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Invest in your future as an independent business owner

Did you know that 34% of independent business owners have zero retirement savings? It can be easy when you run a business to put things like saving for retirement on the back burner, because, frankly, you’re busy. In this conversation, Ankur Nagpal and Jess Catorc, the cofounders of Ocho Wealth, join us to discuss why independents struggle with saving for the future. Learn how to invest in your future—they cover saving for retirement, share how we can reframe our mindset around creating wealth, and give you some tactical tools that you can implement today.

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Can money buy happiness?

While it’s hard to say that yes, money can buy happiness, one thing that money can do is buy freedom. It can buy back your time by allowing you to take stress and tasks off your plate so that you can do the things you love. 

The other consideration with money is the lifestyle creep that comes as you begin to make more. As independent business owners, we often find ourselves thinking that a specific amount of money or revenue will make us happy—but when we get there, even more problems come. When you’re earning money and learning how to manage it, look at the core of what it should be solving. Is it creating happiness or could something else be the root of your unhappiness?

Let’s talk about money

From an early age, we’ve been taught not to talk about money, politics, and religion. The problem with that, specifically when it comes to money, is that by the time we’re in high school or in our young adult years, we’re spending money that we don’t know how to manage.

This poses an issue for independent business owners, who don’t know how to allocate their spending, even if they’re running a successful business. Add in the concept of saving for retirement and no one wants to admit that they don’t know what they’re doing.

40% of independent business owners are not confident that they’re going to be able to retire by retirement age. There is a knowledge gap and an opportunity to change the trajectory of investing for entrepreneurs.

Limitations to saving for retirement for independent business owners

On a national level, there is a bigger retirement problem beyond just independent business owners. Historically, it’s been left in the hands of the employer or with social security that seems to be in a really bad state. Systemically, standard retirement options as they currently are don’t set most people up for success. 

When it comes to independent business owners, it is even more complicated, as it isn’t as accessible to invest in your future. When you’re in a job you love, the last thing you’re thinking about is retirement. Additionally, if you don’t understand how things work, it’s easy to push it off and not take just one step toward investing. That step could simply be to set aside a budget that you can invest in your future.

Getting started with your retirement savings plan

Your first step in getting started with your retirement savings plan is to do a financial forecast of your next twelve months from now into the future. What is your projected income and what would you feel comfortable paying yourself on a monthly basis? From that, what could you realistically contribute consistently to a retirement savings account? 

This will help you determine what the best account would be for you. If you’re in a lower tax bracket, an IRA is likely the best option for you to contribute to (specifically if under $150,000 salary per year). If you’re looking to contribute a larger amount of money, you could consider an independent 401k.

How much should you save for retirement?

It’s easy to hear that you should save 20% of your salary towards retirement and think that’s impossible and not do anything about it. Instead, consider that consistency in what you can afford to contribute. Creating that habit with the bare minimum is far better than doing nothing for your future. As you’re able to increase that amount, consider the lifestyle you want to live at retirement age. Given that, how much should you be contributing after you account for inflation?

Lesser-known ways to generate wealth

While it may feel like you have to have this major strategy to build wealth through investments, oftentimes it’s just loopholes in taxes that most people don’t have on their radar. Here are a few things to consider:

  • Expenses in your business that you can leverage on your taxes (a percentage of your home office, utilities, and internet)
  • How are you incorporated: Sole Prop, LLC, S Corp, or C Corp, etc.
  • Selecting your preferred retirement investment
  • Real estate tactics (consider the ROI)
  • Leveraging credit card points (but paying off the card monthly)

Pro tip: Credit card points from a business card are in an untaxed gray area, meaning you can technically use them for personal use (at least for now). As you’re looking to get a card, maximize your points with the sign-on bonus.

Solo 401k

Ocho was created out of a need that Ankur had while searching for a solo 401k himself. The options just weren’t great and had a lot of limitations. Despite the endless options you have in setting up 401k, many providers were limiting on their end.

That’s when Ocho was built. They offer solo 401ks, which in their opinion is the best retirement account for someone seIf employed. It gives them the highest contribution limits, your money compounds tax-free, you can invest in anything, you can make Roth contributions, and it’s even got good downside protections.

Solo 401ks are meant for independent business owners who do not have full-time employees.

The biggest differentiator between the businesses that succeed and the ones that fail 

When asked about the biggest differentiator between businesses that succeed and the ones that fail Ankur and Jess had their own answers, yet they were similar. 

Jess believes that the mindset around believing in yourself has a lot to do with the success someone can achieve, but also their ability to pivot and listen. 

Ankur believes that the first step is just doing something and talking about it, but once they do that, the next thing that holds them back is the rate of iteration.

Important sections of the conversation

  • [2:03] Can money buy happiness?
  • [4:54] Why don’t we talk about money?
  • [8:14] Getting started with your retirement savings plan
  • [15:13] How much to save for retirement?
  • [18:41] Underutilized aspects of generating wealth
  • [27:47] Solo 401k
  • [31:35] Biggest differentiator for success

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