May 24, 2019
Since Michael has launched his new financial planning firm (Elevation Financial) we decided to have him answer YOUR money questions. We cover all sorts of topics including selling a massage business, raising funds for expansion, approaching finances with limited resources, starting a new business and more.Listen to "E225: Your Financial Questions Answered with Guest Michael Reynolds" on Spreaker.
Since Michael has launched his new financial planning firm (Elevation Financial) we decided to have him answer YOUR money questions. We cover all sorts of topics including selling a massage business, raising funds for expansion, approaching finances with limited resources, starting a new business and more.
Sponsored by: Acuity & The Jojoba Company.
Sponsor message This episode is sponsored by Acuity, our 2018 software of choice. Acuity scheduling is your online assistant working 24/7 to fill your schedule. No more phone tag. Clients can quickly view your real-time availability and self-book their own appointments and even pay online and reschedule with a click. Handle all of your forms before the appointment so you can get right to doing the massage you do best. Look and act professional by offering convenient scheduling to your clients that matches your brand and your voice. Customer support is a delight, and Acuity’s style will help you relax and have fun running your business again. Check out the special 45-day free offer at massagebusinessblueprint.com/acuity.
Allissa Haines Hello, everyone, and welcome to the Massage Business Blueprint podcast, where we discuss the business side of massage therapy. I am Allissa Haines.
Michael Reynolds And I’m Michael Reynolds.
AH And we are your hosts. And how’s it going, Michael?
MR It’s raining. It has been raining for a thousand years here in Indianapolis and we’re all just freakin’ tired of it. That is my weather report. (Laughter)
AH (Laughter) It has finally stopped raining here and we have a beautiful day. And it’s been a beautiful — mostly a beautiful couple days, and —
MR Good. (Indiscernible).
AH Yeah, and the lily of the valleys are out and there’s a nice little — this is my favorite flower ever because it’s our birthday month flower. And they have such a short season and there’s like this little patch of them where we built my tiny office, and it’s awesome. And we have a trio, I think — which is weird; I don’t think they normally hang out in threes. But we have a trio of red-tailed hawks that have taken up nesting near our house. I think I’ve spotted their nest that’s actually legit in a tree in our yard. And it has dramatically cut down on the chipmunk and squirrel population here.
AH Because, you know, circle of life. And yeah, and I’m, like — so I’m telling you this because I’m like watching — I can see their shadows in the backyard as they fly overhead. So keep your small children and cats inside.
MR (Laughter) It’s like a little show there for you. A little nature show.
AH It is. And it’s — and we have a fox too. Oh, my goodness, we have a —
MR Oh, so do we.
MR You’ve got a fox?
AH We do. We have a fox that trots, like, right along the perimeter of the backyard. I’ve seen him a couple times in the morning around the same time, so I think we’re just part of his route. I know they tend to have routes that they travel daily, they have a very specific prowl. And he’s so cute. He’s got this bushy red tail and he’s delightful.
MR Yeah, we actually have one too but I’m surprised —
AH I didn’t know you lived rurally enough to have foxes. But I guess they’re all over.
MR Well, we don’t, that’s the funny thing. We have a very vanilla suburban neighborhood with — I mean, we’re not living in the woods or anything, but we still have a fox. He actually is kind of our neighborhood mascot. He kind of wanders around the — we have a pond in the middle, and so he kind of likes to wander around the pond and we see him occasionally, so that is so cool. We both have a fox in our neighborhood.
AH Yay. All right, that’s plenty of banter. We —
AH — we’ve got a really full episode so I want to get started.
MR All right, fair enough.
AH I’m excited because today is our episode, and Michael is kind of our guest as well as our cohost. So many of you know and many of you do not know that Michael is also a financial advisor and he has just launched his own firm specializing in financial planning and advising for entrepreneurs. And that’s us, business owners. And he covers everything from personal finance to business finance stuff, planning for retirement, a whole bunch of stuff in between. And we decided — we asked our premium members, hey, I’m going to interview Michael, what are your questions? So we got a whole bunch of questions for Michael specifically, mostly specifically, business ownership finance stuff, but there’s some personal in there.
And before we jump into this, Michael, give me your financial advisor introduction as if none of us had ever heard of you before.
MR Sure, well, first of all, I want to say thank you for doing this. Obviously, this business is completely separate from Massage Business Blueprint and you certainly didn’t have to do this, but you were very kind in saying hey, let’s do this, so thank you. That’s actually really nice of you, I appreciate it. (Laughter) It means a lot that you want to kind of highlight what I’m doing.
AH Useful. It’s — you have a useful skill that I think we can absolutely take advantage of and abuse.
AH So please complete your intro.
MR So yeah. So I’ve been in financial services for about five years, and I — earlier this year I launched my independent firm. I just kind of got tired of not being independent. The whole conversation, I won’t have about that, but basically being a business owner is in my blood and I just have to be the business owner. So I launched my own firm called Elevation Financial. It’s elevationfinancial.com. And for those who know what these terms mean or want to nerd out about it, it’s a registered investment advisor, it’s an RIA, which means it’s an independent, fee-only, fiduciary financial planning firm.
So I do specialize in working with entrepreneurs because I am one. So along with this business that we run together, I also have other businesses that I run with other partners as well including — in addition to Elevation Financial. So it’s always been what I do, and I feel like the best way to serve people a lot of times is to find people like you that you can help and you really just have passion around. And so I love entrepreneurship. I think that it’s not right for everybody, but I think that it can often be a really exciting path for people and it integrates really well into financial planning because it’s — the integration between business and life and personal is very important and the balance to find there is really — it’s really good to find that balance because everything benefits. So your personal life benefits if your business life is going well and vice versa. And there are ways to integrate those things together really successfully so that everybody wins. So I do, obviously, the investment advisory aside of it as well as financial planning and helping people with things like budgeting, cash flow, financial decisions, as well as business coaching. So when you work with me, you also get business coaching rolled into one. So that’s kind of my schtick, kind of my spiel. There you have it.
AH I’m sorry, I was muted because I was drinking my tea and it took me a second to get back to it.
MR (Laughter) I was about to say something but I figured that’s exactly what happened, so I didn’t say anything.
AH You know, we’re all just doing the best we can here.
MR Right on.
AH So I’m going to hit — you covered it. I think we all have a pretty clear idea of what you do and why you do it, and I want to jump into our questions. So we’re just — this is rapid fire, people. And I have a feeling I’m going to disagree with Michael on a few answers, but I’m going to try to remember that he’s the financial advisor and not antagonize him too hard on this.
MR Well, you know, here’s the thing — on that note, I’ve — the more I — the more experience I get, the more I have exposure to different aspects of finance, the more I realize there’s no one-size-fits-all. So I want to be very clear about that that if there’s a guru telling you to do something and it’s a one-size-fits-all approach, I would be very cautious and do more evaluation. So that’s kind of the lens by which I usually answer things is hey, here are some suggestions, here’s some information, it’s your money, make your own decision, but there’s not a one-size-fits-all.
AH Excellent. All right. So this is a good one — this is a good one to start with then. So someone asked, “Even if you are in a Dave Ramsey sort of lifestyle” — and we’ll let you explain that at the beginning of your answer, — “where you pay for things when you have the money and credit is irrelevant or credit history is irrelevant, it can be hard to make certain life changes like apartment rentals or mortgage funding if you have a limited credit history. Can you talk about improving that credit history so that you can get apartment rentals or mortgage funding without going into debt?”
MR Yeah, so those who kind of align with the Dave Ramsey philosophy know that that philosophy is centered — well, around a lot of things, but a big aspect of it is not being in debt and not using debt. And I agree with that. People disagree with me, that’s fine. I’m okay with that. But I hate debt. I do not own a credit card and Allissa makes fun of me for that, and we have a whole thing back and forth about it. And there’s the whole Dollar rental story, which I’ve forgot if you told or not — but anyway. I hate debt. I don’t have a credit card. I somehow exist on this planet without a credit card just fine; it works. And I don’t like borrowing money even for anything outside of a mortgage. And so that’s just kind of where I come from.
To answer the question, if you truly want to improve your credit score, the only way to do it is to borrow money. That’s what it’s built around. It’s built around your interaction with debt. So if it’s important to you to have a good credit score, then the easiest way to do it is to take out a credit card and start using it and paying it off on time. That’s kind of the bottom line. A mortgage — having a mortgage will also give you credit history. Other things will also, but if you don’t use debt, if you are in that mindset that I am and you don’t use debt at all, I would look at ways — the specific question here is around rent or mortgage, so I’m going to kind of center on that. And there are other articles — you can go to NerdWallet, other sites, and they have lots of information about how to rent an apartment, for example, without a credit score or get a mortgage without a credit score.
And in the case of an apartment or a rental, the best course is typically to go with an independent landlord who will not necessarily require a credit score, but can do things like look at your employment history, look at your — just your holistic financial picture and they can make a decision based on you as a human versus you as a credit score. With a mortgage, a lot of people still — I mean, Dave Ramsey kind of pounds the table on this all the time, but a lot of people still don’t realize there is something called manual underwriting and a lot of mortgage companies do this. About half the ones I’ve encountered do this. They know how to do it and it means they don’t have to just look at a credit score, they do the same thing as that independent landlord. They look at your holistic financial picture. They look at your employment history, your income, your history of paying various expenses, how much cash in the bank — they kind of look at the big picture. You can even use personal references to kind of support that. So if you, for example, don’t have a credit score and you don’t want to go into debt to build a credit score, there are manual and more personal ways to get an apartment and/or a mortgage. So that’s what — I would advise looking into those options if that’s your preference. And again, if you just want to improve your credit score, the only way to do it is to use debt, so that’s an option for you.
AH Got it. And actually a little side note here, I had this issue when — years back when I was looking for an apartment and — because — well, for a lot of reasons, but what I — I didn’t have a ton of credit history and so — and I was self-employed, so it was — for big corporate apartment complexes and stuff, they weren’t real satisfied. And finally, what I did was I stopped looking at big corporate apartment complexes, and I ended up renting from a private landlord. And when I would go to look at an apartment, I literally brought with me the front page of my last two years of tax returns that showed what I made as a small business owner. Because — well, yeah, for a lot of reasons. But anyhow, I looked at a couple of apartments and the ones I was interested in, I would talk to the landlord and say, listen, I’m self-employed, and I don’t have much of a credit history because I pay for as much as I can out of pocket, and I don’t take on a lot of debt. But look, here, this is the longevity of my business. I’ve been in town for however many years, this is my business, this is what I take in, here’s the legit proof of that. Rent to me. And they did. So there’s usually an alternate option.
MR Yeah, that’s great.
AH Even if you have to get creative about it. But all right, enough of that. So the next question — sorry — (Laughter)
AH — (indiscernible) disheveled in my notes. “Chat about the importance of having a personal emergency fund of one’s own even when, and maybe especially when, your household is dependent on your partner’s income.” And I think that this question can be kind of interpreted in a couple of different ways, but I’m going to let you interpret it however you want. So is it important to have a personal emergency fund of one’s own when —
MR Now I’m curious how you’re going to interpret it.
AH Well, let’s — why don’t you start with yours.
MR (Laughter) All right, I’ll go for it. So this is a really interesting question. I think it — there’s another layer to go back one level fundamentally and that is are your finances combined? My opinion is if your finances are combined, there’s no need for a separate emergency fund because you as a couple have decided that you are comfortable combining your finances and that’s how you operate your household. So that being the case, I don’t see a reason for two emergency funds.
Now, if your finances are not combined, for whatever reason you as a couple have made a decision to keep your finances separate, and that, to me, is an indicator that you probably do need a separate emergency fund because your philosophy is that you are operating finances separately. So that’s how I would kind of interpret that. What are your thoughts?
AH I agree with all of that. And I want to take it even a layer deep — a layer deeper. If you are self-employed, you kind of need two emergency funds, right? Because you need one for your business that will cover three to six months of your business expenses if for some reason you have to stop working and you cannot take an income. I think you need a savings to be able to pay your expenses as you decide if you need to shutter the business or if you are going to be able to go back and work after an absence because of illness or injury or a family situation or whatever. So I think you need —
MR True. I was not counting business. I was thinking strictly personal (indiscernible).
AH So there’s that. And then the second level of this is that — do you need your own savings even if you’d got a partner but if your household is dependent on your partner’s income? So I agree 100% with what Michael said. It depends on how you handle the finances in your home. I also think — and this is probably — I don’t know if Michael’s heard of this terminology, but in this era of women becoming more financially literate, the idea of something called an FU fund — and you can decide what F stands for —
AH — which is an amount of savings that you have so that should you need to leave a situation where you are financially dependent on your partner, you have the ability to do that. And I do think that is vital. And I do think each partner needs to have an FU fund. I don’t think this is just for women. I think that we think of it in terms of women and this has come about in terms of women because, traditionally, women have been the homemakers who do not necessarily make their own money and for a period of time that they are managing a household and raising a family and being the primary go-to parent and not working outside the home and they have less access to discretionary funds with which to maintain a certain amount of freedom. I also think it’s a psychological thing.
For me, I can say right out it’s a psychological thing. To be focusing your time and energy on tasks that do not bring you financial gain — like managing a household and raising children — is wonderful. It can also be disempowering — that might not be the right word. So to have that money in the bank can be really comforting and can eliminate resentful feelings in a time that can be very difficult. So especially if you’re used to being a wage earner and then you’re not, it can feel weird. And if your partner — if you and your partner are not really, really good at communicating about how you feel about these things and talking about money and feelings and division of tasks and assumption of responsibilities and all of that, it can be a really tough situation to be in. I say this as someone who was kind of a partial stay-at-home parent in my first marriage and who is an active co-parent in my live-in relationship now. My communication skills are really good about these things, and it can still be a tough situation.
So I am firmly in favor of each partner having their own private fund, savings, so that it gives you the freedom or a feeling of freedom that can sometimes be really helpful and comforting in a relationship. And sorry, that was long-winded. This is your interview, but I wanted to put that in there. (Laughter)
MR That’s totally fine. Your perspective is important.
AH So all right, we’ve covered that. Next question. “If a person has two businesses, both sole proprietorships, should they have a separate bank account for each?”
MR Yeah, I would. I just think — I mean, you want them to be clean and separate. If they’re literally actually two separate businesses, then yeah, I would separate them and just keep them clean, mainly for organization. You don’t want to comingle funds if they’re literally two separate businesses. So yeah, I would.
MR I’m not sure I have much of a longer answer than that, but that’s pretty much my answer. (Laughter)
AH No, I think you answered it. And there was kind of a follow-up here — or a side note that said, “income for tax purposes will be combined” —
AH — “(indiscernible) a combined total for both.” Yes. Yep, absolutely. And the reality is when you’re paying your quarterly tax payments, they’re only going to pay one quarterly tax payment based on the income from both, and that’s okay.
AH You get to decide how you pay them, you know, if you’re going to — how you’re going to maybe pay every other from a specific business or how you’re going to do that is a separate issue. But I totally agree. It’s not mandatory, but I think it’s a really good way to make sure that your bookkeeping is on point. And if you don’t keep them separate, you need really, really good bookkeeping so that you’re separating transactions by business. And this is because you want everything to be trackable. You want to be able to really easily run a report and see how much income you made from each service in each business.
MR Yeah, I like clean separations and clean organization.
AH It’s a better way to see where you’re hemorrhaging money and really making income, too, so that you don’t mix the two up. All right, let’s do our halftime. We’ve got some bigger questions for the second half, but let’s do our halftime. Michael, who’s our halftime sponsor today?
AH Yay, jojoba.
Sponsor message This episode is sponsored by The Jojoba Company. We firmly believe that massage therapists should only be using the highest quality products because our clients deserve it and our own bodies deserve it. Jojoba is nonallergenic so you can safely use it on any client and every client. It won’t clog pores so it’s great for clients with acne issues. It won’t go rancid; it can sit on your shelf forever getting hot and cold and hot and cold again. And it’s a great carrier for essential oils because of this “no rancid” situation. The Jojoba Company is the only company in the world that carries 100% pure, first-pressed quality jojoba. And you, my friends, can get 10% off orders of $35 or more when you shop through our link at massagebusinessblueprint.com/jojoba. And you want to stay tuned next week because we have some more exciting news about jojoba as well. But meanwhile, you can visit them at massagebusinessblueprint.com/jojoba.
MR Oh, jojoba, how we love thee.
AH We really do. All right, so this question’s a little heavier. It’s really, really important, and we’re probably going to do a whole episode on it in some upcoming weeks, but I want you to touch on it here because we just got the question again the other day. So here’s the story. Our premium member says, “A few months ago a close friend of mine died unexpectedly. He was self-employed, and it really got me thinking about what documents and passwords I need to have available when I die — hopefully not for a good long while — and someone else is tasked with closing down my business and dealing with banks, insurance, office location, and whatever else. Thankfully my friend had a list of passwords/accounts handy, but even that is still a gigantic task all while dealing with the loss and non-compassionate customer service people and paperwork. So much paperwork.” So Michael, how do we make life easier for people should we die while running a business or become incapacitated?
MR Yeah, that’s a really good question. So I have a legacy drawer. Some people have a physical legacy drawer, but I have a virtual one in Evernote. And this can be for both business and personal. And things like life insurance policies are stored there, any important documents — your will, obviously make sure you have a will. But from a business standpoint, including personal, a lot of technology can make this easier as well.
One really good tool that you and I both use, Allissa, that I think you’ve used for this exact purpose is LastPass. You can delegate someone to be your, kind of, backup in LastPass ;so if something happens to you, they can basically validate a couple of questions and they can get access to your LastPass account, which therefore gives them access to all of your banking logins, your insurance policy logins; all the logins to all the stuff —
AH Any passwords that you have stored in LastPass.
MR Yes, any passwords you have stored in LastPass, which I would advocate to throw everything in LastPass.
MR So that’s one, kind of, single point of entry that you can allow someone else to have access, whether it’s a spouse, a partner, a best friend, multiple people, a sibling, whoever it is. You can have people ready to take over all of these accounts when — if something happens to you, God forbid. So that’s kind of one tool you can use for things like that. So that’s something you’ve done, right, Allissa?
AH I’m sorry, say that again.
MR And you’ve done that for LastPass, right?
AH I — yeah, I’m all set up with that. I don’t think — I think that when I tried to add an emergent — your emergency person has to be somebody else who uses LastPass and Walt hasn’t set it up yet.
MR Yes. Oh, gotcha.
AH I think when I tried to make you my emergency person, it didn’t work right because my operator error, so it’s a thing on my to do list. But at least I got the LastPass set up.
MR Yeah, we should figure that out. (Laughter)
AH Yeah, I do have the LastPass set up and I do have — Walt does have my master password for that, so (Laughter).
MR Yeah, there you go.
AH You know, whatever. It’s an imperfect system, but it’s better than nothing. And there’s a lot of other factors to cover to make it easy for someone else to handle shutting down your business should that be necessary. But LastPass is a really good start. Or some kind of system like that — a legacy drawer or whatever you got going on is really, really helpful.
AH Okay. I know you’re going to love this next question, so I’m really excited about it. “How do I seek funding for a new business build-out?”
MR (Laughter) Why are you excited about this?
AH Because I know what your answer’s going to be and I’m excited for it.
MR Because my answer is don’t borrow money, is that what you’re thinking?
MR Yes. Don’t borrow money. So I’m going to tell you what not to do first. In my opinion, again, you do what you want. Everyone has different opinions, but my opinion is do not borrow money. People love to borrow money to build stuff out and to enhance their business and expand their office and stuff like that, and people can do it successfully. That’s perfectly fine; it’s not the end of the world. But it’s just — it puts you so far behind. I mean, if you are borrowing money to expand your office or do a build-out or something, you’re already starting that new stage of your business with chains around yourself. You’re just kind of trying to wade through that debt and it’s holding you back. And so I just feel like if you don’t have the money to do it, you shouldn’t do it yet; you should save up for it.
So as far as how do you seek funding, the way this is worded, I’m kind of struggling with because it’s “how do I seek funding” which implies how do I go out and get money to do it? So there’s a couple ways you could do that, obviously, if you really, truly want to go out and get money. One is to go borrow money, which I’ve already told you how I feel about that. The other is to go seek investors, which I’ve never really seen that work out very well unless you’re a certain type of company that is built around the model of going public and getting investors, etc. But if you are a lone small business owner, getting investors to do an office build-out is fairly impossible. So I wouldn’t really put too many eggs in that basket. The other is more crowd source-type funding, like GoFundMes or Kickstarters, things like that. You can offer people some sort of incentive for crowd-sourcing donations, basically, to your build-out. So if you’re a massage therapist, it might be something like, hey, I’m going to give you special discount on packages if you contribute to my GoFundMe to build out this office space. I don’t know, maybe that can work. I wouldn’t really — I don’t know, it just feels kind of weird. You could try it, but honestly, I don’t have a great answer besides save up money and do it when you have the money. That’s a really boring answer. You probably hate that answer, but that’s kind of what I’m thinking.
AH All right. I mean, does that — it limits opportunities —
MR Yeah, it does.
AH — in a lot of ways. Yeah. And I don’t think that that’s a bad thing. I would say — so let’s say that I have a really great opportunity in front of me — and I agree with you. I’m a hustler. If something’s like, okay, I need 20 grand to do this opportunity in front of me, I would rather be like, okay, how can I come up with 20 grand in the next eight weeks. And I am also a fan of that. I also know that’s not always possible. I wouldn’t have been able to put a new floor in my yoga space if I hadn’t, and I wouldn’t have been able to open the yoga space if I didn’t have the new floor, so I had to borrow to put down this new floor. And you’re going to — I don’t know if I’ve ever told you this is what I did with that. So I totally — I put it on — I got a zero-balance credit card situation for 12 months. (Laughter)
MR Um-hum, I think you did tell me that.
AH But I set up my payments to — like I — what is it going to take per month to pay this thing off before the zero-balance transfer situation goes berserk. And I figured out how much and I decided if I was going to be able to do that and I was and I did it. So not a great —
MR You were very intentional about it.
AH It was very intentional.
MR You were very intentional and you had a plan, and I would argue you are the exception.
MR Which most people I hang around with are exceptions because we tend to track people like us. (Laughter) I mean, you’re smart. You had a plan.
AH But I did ignore paying off other debt that I should have been paying off while I was paying off that floor, so [poe-tay-toe] [puh-tah-toe]. But I would say if you are really intent, if you — if this is a really good opportunity and you’ve thought it really through, then visit whatever bank or credit union you’ve been banking with and also your — check in with the SBA to see what kinds of banking options — loan options they have available for you and bite off — only bite off 50% of what you think you can actually chew. Like if you think you can make $1000-month payment on whatever this loan thing is, your payment shouldn’t be more than 500 bucks. Plan for the worst possible situation of payoff. But I’m not a financial advisor, so I probably shouldn’t have answered that at all. Do what Michael says.
MR Well, no, I think it’s good to ask questions about this. So I would — I mean — obviously a lot — all these questions are — you know, we don’t know all the backstory. So for example, seek funding for a new business build-out — well, I want to ask what is the build-out? What’s it — what is the purpose of the build-out? Is it something that is — has a 90% likelihood, in your opinion, of working, or is it like a “this sounds like a cool idea; let me try it and see what happens”? Why is the build out happening, first? That’s the first thing I want to know —
AH And —
MR — because that will — yeah, go ahead.
AH And is your business already so stable that you could pay it off even if it doesn’t grow?
AH Like, could you pay this off making what you make now? And if not, then there’s inherent risk. You’re gambling on being certain that you’re going to have that bump in income from whatever this build-out is. And what if that doesn’t happen, and what if it doesn’t happen for six months, and what if it doesn’t happen for twelve months? Where does that leave you?
MR And the next question I would ask is what’s the downside of delaying it? So for example, let’s say you take out a three-year loan for a buildout. Okay. So you’re paying payments for the next three years anyway. So what happens if, instead, you pay yourself payments for the next three years, the exact same payments, and put that into a separate account and then you do the build out in three years versus now. Then you’re coming from a position of cash versus debt, the risk is gone of having the debt, so what’s the downside of waiting three years? I would ask that question because sometimes we get in the habit of saying, well, I want this thing to happen now and I can’t wait. And really? I mean, can you or can you wait three years? I mean, if you can and it’s not the end of the world, then think about that.
AH Bam. Okay. So let’s get on to some real talk because I like talking about how financial advice needs to be adapted for people with much lower incomes than the regular market of people getting financial advice.
MR Absolutely, that’s who I work with. I work with people that are not the typical clients of financial planners. In fact, I don’t chase the high net worth clients everyone else is chasing. I really like working with real people.
AH All right, so real talk. I’m self-employed. I’m a single parent. I’m doing okay in my business, which means I’m bringing in about 35k a year; that’s what I’m taking home to raise my family on. So lower end, depending on where you’re living, but I’m making it work and I’ve got a kid. So it’s just barely enough, but it’s enough. But there’s not much leftover, and there’s nothing left over when I have to do things like pay for little league or go to a family wedding and take a gift. Where do I start? How do I start building a savings? How do I start building retirement? How do I make more money when I can’t afford more childcare? And how do I figure out about making more money without making so much money that I lose my affordable healthcare credit and make my health insurance double? So what do I do? How do I start building a savings and retirement and planning for the future?
MR So this is a super complicated question. (Laughter)
MR So there are so many variables. For example — there’s just so many variables. Like what are some of the details about this person’s life, for example, and all those things. So that being said, if we make the assumption, in my opinion, that expenses are truly cut down as far as they can go, which I think is — we’re going to make this assumption here because it’s kind of phrased that way. So let’s assume that expenses are really, really efficient. I mean, usually — really always in this case, for this example, it’s income. I mean, it’s about increasing income. And it’s really easy to say that. I realize that people say, oh, well, make more money. It’s not easy. As a business owner, especially, it’s not easy. However, on the flip side, as a business owner, you have more influence over your income than you do as a regular employee. So that’s why — that’s one of the reasons I think entrepreneurship is so amazing. It is — it’s a way to unlock the influence you can have over your income. You can unlock that influence that you can’t have working for someone else.
So with that in mind, if I’m talking to someone in this situation, I’m going to ask a lot of questions about their business. What are you doing in your business? The key to the equation here is the income side of it. So is the business you’re in the right business for you? Do you want to do something else? Do you want to — are we going to work on how to expand your profitability in your business? Are we going to look at ways to add product lines or service lines to your business? So as a massage therapist, for example, I think — we talk about this this a lot. There’s ways to change your path a little bit to kind of stand out. For example, niching. We talk about niching all the time until we’re blue in the face and people are sick of it. But that is one way you can potentially earn more money because you can charge higher rates as a specialist. That’s one avenue you can consider. Adding product lines, doing retail, that’s one way some of our members, for example, are adding income to their revenue. They are adding product lines and product and retail sales to their massage practice. Some people are doing multiple things. They’re doing massage plus something else. We’ve had people consider quitting massage altogether and getting a regular job for a while and then coming back to massage. So I usually start the conversation — it’s a really long, messy conversation, so it’s not something we can answer in a couple min here. But I usually want to start the conversation with okay, how can we get creative and lay all sorts of options on the table for increasing income. That’s really — there’s not a magic button to push beyond how do we figure out the income side.
So with the insurance part of it, yeah, that’s a factor for many people. If your income reaches a certain level, that could jeopardize the insurance you have and there’s no magic answer to that, really, either beyond how do you plan for it and how do you get enough income, maybe, saved up in the interim as you’re building up income to kind of cover that cost. That’s a whole kind of balancing act. I don’t have a great answer beyond lots of creative planning work, thought, thinking through the real questions of what’s important to me and how do I get there.
So I don’t really have a great answer beyond a lot of the complexities that we don’t really have in this scenario.
AH That’s fair. All right, I love the next question because I already know your answer. What financial advice would you give someone starting up a massage business?
MR Also a super broad question. (Laughter) I’m really bad at broad questions. I’m really good at specific questions. But with this one, I mean, there’s a lot we could cover. As far as specific financial advice, I mean, it’s probably obvious, but be really lean. If you’re starting a massage business, it’s probably really tempting to get the best office you can get, the best table you can get, the best equipment, advertising, all the fancy stuff. All that stuff seems very tempting, but you don’t need a lot to start a massage business. You need a place to practice, you need a table, and you need some basic equipment and supplies. I mean, that’s kind of it. Obviously, liability insurance. But beyond that, you don’t need the best possible office if you’re just starting out; you need a space that’s reasonable. So I would be really, really ruthless with yourself about what you truly need and start making money as quickly as possible and start building up a good short-term savings in your business as quickly as possible so that you’re in a better position to upgrade later on. So that is kind of the first place I would start with that.
Obviously, it’s no secret I would say don’t borrow money, don’t get a credit card. We’ve heard questions a lot about how do I get a business credit card etc. I’m — I know I’m a weirdo. Most people, we live our lives kind of going — we’ve been conditioned to say that we just have debt and debt’s a way of life, and I don’t think it has to be that way. So I would encourage you not to get a business credit card. I would encourage you not to get a line of credit. I would encourage you to buy things with real money, be in a cash position, and be willing to delay gratification even more than you think you want to. And a lot of that is going to be uncomfortable because we want to have a great website that we pay $5,000 for. We want to have a fancy office that has a beautiful reception area and all sort of nice amenities. And we want all these things and we think it’s going to make a difference, and it might. It might actually make a difference. But I don’t like doing that at the expense of my financial foundation because I’ve just seen too many people on the personal side and the business side just get themselves in this cycle of doom because they are not able to get ahead of their finances because they overextend themselves too early. That’s a long answer. Probably obvious, but that’s where I would start.
AH I think it was efficient actually.
AH Okay, and this is our final question, and I think it might be the most fun because I love knowing that this can happen. And it is actually in the middle of happening to one of our members who is selling her business. What do you do with all the fat money when you sell your business? And I know this is really broad, but what should, maybe, your priorities be for spending when you sell your business?
MR I love this so much because like you already mentioned, we had someone on a while back on how to value and sell your business and a lot of people think, well, you can’t sell a massage business. It’s impossible. And here it’s happening and I love seeing that. It actually does happen. It’s not common. It’s rare, but I love seeing that it does happen, and I hope a lot of other people have hope that if you want to do this someday, it actually can happen. So that being said, what do you do with the money?
Now, I’m going to basically just classify this as what do you do with any lump sum money coming in because that’s really what’s happening is you get some lump sum, whether it’s selling a business or an inheritance or whatever it is. Obviously, it’s going to be dependent on where you are in your financial journey. So if you have a lot of debt, that’s something to consider. Before that even, though, make sure you have a short-term savings. The very first step to any kind of financial foundation is a short-term savings. And this is not investments, this is not retirement, this is strictly cash in the bank; a boring old savings account or a money market or a high-yield savings. It’s not meant to make you money. It’s meant to be there as a safety net. So I would — step 1, if you don’t have a short-term savings, get your short-term savings in place. Usually three to six months of expenses is the ideal recommendation. That’s usually reasonable for most people. Some people like more. Some people like 9-12 months. That’s fine. Just make sure you’ve got a good cushion of savings in the bank.
Once you’ve established that, if you’ve got money left over, I would knock out debt as quickly as possible. Debt is — I mean, I’ve talked about it a lot. You know how I feel about debt. But it just adds so much risk to your life and so much baggage to your life, and it has a way of just eating away at every aspect of your life until you just get ready to knock it out, eradicate it. So I would knock out debt as much as possible. If there’s anything leftover, then think about the investment side of it. Think about retirement savings. Think about putting it into college savings plan if you have children.
So short-term savings first, debt second, and investing third is usually a good roadmap. The caveat being it’s highly dependent on your specific situation. What are your thoughts?
AH Okay. I think that was really clear. I think you laid out the priorities in an efficient way.
MR Right on.
AH So nicely done.
MR I love it. Thank you so much for sharing that you’re selling a business.
AH Yay. It’s pretty awesome. It was really awesome to hear from this member when she was making that agreement and realizing that she was going to get a lot more for it than she initially anticipated and thought was possible. So that was really cool.
All right, so we’re going to wrap it up and then I’m going to give Michael a chance to talk about what he does for people in his firm. And I also want to mention — this isn’t a secret to most of you. Michael is actually my financial advisor, and I have sent some of my family to him. And it’s really, really awesome and everyone’s been really happy. And if you’ve ever used Michael for financial services, you should reach out. Get your stuff reevaluated.
And Michael, why don’t you tell people what kind of things you can do for them and make sure you tell everybody about your podcast.
MR Cool, thank you. So I have a couple levels of service. Well, first of all, let me back up. I work with anybody across the U.S., so I am high-tech and virtual, which is a little bit different in this industry. So I videoconference, phone, email, electronic signatures, paperless as much as possible — at least as much as possible in the financial industry. (Laughter). But yeah, so I work with people in every state in the U.S., so anywhere you are, I can work with you virtually.
And I have a couple levels of service. One level of service is called advisory and the next level is planning. So advisory is basically if you want to get some advice on investments like setting up a Roth IRA for retirement, have someone in your corner to ask questions anytime. I stay in touch with you on a regular basis. We have an annual meeting to kind of assess your financial situation. So it’s really centered on investments mostly, but you’ve got someone you can ask questions and just get general advice from. That’s kind of my advisory level.
And then there’s a level above that called active planning. And in addition to advisory what we do is we actually — I put together a financial plan with you and we’ve got software where we stay in touch real time and it syncs up and you can see exactly what your progress is, and we put together a road map of exactly where you’re going to end up based on different decisions we make. And you’ll have an app on your phone, again, so you can track everything and we also put a — not really a dream board, but like a goal board together, where we have short-term, medium-term, and long-term goals and we start working them together. We start pulling things over into the immediate view. It could be things like establish your emergency fund. It could be start a new business. It could be sell a business. It could be start a college savings fund. It could be set up a monthly budget program. It could be cashflow planning. It could be anything related to life or business, and we work on those things together on an ongoing basis and you have accountability. I work with you to be an accountability partner to kind of coach you through those aspects. In addition, business coaching goes with that. So if you want a business coach to help you with things like even Facebook advertising or picking software or whatever it might be — anything that goes with running a business, I’m there as your coach as well.
So that is what I do. And I just launched a new podcast of my own called The Elevation Project. You can search for it wherever you listen to podcasts or go to elevationfinancial.com/podcast and you can grab it there. So I appreciate the shout out.
AH I — yeah. I totally forgot what I was going to say because I was like —
AH — I was just noticing that you put up a new episode of the podcast today and I was like, ooh, I wonder — I got distracted by the description of it. So.
AH Sorry about that. So let’s wrap this up. If you have any questions you want answered about business, money, or anything about business and marketing for your massage business, you can email us both at email@example.com. And I’m just going to make a little note here, if you emailed us or contacted us through the website in the last couple weeks and for some reason didn’t hear back from us, I’m really sorry. We both had a weird junk mail thing going on. But we both weeded through our junk mail boxes, made sure that we got to everything. But if for some reason you didn’t hear from us, I’m sorry, email us again firstname.lastname@example.org. We usually — you will hear back from one of us within a day or two. And send us your questions, and that’s all I have to say. Maybe tell a friend about our podcast if you found this useful. Otherwise, find us online massagebusinessblueprint.com. And have a really nice day.
MR Thanks, everyone.