers, the numbers are adding up, Michelle. They’re like, I need to find invest. Like I need to find some backing. Yeah. Where should I go first for money.
And even before that, answer this question for me. Should I go to friends and family? Or not go to friends and family?
That’s a situation by situation answer. In general, I would say no. Friends and family tend to be more, I don’t know, interested in telling you what to do. Then if you have an investor, if you get a loan, there are gonna be guidelines and rules you have to follow.
If you’re a new entrepreneur, sometimes you’ll have to do check-ins and things like that, but it’s not the same as, for example, borrowing money from your mom to start your business and then she comes over every day and tells you everything you’re doing wrong. Oh God. So for example,
I’m laughing ’cause it’s not funny,
like, well, right, and you know your personal relationships, they’re the ones that you want to be there.
If your business fails, if your business fails and people you love in your life have given you that money and you can’t give it back to them, no matter how cool they are about it, there’s always going to be sort of that feeling there that you’ve let them down. I mean, not for everybody. For a lot of people I know that’s sort of what they end up in.
I let everybody down. I didn’t. Yeah, and that has nothing to do with it. You didn’t do anything wrong. A lot of businesses fail mostly because they’re underfunded, because they didn’t think they needed as much funding as they, as they do. I think a good place to start is with grants. There are, especially post covid, so many small business grants.
And to do those you have to do some work. Like you have to have a business plan, you have to have an idea. It also forces you to more kind of codify what you want your business to do, how it’s gonna work. And there there’s a lot of money there. And with grants, you don’t have to pay them back. So they’re sort of, I don’t know, like a gift that you pay tax on most of the time.
Yeah.
Boy, I love that start and taking my friend Vicky’s idea again. I know that she’s been looking into grants that revitalize these downtown areas of older towns like Texarkana, where there’s a bunch of interested parties that wanna see these downtowns flourish, and so she’s exploring those.
Absolutely. There’s a, a lot of grants for women. There are actually special grants for women over 50 starting businesses. I mean, there’s so many. If she’s a veteran, there’s like special grants for women veterans in small towns. It’s like almost like scholarships, you know? Like there’s something that fits you and what you’re trying to do.
And I do like the fact that grants and loans and investors, they wanna know exactly why they should put their money into you. So you should know why they should put their money and why you should put your money and your faith into yourself. And having that all sketched out ahead of time gives you the backbone to start your business on.
It’s like solid footing instead of. Hoping the ice doesn’t break.
I love all this planning. I remember I had a client that worked for the state of Michigan. She was an engineer building highways, and she said, before we build the highway, we look at everything that could go wrong and we try to eliminate all those possibilities and only then do
we
start building.
I think that definitely applies here. The book is starting a Business 1 0 1, from creating a business plan and sticking to a budget, to marketing and making a profit, your essential primer to starting a business. Another job well done, Michelle, but available everywhere, right? I mean,
everywhere I’ve been, which is not that many places, but totally good wine
and a few places.
Michelle hasn’t
been right. I’ve not been to Texarkana bookstore. So
well come on Michelle. Let’s party in Texarkana. All right, thanks for hanging out with me and uh, we’ll have a link to the book in the show notes as well. Thank you so
much. It’s been great talking with you.
I am Rocky Ani the Profit Answer man.
And when I’m not helping small businesses stack Benjamins for themselves, I’m Stacking Benjamins for myself. Big thanks to Michelle Kagan. Time for our segment. Where somebody, you better call Saul. See? Hi and og. This is the part of the show where a stacker calls in with a burning question about their personal financial situation.
And today we’re gonna help Chris out. Chris, you’re on the line, man. What’s up?
Hey, better call Saul. Glad I got your number because I could really use a scumbag. Attorney’s hope right now.
Wait,
you’re telling me this isn’t the dirt bag with his face on the bus Stops all over town basement. How’s the guy that hangs out in his mom’s basement?
Gonna help? Anyway, guess while I’m here. Let’s chat. I need help with this tax situation. I’m trying to
figure out. Wife and I are in our
mid and late thirties. The plan is to have enough assets to retire sometime in our fifties or earlier, but that’s our goal because we’d be retiring early. I’d like to take advantage of the Roth conversion letter for my 401k.
I’m wondering what the mechanics look like when doing this. Will I need to only move the amount I want to convert that year to my traditional IRA and then convert that amount to the Roth? The goal would be to keep taxes to a minimum or zero if possible. I’ve heard things about what I think is the pro ratter rule that I’m guessing would affect the Roth conversions if I transfer the whole amount to the IRA.
Is this going to depend on my employer’s 401k plan when it comes to allowing only transferring a specific amount and not the entire balance to make these conversions happen and keep the tax bill low? I don’t hear much discussed about this topic and would love to know now if I’m planning correctly, since I would like to take advantage of these
conversions.
Thanks. Hey Chris, thank you so much for the call, and I think dudes in mom’s basement can help. Of course, a lot of times. Let’s talk about this whole converting it over to the Roth side og.
I like how people will take something that is a very nuanced piece of financial planning strategy and put the word the in front of it, like it’s the only thing and or it belongs to someone.
I wanna do the Roth conversion ladder. It’s like, what do you mean? The Roth conversion ladder? There’s like 7,000 ways to convert money into Roths. Like, which one do you wanna do? I guess what he’s talking about here is he wants to retire early and use the fact that. He has lower earnings to move money from pre-tax accounts, IE uh, 401k pre-tax, 401k into Roth at a low tax rate, thus, arguably getting kind of a double tax benefit, right?
He’s deferring taxes today at a higher rate and then not paying them later at all or at a substantially lower rate when he does the conversion. This requires a couple of things. Of course, it requires tax rates to be known in the future, which we do not, and it requires them to be actually be lower in the future, which we don’t know whether or not they will be.
So you can kind of pencil this out on the back of an envelope, but the reality is, is that you’re gonna have to wait and see what’s really going on in the year in which you wanna do the conversion to decide whether or not it makes a lot of sense. A couple of things to be aware of. He did bring up pro-rata rules, which is to say basically when you do a IRA conversion to a Roth, the IRS doesn’t let you cherry pick the numbers.
So you can’t say, well, I just wanna convert this part of my IRA, the part that doesn’t have a lot of taxes. It’s like, well, tough if you have any IRA, they’re gonna average it all out. If you’re converting money, that is what we call the backdoor Roth IRA, where you’re putting money in and not getting a tax deduction upfront for it.
A non-deductible IRA, and then doing a conversion. We see a lot of people make, make mistakes there because they do that and then con, you know, and then convert money. But in reality, they’re only converting a portion of it because the IRS looks at the entire balance of the IRA, this really wouldn’t affect, uh, Chris, because ostensibly all of his money is pretext.
So it doesn’t matter where the pretext money is, if it’s all IRA or all 401k. The other thing that he might look at is some plans are starting to offer in plan Roth conversions. So you can convert into a Roth within your 401k. I’ll give you 10 99, do the same thing, and now it’s just part of your Roth 401k.
So we’re starting to, it’s
really nice that that’s happening, by the way. Wow. Just a little commentary there. I really like that. Yeah. I hope if somebody’s listening and is in HR upper management and you don’t have that at your company, I think that is a great thing you can do for your employees.
Yeah, I mean, it does make it a lot simpler for sure, especially, you know, as, as people are being a little bit more conscious of it.
But with, with, you know, when they give things, they take things away. So you used to be able to undo Roth conversions if the, the math didn’t check out at the end of the year, and now you can’t do that anymore. So we see a lot more Roth conversions toward the end of the year. What you have a known, or at least a fairly certain idea of what your, what your tax liability’s gonna look like.
The other thing to consider with all of this is largely if you’re doing Roth conversions while you’re working, or slightly after, you wanna have the money to be able to pay the tax bill from another source while you can pay it from your IRA. It’s. Kind of defeating the purpose because you’re taking money out to pay the tax bill.
That’s not part of the conversion, basically. It’s not as beneficial to do it that way. Ultimately, what we think about when it comes to Roth conversions is this is a year to year decision and you can, you can plan it out and you can have a pretty good idea of how you want it to look in the future, but there’s too many variables year in, in year out, and way too many variables.
You know, Hey, I’m 35. I was thinking about doing a Roth conversion when I’m 52. What do you think It’s like that is a bunch of paper that you don’t need to waste right now because you’re talking about, you know, three more presidential cycles, you know, six more congression. I mean, there’s so many, there’s so many things that are gonna change from a tax standpoint and a retirement planning standpoint.
Between then and now, I think you do this on a year to year basis. That includes deciding how you’re gonna contribute money into your workplace plan. We had an article by Ed slide just a few minutes ago, and Ed, who everybody pretty much assumes is like the world’s greatest IRA expert. He has been on record many times to say Roth 401k, period, full stop.
I don’t care about anything else. Yeah. And he’s got a really good point of it solves a lot of those problems because you’re, you’re, you’re dealing with today’s problem today, which is, I’ve got income. I’m gonna pay taxes on this income, but once I invest the money, it’s mine and my family’s till the end of time tax free.
That’s a pretty powerful thing to say. I don’t ever have to worry about having to pay taxes on this. Again, the downside of pre-tax money is you look at your 401k or whatever and you go, oh, I got a million bucks in there. Well, do you, you got, you got $400,000 of that is the government’s money. So you’re holding onto some money for them.
You know, your spendable money might be six or 700 K out of that. Um, now you can do what Chris is talking about. Try to manipulate it, you know what I mean? Like I can take a little bit out here at 10%, a little bit out at 12%, but you’re still writing a check for taxes along the way. And when you get to the point where you’re actually in retirement, you actually need cash flow.
You’re gonna take out what you need to live on anyway, regardless of what the tax rates are. And so I like the idea of making this super simple like ed slot suggests and going, just put it all in the Roth. You’ve got the money today. You can pay the tax bill today, put it in the freaking Roth 401k and be done with it.
Your matching is likely always gonna be pre-tax because the tax break that that businesses want. So you’re building both legs of that, of that stool, so to speak, you know, through those contributions. But if you wanna get super tactical about it, it’s definitely year to year decision of pre or Roth, and you can make those changes pretty frequently within your 401k plan.
So change your mind halfway through, just change your mind. It’s
fine. Absolutely love it. Thanks for the call, Chris, and uh, and for the great stuff to kick off your question. Fantastic. You know, uh, the pro rata rule is something people are wondering about, what exactly that is. What this talks about is if you’ve pre-taxed money, I.
After tax money in your 401k and you go to do this. What some people try to do is almost like they’ll do when they sell stock, where they’ll go, no, I’m gonna take just the pre-tax money and do this, or just the after tax money and do this so I can lower my tax bill today and manipulate the tax system.
The pro rat rule says that if you have pre-tax and after-tax money in your 401k, it’s gotta come over pro rata. So if it’s three to one pre-tax to post-tax, the money that goes over is three to one as well. There’s a simple way to avoid the pro rata rule. I usually hear financial nerds bring it up. The pro rata rule, financial nerds, by the way, should be the last people to be bringing up the pearl rat rule because what financial nerds really should know is you should never have after tax money in your 401k.
This is just another horrible reason or another good reason. To not have after-tax money. Why OG so many people have after-tax money in their 401k. There is zero benefit. Zero benefit unless you’re in the middle of this Roth conversion, which as some people are flipping the money. Maybe there’s after-tax there for a few days, but there’s no reason to contribute after-tax money people there is zero reason.
Yeah. To let it pile up is what you mean. Yeah. Yeah. Either go Roth or go pre-tax and then you avoid the pro-rata rule completely. You’re done.
Yeah. Well, the reason you’d have after-Tax was if you’re gonna do like the mega backdoor, but to your point, you do that at the end of the year and then you take that money out and convert it to a Roth within the first couple weeks of the year right away.
You’re not hanging onto it for years, years and years. The other time we see that Prorata thing is in IRAs, you know you’ve worked at three different jobs. You take the money out, you put it in your IRA, you do a rollover, and then all of a sudden you read about, I. Backdoor Roth and you’re like, oh, I should do that.
So I’m gonna put 6,000 into my IRA and I’m gonna go convert 6,000 out. Boom. I just did a backdoor Roth. It’s like, well, no you didn’t. Your IRA, you know that you’ve accumulated over the years of all pre-tax, 4 0 1 Ks that you rolled over is worth $600,000 and you just put 6,000 in to do a backdoor Roth.
You took 6,000 out. Well, the IRS went, well, you had $6,006 of which 1% of that was after tax. Thus your conversion is 1% after tax at 99% pre-tax. So you can’t do that. I mean, you can, there’s nothing wrong with it. It’s just not giving you the benefit that you think you’re getting. You know what I mean?
Right. So you just have to somewhat plan for it. To your point, one way is to, to get the Roth side of the equation is to just put the money in the Roth to begin with. You know, I’ve, I talked to a lot of people who are like, I gotta do backdoor Roth. It’s like, why don’t you just do Roth 401k. They’re doing 5% in their 401k pre-tax.
And then they say, well, I gotta do back to a Roth. It’s like, well, why don’t you just do 10% in your 401k and split it 50 50 do 50% Roth 401k and 50% pre-tax, and you’ve accomplished the same thing. You’ve saved $12,000, 6,001 and 6,000 in the other, and you did it without a buttload of paperwork and tax forms and all this other sort of stuff.
Like you just saved it. It was just easier than trying to manipulate all this stuff. So now if you get to the point where you’re maxing everything out and you’ve got some other wiggle room, I suppose, but, um, maybe, but that’s, that’s less frequent than the other side of it.
Thanks for the question, Chris.
Hey, if you’re not here to get just one question answered, but you’ve got lots of questions about your money. Uh, OG and his team are taking clients, so head to Stacking Benjamins dot com slash OG and that is the first, that’s me. That’s, that is the first, first step to getting on him and his team’s calendar and seeing how they can interface with you to make better financial decisions.
Man, already almost a third of the way through the year. I can’t believe it. We just
started the year. It seems like it goes quicker all the time, doesn’t it? I mean, there’s a metaphysical reason for that, but it’s uh,
is it meta? Meta meta, meta metaphysical. I think just scientific reason. I think, I think meta.
I think metaphysical is like philosophical reason.
Yeah, that’s what I mean. Because each day is a smaller percentage of your total, so therefore they seem to go
quicker each, each year. I could also be a scientific reason, wouldn’t you? I don’t
know. I’m gonna go with metaphysical. Yeah, I agree to disagree.
I like how people say that about facts. Uh, you know. We’ll, we’ll agree to disagree that, uh, mountains are really tall. Eh, who knows? Pilots can tell you the earth is flat. Time for us to wander out onto the back porch for the last section of today’s show. And, you know, oh gee, we had our first meetup in, uh, Minneapolis a couple weeks ago, and big thanks to everybody who came out there.
We are going to, if you’re in the Twin Cities area and you’re just listening for the first time, we are holding these monthly meetups now and we’ve got a great group of stackers in the Twin Cities. So, uh, come out and join us. We just started a new Facebook page. In Facebook, just search for Stacking, Benjamins, twin Cities, and, uh, and then request for Chris in the gang to let you in.
And, uh, you can chat with them. Also, you’ll find out our 2 0 1 newsletter. Of course, on the show here, we’ll tell you when the, the, the next meetup is going to be. But now they’re, they’re monthly og they’re rolling. I was just in Minnesota too and I just missed it. I think it’s pronounced mini soda. Ah,
Minnesota.
Yes.
It’s a long o second. We got something great in the basement from, uh, Tom catching up on old episodes. And, uh, Tom, along with a lot of people, really enjoyed our conversation on the ESPP, on the employee stock purchase plan and the big discussion about the number of people that don’t take advantage of that.
Tom is also, as you know, quite a money nerd. He teaches money classes to young people. And he said, OG pointed out that, hey, it could be a 15% discount, but he said that would actually be a return. This is how we know Tom is a real money nerd. That would be a return of 17.6%, but not only is it great og, it’s great.
For you.
Yep. And, uh, also confirmed that Tom is a complete nerd, so it’s a complete absolute. We, we killed two birds and one stone. It was way to go, Tom. Nice
job. Nice job tub. Tom’s like, it’s not great. It’s even greater than that, than he adjust the tape on his glasses and says It’s actually 17.6. Yeah.
Okay.
Pocket protector, settle down.
Uh, so that
was, he’s using that fancy math when you actually use the real numbers. You don’t just guess like OG does.
I have been trying to watch, uh, before the Academy Awards all of the different movies that are up for Academy Awards and I saw two. I’m not gonna play the clips of them like we normally do.
Thank you. No, because I really, I really just want to, um, get through both of these. In one fell swoop we saw Maestro, the story of famous conductor Leonard Bernstein. Mm-Hmm. His life directed and acted by Bradley Cooper. I didn’t even see Bradley Cooper. I saw Leonard Bernstein. Wow. Which was ama I, I mean, he looked amazing and he actually played the part really well.
He wasn’t up for an award at the Academy Awards, but the film is, and so is Kerry Mulligan, who plays the part of his wife. I, I, I just dislike this movie so much.
You disliked it or just
liked it? Disliked it. I know D Doug had a positive review of it, uh, about a month ago, uh, here, and, and, and I couldn’t stand this movie.
It just, I wanted to learn more about Leonard Bernstein’s life. Instead, I found out that he was on all kinds of drugs and he was bisexual and all that is fine if it’s a piece of his life. Like, that’s not, like there’s nobody who comes up to you and goes, I wanna be defined by my sexuality and my drug abuse.
Right. Like, that’s, yeah. Like, that’s not all of his life. I wanna know actually about the stuff that he did. I. During his life as well. So include all those facts about him and all this stuff about him, but also go through something about what he actually did. Like. There was nothing about what he did in the movie.
It was just, it just became, his family got more and more and more miserable over time. The end, like, there it is, there’s Maestro. Okay. It was a very pretty movie, just didn’t love it. But then I got to see this French movie called Anatomy With of a Fall. And generally when a foreign movie is up for an Academy Award, like your years per cup, like I remember that there was that South Korean movie that won a couple years ago.
It was called Parasite. It was a really good, really creepy movie. Uh, excellent choice, but I think to kind of break through and, uh, be up for the big award. But Anatomy of a Fall is part English, part French. Incredible movie. A guy Dies after falling from the top of a, of a chalet in the French Alps. And the entire movie then is the investigation to find out what actually happened.
So it’s a great detective thriller. You get the courtroom scenes, it’s this couple, and they have a son who’s blind and he’s the primary witness. So he heard stuff, but of course couldn’t see anything. And, uh, just, just a great movie that, that, uh, two and a half hours long, which generally for me is a no thanks, but it doesn’t feel two and a half hours long.
I was on the edge of my seat the whole time. Loved it. So, anatomy of a Fall, big thumb up. You know, I liked Oppenheimer. I didn’t love Oppenheimer, but I liked it. I liked, uh, flowers of the Killer Moon. I didn’t see Barbie. I’ve got a few, I’ve got a few more to go. Did not love. Um, I liked poor things, but didn’t love it.
I didn’t like Maestro. Kind of hated Maestro. Uh, my favorite still is the holdovers guess. We’ll see. I think you’d really like the holdovers og. Okay. Yeah. You see anything This last week while we were away? Uh,
no. Uh, back of my eyelids for an extended period of time. Oh, isn’t that great? I’m a fan of sleep.
Oh, that’s good. Yeah. Sleep is good. I’m, I’m, I’m stuck on finishing the Suits series, which is, I’m on season eight. I’m very tired of it. I’m ready for it to be done. Every episode is the same over and over again. Just why won’t it die?
I just started season three. Yeah. So I’m still in the, it’s really good
phase.
Yeah. I won’t tell you what happens, but, um, it’s like, okay. Yes, we are one closer to this being a wrap. I. By the time you get to season eight,
I usually, generally last two, three seasons of any of these series before it just becomes too much. I lasted for like, oh, it’s very
formulaic. You know, every
episode’s the same.
I lasted, I mean, west Wing, one of the best series of all time. People say I lasted three seasons
of that. Yeah, I think the same. I, I tried to watch it and I, I thought it was great just to go back in time and watch a show that was made, what, the nineties or something and it’s like, still holds up. Some of the stuff is, uh, still good and obviously the comedy was good, but I like the lawyer esque shows like Boston Legal and the Practice and, you know, that kind of, I love the practice.
That was so good. Those
kind of programs. And I liked when, um, James Spader went to the blacklist black list and they started that and then that kind of went off the rails.
But again, I only watched two seasons of Blacklist before I went. This is becoming the same crap over and over. Yep. Bad
guy. Good guy.
Good guy wins, bad guy loses over and over and over. Spader
being smarmy, we yada, yada yada.
Yeah. Yeah. So we’re getting close. We’re, we’re on the, we’re on the, the downhill side of, of suits and we still have to finish up Yellowstone. We got maybe partway through season five, but haven’t, haven’t finished that.
I think we gotta get through that. I,
what’s, you know, I’m gonna frustrate some people because A, I’ve never watched Yellowstone, but B Cheryl agreed with the critics on Yellowstone who say that it’s incredibly uneven. It’s way uneven and most of the characters you just don’t like. And she stopped watching it ’cause she’s like, I don’t really like any of these people.
I just don’t wanna see any of them win. I don’t, I don’t know why I’m watching this. And so she watched, I think she even made it like a season and a half before. She’s like, I just feel miserable at the end of every one of these episodes. So I, I like
it a lot. I mean, like many people, you watch it and you go, I should move to Montana.
I know this, this looks like my place. Well, it, she said it’s like a travel channel though. It’s just so beautiful. I mean, cinematography is awesome. And the prequels are really good too. She loved the prequels. 1883 was great. Yes. I thought, um, 1923 was great. Apparently they’re gonna have another season of that, uh, at some point.
But, um, it’s the same thing. You know, it just kinda gets long and you just go, all right, what’s the, where, what are we trying to get to? You know, what’s the end, end game here? And the end game is coming up on the next episode, you know, it’s like,
okay. I, the, the series that I watched myself, uh, I really wanna get back into Billions.
I’ve watched three episodes of Billions and I liked it, but three
episodes. Yeah. Oh my gosh. They have seven seasons. I know. Yeah. That, that was probably my favorite show of all time so far. I mean, 24, I really liked 24 years and years and years ago. That whole series I thought was fantastic.
Well, it’s, the session sounds like it’s really good succession.
You haven’t
seen that either. Haven’t seen that either. Okay. That between billions and succession, those have to be one of your next two. The writing in both of those is just unbelievable. Succession’s got way better writing, but you can’t, you can’t take your eye off the ball with succession. Like you can’t, you have to be fully into it because they hit so much stuff like boom, boom, boom, boom.
There’s no time to, like, there’s no laugh track. There’s no like, wait a, what did he just say? You like, you just have to be, and you can’t be washing the dishes and have it on your phone and, ’cause you’ll miss half the half the witty stuff. But then also like all the. You know the great writing that’s in there.
So succession was great and Cheryl and I’ll
probably
watch that one together. Yeah, billions is fantastic.
Go watch it people. All right, well Doug you’re back just in time because it’s time for you to answer this question. I dunno how he’d know. Well, here, I’ll save you Doug. Here’s my notes. What should we have learned today?
So, what’s
stacked up on our to-do list today. First, take some advice from Michelle Kagan. Have a business idea. Start punching holes in it now, not because it isn’t a good idea, but because you want it to succeed. Second, have a Capital One or Discover card. No changes right now, but look out for benefit changes coming shortly according to experts, but what’s the biggest to do?
Always. Always make a copy of your Keytar VHS tape audition before you put it in the mail. I don’t even wanna think about all the opportunities I’ll miss out on without that tape to submit. Luckily I know the riff though. It’s
bow. Wow. Wow. Bow. See? I mean, it’s a hit. Right? That’s a hit.
Thanks to Michelle Kagan for joining us today. You can find her books starting a Business 1 0 1. Wherever books are Sold. Will also include links in our show notes at Stacking Benjamins dot com. The show is the Property of SB Podcasts, LLC, copyright 2024, and is created by Joe Saul-Sehy. Our producer is Karen Reine.
This show is written by Lisa Curry, who’s also the host of the Long Story Long podcast. With help from me, Joe Kate Youngen, Karen Repine, and Doc G from the Earn and Invest podcast, Kevin Bailey helps us take a deeper dive into all the topics covered on each episode in our newsletter called the 2 0 1.
You’ll find the 4 1 1 on All Things Money at the 2 0 1. Just visit Stacking Benjamins dot com slash 2 0 1. Wonder how beautiful we all are. Of course you do, but you’ll never know if you don’t. Check out our YouTube version of the show Engineered by Tina Eichenberg. Then you’ll see once and for all that I’m the best thing going for this podcast.
Once we bottle up all this goodness, we ship it to our engineer, the amazing Steve Stewart. Steve helps the rest of our team sound nearly as good as I do right now. Wanna chat with friends about the show later? Mom’s friend Gertrude Stacey Doe and Julia Gar are our social media coordinators, and Gertrude is the room mother in our Facebook group called The Basement.
So say hello. When you see us posting online. To join all the basement fun with other stackers, type Stacking Benjamins dot com slash basement. For more interactive fun, join us on Instagram every Tuesday and Thursday for our Instagram lives. Kate Yakin and Joe host those weekly. Not only should you not take advice from these nerds, don’t take advice from people you don’t know.
This show is for entertainment purposes only. Before making any financial decisions, speak with a real financial advisor. I’m Joe’s Mom’s Neighbor, Duggan. We’ll see you next time back here at the Stacking Benjamin Show.
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