What I learned In My First Year of Business

What I learned In My First Year of Business

Today (October 10th) marks my official 1-year mark since I launched my financial advisory practice, Modern Wealth Builders, LLC. It’s crazy how QUICKLY a year goes by and how much you can change in one year.

This last year forced me to learn more about myself than any other experience I’ve ever had. It made me get out of my comfort zone to try things that probably made me look silly at times, but are ultimately necessary to learn what does and doesn’t work. BELIEVE ME, when I say, I have by no means ‘figured it out’, but I have some valuable lessons to share with you about building a business. Especially businesses that involve ‘complex sales’ where YOU are the product (the service you provide).

Here are my FIVE biggest takeaways:

No one cares about how passionate you are about your service (and/or product). You need to make them the hero of the story.

I’m still guilty of this, but I’ve gotten better at it. People don’t care about what you’ve done, you’re accomplishments, etc., it’s about what you can do to help them with their specific pain point.

You can’t be everything to everyone. You’re naturally going to rub some people the wrong way and that’s ok.

Anytime you put yourself out there, whether, for business or personal reasons, you’re going to rub some people the wrong way. Especially people that don’t know you. The truth is polarization helps build brands and drive engagement (as long as it’s authentic), so embrace the trolls.

In-person networking in the business of complex sales is the best way to get started.

Even though we live in a digital age where google search engine optimization can make or break a business, I still believe in-person networking is powerful. With so much competition from big brands to grab our online attention, the personal touch of face to face networking is vital for building trust and establishing credibility. I neglected this early on.

Never get too high, never get too low.

This applies to ANY business. No matter how good your product or service is, there will inevitably be randomness that is out of your control (whether good or bad). Give yourself less credit when things are going well, and less blame when things aren’t. These things tend to even out over time, as long as you’re being consistent, it should come together.

It’s ALWAYS harder than it looks.

Before I went off on my own, I would look at other independent advisors and think, “that’s easy, what are they even doing”. It’s easy to throw stones when you haven’t been in the other person’s position (I used to do it). There’s way more that goes on behind the scenes, AND (again) you have to put yourself out there (at least a little) if you want to build a brand. This is what the “faceless twitter trolls” don’t understand. I know they’ve never built a financial advisory business from scratch because if they had, they’d have more respect for the independent advisors who ARE putting themselves out there to grow their business. Like most things in life, it’s about perspective. Turns out when you get to know someone, you usually end up liking them. Hate feeds on a lack of exposure.

The last lesson (dammit I guess I had six) I’ll share with you is the ‘process mentality’. You have to ENJOY the process or else you probably won’t last. This is because (especially in a service-based business) there really is no ‘destination’, therefore you better learn to love the JOURNEY.



Why I Respect BUT Dislike the Latte Factor

Why I Respect BUT Dislike the Latte Factor

Earlier this year CNBC published an article titled, Suze Orman: If you waste money on coffee, it’s like ‘peeing $1 million down the drain’

Here is a quick excerpt from the article:

“Let’s say you spend around $100 on coffee each month. If you were to put that $100 into a Roth IRA instead, after 40 years the money would have grown to around $1 million with a 12 percent rate of return. Even with a seven percent rate of return, you’d still have around $250,000.”

“You need to think about it as: You are peeing $1 million down the drain as you are drinking that coffee,” Orman says. “Do you really want to do that? No.”

What Suze Orman is referencing here is known as the ‘Latte Factor’ made famous by New York Times bestselling author David Bach.

Being cognizant of the small purchases in life and how they can lead to wasting substantial sums of money is IMPORTANT. Especially for someone just starting their personal finance journey and looking to build a solid foundation. However, to achieve meaningful wealth I don’t believe the “latte factor” is ultimately going to move the needle (unfortunately).

The major purchases in life such as a car, home, and education have opportunity costs that are worth a lifetime of latte purchases. So while I respect the principles of the latte factor, I don’t like the hyperbolic examples used by personal finance ‘gurus’ to draw attention to unrealistic examples.

More specifically, I REALLY don’t like the example used by Suze Orman in this article. A 12% annualized return is well above the long term average for US stocks and would be extremely unlikely to be achieved even by professional money managers. As you can see, the rate of return (over a 40 year time period) has a MASSIVE impact on the ending dollar amount.

The ending dollar value also doesn’t account for inflation! When you use realistic numbers that account for REAL returns after inflation, this example quickly loses its ‘clickbait’ appeal.

If foregoing coffee purchases aren’t going to move the needle, what will? 

Again, assuming you are aware of and respect the latte factor, here are some things that have an opportunity cost that surpasses a LIFETIME worth of latte purchases:

  • Failing to plan for tax efficiency within your income and investments
  • Not maximizing lucrative employer stock compensation (such as options and purchase plans)
  • Failing to take advantage of 401(k) matches
  • For business owners – failing to reduce taxable income via retirement plans and available deductions
  • Overextending yourself on a home (residence) and/or viewing it primarily as an investment
  • Taking out student loans for education without a reasonable return on investment
  • Not discussing finances with your partner, which can ultimately lead to divorce

To really benefit from compounding interest with REALISTIC rates of return it requires a high savings rate. The ‘easiest way’ to achieve a high savings rate is by increasing your income. Foregoing the $5 latte will give you a great foundation, but will not ultimately move the needle (like increasing income will).

Don’t ever sell yourself short! Your earning potential is usually much higher than you think. Be cognizant of the small purchases but focus on getting the big-ticket decisions right.

Tune in to the DO MORE WITH YOUR MONEY podcast below to get my complete thoughts!

Available on Spotify, Apple Podcasts, Sticher and SoundCloud

AND make sure to connect with me on Instagram, Twitter, and LinkedIn

Jeff Bezos in 1999 on the Importance of Diversification

Jeff Bezos in 1999 on the Importance of Diversification

There are no guarantees. There is always uncertainty.

Even when you have an unbelievable vision.

I love this clip of Jeff Bezos (scroll down). It shows his foresight about the future of retail and customer service. What stood out to me was his humility to recognize the uncertainty of who the expected winners of the ‘internet revolution’ would be.

“Long term I believe that it is very easy to predict that there are going to be lots of successful companies born of the internet. I also believe that today, where we sit, it’s very hard to predict who those companies are going to be.”

In hindsight, it’s easy to look back at Jeff Bezos and his vision to ‘know’ that Amazon would be a massive success. Even Jeff Bezos recognized the uncertainty he faced along the way.

For long term investors, it’s not about predicting the exact winners, it’s about making sure you have exposure to those winners.

As long as you’re saving enough on an ongoing basis, a long term investor can afford to own companies that will not be winners to the magnitude of Amazon.

What the long term investor cannot afford, is completely missing ‘the next Amazon’ altogether. The best way to do that is through diversification.

“Young, Successful…and Drowning in Debt”

“Young, Successful…and Drowning in Debt”

“On the surface, plenty of Boston millennials are earning, spending, and having a blast. But beneath the veneer of $17 margaritas and shopping trips around the Seaport, many are living with debt – and lots of it. Is buying the good life on loan the new normal? Or is it plunging a generation into an early midlife crisis?”

A friend recently sent me over this clip from Boston Magazine, which obviously resonated with me!

Here are my takeaways:

There’s no question many young professionals are living beyond their means. To act like this is something new, however, would be extremely hypocritical since most of our older generations are ALSO woefully unprepared for financial independence (retirement). Young people living for today and not worrying about the future (shocker).

There’s also no question that Instagram culture is influencing our ‘keeping up with the Joneses mentality’. It’s HARD to forgo indulging when you are constantly bombarded with pictures and videos of your peers ‘having the time of their lives’. But, like most things in life and personal finance – there is a balance!

Should a young person not be allowed to go out to dinner with friends because they have student loans? Should every last dollar of disposable income be put towards debt repayment or growing your net worth? If you have that level of discipline and want to sacrifice to get ahead, I applaud you. I’m more in the camp of living for today while still planning for tomorrow. As long as you have an adequate savings rate (which includes debt repayment) and are not leaving free money on the table via lucrative employer benefits (such as equity compensation, employer matches, etc.), I see nothing wrong with ALSO enjoying yourself in the present.

One thing I will suggest and strongly advocate for is making tradeoffs when it comes to location and where you live. You don’t have to live in the Seaport to experience the Seaport. What’s the point of living in the Seaport to pay $2,500 for a studio apartment when that leaves you no disposable income for the experiences you REALLY enjoy ( going out to dinner with friends, etc.).

I always advocate friends, family, clients, etc. to think hard where their money is used to derive happiness. I’ve found for most, it’s the ability to have the flexibility to share experiences with others. Think about what tradeoffs you can make to give yourself that flexibility.

Lastly, let’s all agree to not let flexing on the gram influence OUR spending decisions. Personal finance decisions are PERSONAL, we don’t know someone else’s balance sheet and cash flow, so it’s best to focus on our own.

Organize, Track, and Pay Yourself

Organize, Track, and Pay Yourself

Organizing your finances is hard enough. When you’re a small business owner it can be even more complicated since you also have to account for the cash flows of your business.

Simplifying, organizing, and tracking your business cash flow is essential so you can pay yourself for your hard work. Assuming you don’t need to reinvest in your business, you should be paying yourself to supplement your lifestyle, and invest for financial freedom outside of your business.

Separating Personal and Business Expenses

Do you have an established business entity such as an LLC, Partnership, or S-Corp? If so, you should at a minimum have a separate business checking and business credit card. This will make it easy for keeping personal and business transactions separate and will also help to build business credit.

If you don’t have an established business entity for liability purposes, it’s still important to have a way of tracking business expenses. Using something like QuickBooks Self-Employed can allow you to easily build out rules for classifying business versus personal transactions, even if they’re both on a personal credit card or checking account.

Why You Need to Track Business Cash Flow

Assuming your business is your primary source of income, you need to be able to pay yourself so you can live the way you want to AND invest for YOUR financial freedom. Your business may or may not have a market value if you were to sell. Either way, relying on potential equity from the sale of your business should not be the foundation of your financial plan.

As important as paying yourself is paying the IRS. Again, using something like QuickBooks Self-Employed makes it easy for projecting quarterly estimated tax payments. You want to make sure you’re on top of this as you could face potential penalties for underpayment.

Your Business and Personal Financial Health are Connected

The financial health of your business will ultimately determine the health of your finances. Make sure you’re extracting your fair share from your business and paying yourself enough to build something outside of your business.