June 10, 2025 • 24 mins
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Episode Transcript
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Speaker 1 (00:01):
Welcome to the Fiscal Physical Podcast.
Join us each week as we sitdown with the founder of Alchemy
Wealth Management and author ofyour Fiscal Physical, Ryan
Nelson.
Tune in to gain valuableinsights and practical tips as
we simplify complex financialconcepts into digestible lessons
(00:22):
.
From budgeting to retirementplanning, this podcast is your
go-to resource for masteringfinancial literacy.
Aaron Hoisington (00:33):
Welcome everybody to this week's episode
of the Fiscal Physical Podcast.
My name is Aaron.
I am joined, as always, by MrRyan Nelson, the founder of
Alchemy Wealth Management.
Ryan, how are you on thislovely day?
I'm doing well today.
Ryan Nelson (00:48):
How are you doing?
Aaron Hoisington (00:48):
I'm doing pretty solid.
My man and I hope, all thelisteners out there are doing
well too.
Hopefully, you guys are waitingwith bated breath for this
episode to drop, as it's goingto be a good one.
You ready to jump in, ryan?
Absolutely.
Let's do it All right,excellent, so.
So today we are going to betalking about entrepreneur
essentials.
As I was talking to Ryan beforethis episode, that's always a
(01:10):
tough word for me to sayentrepreneur, not essentials.
I got that one down.
But you know, ryan, these daysyou see many people who are
starting their own business orit gets thrown around a lot on
social media, working foryourself, these different things
.
So I kind of wanted to havethis.
You know, talk about thisspecific topic because correct
me if I'm wrong you are abusiness owner right, yeah, I am
(01:32):
, I am Okay, excellent, veryastute.
I think that you got a leg up onme in that regard there, but
we're going to dive in todayabout what really, you know
being an entrepreneur actuallymeans what people should know,
you know.
You know being an entrepreneuractually means what people
should know.
You know disclaimer like whatwe're going to talk about.
A lot is going to be around thefinancial piece of it, cause
that's kind of what we're tryingto improve that financial
(01:52):
literacy.
But hopefully you guys canlearn something from this and,
um, you know, if you're thinkingabout starting your own
business or working for yourself, kind of decide knowing what
that actually is and knowingwhat the pros cons, what could
all go into that there.
So, ryan, I'll go ahead andturn it over to you, my man.
Ryan Nelson (02:10):
Yeah, let's do it.
So what is an entrepreneur?
Aaron Hoisington (02:14):
It's a great question, because that word gets
thrown around a lot.
Oh, it's an entrepreneur.
What is it in your mind?
I feel like it's somebody who Idon't even know.
I want to say a self-employedperson like a business owner, or
somebody who works forthemselves, but I don't actually
know the official definition, Isuppose.
(02:34):
But I'd be curious to learn.
Ryan Nelson (02:37):
Yeah, I don't know the official definition either.
Let's take a look.
Sounds like it's a.
Aaron Hoisington (02:40):
French word.
I'll tell you that, there yougo.
Ryan Nelson (02:42):
So a person who organizes and operates a
business or businesses, takingon greater than normal financial
risk in order to do so.
Oh, okay, cool.
So that's the officialdefinition.
Looks like that's from Oxford,but yeah.
So to me, yeah, it's actuallypretty close to that.
So I guess I was pretty close.
But yeah, so it's like startinga business and taking on the
(03:04):
financial risk of doing so inexchange for the potential
reward of doing so.
So it's sort of that risk andreward payoff.
So as an entrepreneur, you ownthe business and you're taking
more of the financial risk, getmore of the financial reward.
I don't know that that's eithergood or bad.
I think some people areprobably not cut out to be
entrepreneurs.
Other people are, like,seemingly more natural
(03:26):
entrepreneurs and morecomfortable taking that risk and
reaping those rewards, whereasother people don't really care
to reap the rewards and wouldprefer not to take the risk.
Right, but to your pointearlier, I think, yeah, let's
focus more today on thefinancial side of this, not
necessarily like branding.
We can touch a little bit maybeon legal structure and stuff,
but this would really be sort ofmore the financial aspect of
becoming an entrepreneur.
(03:46):
Perfect, yeah, let's do it.
So one thing I would say isjust a couple of thoughts would
be as you start a business,you're trading that steady
income for theoretical potentialupside, hopefully not sure what
right.
And autonomy.
I think that's really what youget out of being an entrepreneur
(04:09):
is the upside of the businessgrowth and autonomy.
So if you were an employee ofanother business, I mean
somebody else was theentrepreneur.
If Elon Musk is theentrepreneur and Tesla is the
business, then there's lots ofemployees of Tesla.
They don't have necessarilyvery much autonomy, they don't
get to participate as much inthe upside of the business, but
they get a steady income.
(04:29):
Elon Musk you probably hearthese crazy numbers where, like
Elon Musk's net worth will growby millions or billions of
dollars in a single day.
That's him both takingadvantage of the upside, also
being a victim of the risk ofbeing an entrepreneur, and he
has more autonomy.
(04:49):
He seemingly gets his handsinto whatever he wants to
because he has the autonomy todo so.
So again, if you were just totake him as an example of an
entrepreneur, you can envisionthe trade-offs there.
One misconception I would sayis sometimes people think that
working for yourself or nothaving a boss can mean fewer
(05:12):
hours or less stress.
I don't know that that'snecessarily true.
I think, especially at thebeginning, most entrepreneurs
probably work more hours andhave more stress.
Theoretically it's possibleprobably to get to a place where
you could maybe work less hoursand have less stress, but I
certainly wouldn't say that allentrepreneurs in general work
(05:34):
less hours and have less stress.
Aaron Hoisington (05:35):
Yeah, I'd say that's one of the things you see
circulating in social mediaTikTok, all these Work for
yourself, work 10 hours, work 15hours a week, make 100,000.
You're like, well, how long doI have to grind for like 60
hours to get this off the youknow?
60, 80 hour weeks to actuallyget this off the ground, to be
able to maybe work less?
Ryan Nelson (05:55):
And.
Aaron Hoisington (05:56):
I feel like I don't want to.
I'm sure it's probably outthere, but it seems pretty rare.
You we've been my wife and Iwe've been reading this book on
how Netflix got started, and theamount of hours that those guys
put into this company at thestart are just incredible and
you think about like, oh yeah,you started your own business or
you're an entrepreneur.
If it's going to be successful,you're probably working quite a
(06:20):
bit, at least in the first partof it, maybe throughout the
whole thing, who knows, but it'snot always hey, cool, I'm just
not going to work anymore CauseI'm a business kind of thing.
Right?
Ryan Nelson (06:30):
Yeah, exactly.
Uh, it kind of reminds me ofthat quote we used a couple
episodes ago.
Uh, that founder of McDonald's,uh Ray Kroc, when he mentions
being an overnight success andhe's like yeah, it was an
overnight success after 30 yearsright, so yeah definitely,
after grinding for 30 years, youcan become an overnight success
.
Maybe you get less stress atthat point and so.
But another interesting thingis you kind of go from like
(06:53):
having one boss that you reportto to like having every client
in some way be your boss, right?
So again, just another littleinteresting thought there.
But yeah, so that's kind oflike what entrepreneurship is in
general maybe, but let's dive alittle more into the financial
side of this Sounds good.
So some of the startups so likestartup considerations.
So if, for example, if a clientwas coming to me and asking hey
(07:16):
, I want to start a business XYZ, help prepare me to be in a
position to start business XYZ,right?
What I would say is we probablywant to focus on having a bigger
emergency fund.
So in general, we would talkabout emergency fund being
between three and six months ofspending.
I think we had an episode onthat back, probably almost a
year ago now on emergency fundsand again, rule of thumb three
(07:39):
to six months.
If we're going into somethinglike this, where our income will
be much more volatile andunknown, we probably might want
a much larger emergency fund.
So we may tweak that and say,instead of wanting three to six
months of emergency funds.
Maybe we want something betweensix and 12 months of emergency
(08:00):
funds.
I know in my industry there'ssort of a well-known best
practice that if you're going tostart a financial planning firm
you should have 24 months ofrunway.
So again, I'd say think biggerthe better.
Six to 12 months is probablyideal for a lot of businesses.
Depending on the business, youmight need something even bigger
.
So even up to two years ofemergency savings built up,
(08:23):
which it's a tall ask.
Aaron Hoisington (08:26):
Yeah, that's a lot of yeah, not everybody just
has that money lying around.
Ryan Nelson (08:30):
Yeah, and obviously a lot of this has to do with
what business you're going into,what experience you have.
If you're working at a saloncutting hair and you go out and
start your own salon and you'reable to take all your clients
with you, so you already have afull book of business, you may
not miss a beat, right Right.
If you're starting a brand newcompany in a brand new industry
(08:51):
and the sales cycle is sixmonths long, you know you're not
even going to get your firstpay.
If you find a client on day one, you're still not going to get
paid for six months.
You're going to want to have alot.
It's going to be a lot longerrunway or a lot sort of longer
pre-revenue period, so thatperiod before you start making
revenue.
So just think about thebusiness you're looking to go
into and how much emergencysavings you would need to offset
(09:14):
that pre-revenue period.
Smart.
And then the other thing I'd sayto pay attention to is there's
a lot of upfront costs.
There's legal costs.
Potentially you might need alawyer to read your current
employment contract, set up abusiness entity for you.
There's technology costs.
(09:35):
You're going to need potentialoffice space, there's insurance.
So there's a lot of costs youwould have upfront.
Even if you're in thatpre-revenue period, so not
making any revenue, you mightstill have all of these costs.
So you may go from a businesswhere you were an employee and
the business was covering allthese costs to now you having to
cover them all and you go frommaking a steady paycheck to no
(09:55):
money for a period of time.
Right, so there can be quite abig financial burden there and
I'd say, just be aware of it and, as long as you plan
accordingly, shouldn't be anissue, but definitely something
to think about there.
Aaron Hoisington (10:09):
Yeah, no, absolutely.
Those are some great call-outstoo, of just thinking about the
idea of potentially I mean,everyone's going to be in a
different situation but goingfrom a steady job to where
you're collecting a paycheckevery two weeks or weekly,
however you get paid, and thenpotentially not making money for
six months or something likethat, or a year or something
like this, to put in thatinvestment and having that just,
(10:31):
I guess, stress over the head,because who knows if it's going
to be successful, you don'tspecifically know.
So I think that you called outoriginally not everybody's maybe
cut out to be an entrepreneuror being able to, because you
have to handle that, not onlythat financial risk, but the
stress that comes with it aswell too, and I think that's a
big piece of just life ingeneral.
Are you cut out to handle thatstress of the potential reward
(10:53):
down the line?
For sure, I don't know.
Yeah, right.
Ryan Nelson (10:55):
Absolutely.
Then another thing I would sayis it's probably best to consult
your attorney and your CPA oraccountant on this stuff.
But you're going to want toseparate your business finances
from your personal finances.
So you shouldn't be running thebusiness expenses and the
business profits through yourpersonal savings account, right?
(11:16):
So you'd need to set that upand make sure you're sort of
running your finances throughthe right sort of legal entity
and bank accounts.
And that changes from your taxesas well.
If you're used to receiving aW-2 paycheck, your employer is
probably withholding taxes fromyour paycheck and sending them
(11:36):
to the government, right?
When you're your now ownemployer, if you're not giving
yourself a W-2 paycheck,nobody's withholding taxes.
And so now at the end of theyear, all of a sudden you could
find like let's make our numbersreally easy If you made a
hundred grand and no taxes werewithheld, well, you're going to
owe taxes on a hundred grand,right.
And the other thing with thatis, if you weren't paying them
(11:59):
sort of in the right quartersthroughout the year, the IRS may
even look back and say, hey,not only did you not pay us,
we're going to basically chargeyou a penalty for not paying us
on time Sure.
So definitely you'd want towork with your CPA and make sure
that your finances are runningthrough the right accounts and
you're paying your taxesappropriately, and it may be a
(12:20):
less automated process thanyou're used to being a W-2
employee currently.
Aaron Hoisington (12:25):
Yeah, I think about that and you raise a great
point of you know when I filemy taxes normally, like it's
very simple for myself and mywife.
We have a couple of W-2s, claima couple of things and, bing,
bing, boom.
I can finish this in like 15minutes.
Sure, like everything is justimports in.
Now they make it so easy.
Shout out TurboTax.
Would love you for you to be asponsor.
But just in general, likehaving to now think about all
(12:51):
these different you mentionedrunning the money or filtering
the money through your businessaccount specifically.
Just even that, I'm just like,oh yeah, I guess I just wouldn't
put that into my checkingaccount.
I would have to go through thatspecific account and just
setting that up.
In general, I'm like, yeah,that's a lot of stuff to think
about, for sure.
Ryan Nelson (13:09):
And then what's also interesting is there's what
we sort of refer to in yeah,most of us just call it what's
called the self-employment tax.
And so, like you, for example,you're a W-2 employee, right,
and so as a W-2 employee, you'repaying, say, half of Social
Security, and your employer ispaying half of the Social
Security tax right and FICA.
(13:30):
So now, as your own employee,you have to pay that all
yourself.
You're the owner, you're theemployee, you're everything
right, so you have to pay thatall yourself.
So that's what we call theself-employment tax.
That's 15.3%.
So if you're normally in, say,a 22% tax bracket, you're going
to pay your normal 22% tax.
You know, as we discussed inprevious episodes, right, it's
(13:53):
kind of a tiered system.
It's a progressive system, wecall it.
But either way, you're going topay whatever you paid to the US
government in the form ofnormal sort of income tax.
You're also going to pay thisself-employment tax of an
additional 15.3%.
So that's an additional taxthat a lot of people don't think
of or consider when they'restarting their own business.
And most people sort ofintuitively remember and know
(14:14):
they have to pay income tax.
Oftentimes they're not thinkingabout this 15.3% tax, which
adds up right.
Aaron Hoisington (14:21):
You think about your normal tax rate, you
add another 15.3% tax on.
Ryan Nelson (14:24):
there it adds up and if you're trying to compare
how much you would need to earnas a business owner to sort of
break even compared to whatyou're making now, you might
have to earn actually more thanyou think when you start taking
all these variables into account.
Aaron Hoisington (14:40):
No, that's it.
I can't remember if it was inyour book or somebody had
mentioned the self-employmenttax before.
I don't know, and I rememberbeing like, oh shoot, that's
right, that's what my employercurrently covers.
Ryan Nelson (14:50):
I suppose, for.
Aaron Hoisington (14:55):
Interesting, that adds a little pretty penny
on an extra 15%.
You're like cool, I got to makea little bit more to offset
that potentially yeah exactly itadds up.
Ryan Nelson (15:05):
And then another thing, as far as business entity
goes, I would say again anotherthing to chat with your CPA and
your attorney about, butthere'd be considerations of
whether or not you want tooperate as a sole proprietor or
an LLC.
Do you want to file your taxesas an S corp?
So there's different ways andentities you can set up Probably
too detailed to get into onthis podcast, but certainly
(15:26):
something you'd want to justthink about and have in the back
of your mind and consult theappropriate professionals to
make sure you're addressing.
Those types of conversationscan have huge tax implications
and what I find is most peopledon't address those early enough
.
So I would say, just know andbe aware that your legal entity
is important and affects yourtaxes and you should be talking
(15:47):
to the right people about that.
I don't know that we need to goany deeper into it today.
Just be aware, yeah.
Aaron Hoisington (15:52):
It seemed like one of the common themes
throughout this is ensure thatyou either hire the right people
or you consult with the rightpeople before you just decide
like, okay, cool, let's do this.
And I would say, probablynowadays, the resources out
there are probably much morenumerous and more available.
I would guess versus 20, 30years ago or whatever.
I mean you could plug into chatGPT, like how do I start my own
(16:15):
business and it'll probablyshoot you out a bunch of stuff
which is great, but at the sametime it's like okay, cool, now I
know potentially where to findthis information and what's my
specific situation and what'sbest for me and I think you hit
it right.
Potentially an attorney,definitely a CPA, ensuring that
you get all your ducks in a rowas early as possible.
So down the road you're like ohshoot, I forgot to pay XYZ tax.
(16:38):
Whoops, kind of thing you don'tget burned by something along
those lines that potentiallycould jeopardize you.
Ryan Nelson (16:44):
Yep, exactly.
And then the other thing Iwould say to just be aware of as
an entrepreneur is retirementbenefits, long-term focus.
So right now, most W-2employees, they're getting
health insurance through theircompany.
They're getting a 401k with a401k match through a company.
Again, just remember, once youare the owner and the employee,
you're everything.
(17:04):
Now you're responsible forpaying for your own health
insurance.
If you are a one-person shop,you're not even going to be able
to go get a group healthinsurance policy similar to what
your employer has.
You're going to have to just goto the marketplace and find
like it's kind of a singleperson or family policy and then
same with like a 401k match.
(17:24):
As the business owner, the coolthing is you get to pick up,
set up whatever businessretirement plan you want,
structure it however you want,which is nice.
The negative side is the matchthat you're like paying yourself
.
Aaron Hoisington (17:36):
it was your own money right, it's coming
from your own business right?
Ryan Nelson (17:42):
So of course there's trade-offs there, right?
If you're participating in yourbusinesses and your current
company's 401k, that's kind oflike free money, right, that
you're getting Once you start upyour own 401k.
It feels a lot less like freemoney, it feels like your own
money right.
So benefits to being able to setup the plan you want, which is
a huge planning benefit.
Anytime I'm working withbusiness owners, the fact that
we can set up the exact rightplan for them is a huge planning
(18:04):
plus, so I love it.
I love the opportunity to sitdown with business owners and
figure out what plan makes senseand get it implemented, and,
again, it's a huge benefit tothem.
But do also acknowledge that,yeah, now you're responsible for
the 401k fees.
You're responsible for the 401kmatch, all of that.
You're responsible forproviding the health insurance.
So, yeah, just something elseto think of and then maybe to
(18:25):
put a bow on all of this.
The other big benefit of beingan entrepreneur is you know your
business becomes an asset aswell.
Oh, okay, so in theory, if youown your business, you could
theoretically potentially sellit in a year or five years or 10
years, 40 years, right, andthat's a benefit.
It's a benefit that you'reworking towards.
And then there's other peoplewho, if they think about all
(18:59):
these pros and cons, they say Iwould feel a lot better not
being an entrepreneur, being anemployee right and yeah, I
really don't believe either isbetter or worse.
Aaron Hoisington (19:07):
I think just different people will gravitate
towards different solutions oncethey know the pros and cons,
yeah, no, and I think thatthat's a great call out of you
know you never know what's bestfor an individual, best for a
family when it comes to thosecertain things and what your
responsibilities are.
What you're looking for Somepeople you know might enjoy.
Like cool, I have this safetynet of, like I know, my
employer's covering X, y, zversus being totally responsible
(19:29):
for that overall.
Just out of curiosity, ryan,this popped into my head now Did
you ever think you'd own yourown business?
Was that like something yougrew?
Ryan Nelson (19:38):
up.
Maybe I should just say thepersonal section.
But I asked it now, so we'regoing to go with that.
I don't necessarily yeah, Ican't think back in middle
school or high school orsomething necessarily like
having a goal to own my ownbusiness or thinking I would.
I guess it was a slow, gradualprocess, yeah.
So yeah, I didn't necessarilyhave like a long-term goal of
accomplishing that.
(19:58):
It just sort of differentdominoes fell and it ended up
making a lot of sense and Ithink my personality is a good
fit for it.
But yeah, it wasn't necessarilya long-term goal.
Aaron Hoisington (20:08):
Yeah, no, I was just curious if that was
something that just purelycurious, but awesome, and that
was a great breakdown there.
Hopefully you guys kind oflearned something specifically.
Maybe, if nothing, you takeaway what an entrepreneur is and
maybe if it's something you'vebeen jonesing to explore or
checking out, definitely do yourresearch on it and make sure
it's right for you and if that'sthe place you want to go, more
(20:29):
power to you without a doubt.
But excellent, we'll go aheadand take a pause here.
We'll be back on the other sideof this and everybody hang
tight.
Speaker 1 (20:36):
And now to put the personal in personal finance.
Aaron Hoisington (20:43):
Welcome everybody back to this side of
the fiscal physical podcast.
I'm still here with Ryan and,as always, we're going to do a
little bit of a personal sectionhere.
So, Ryan, I have a question.
When I was writing this down, Iwas I was curious to see what
you were going to say to thisone here.
But what's the most spontaneousthing you have done in your
life to date?
Ryan Nelson (21:04):
Yeah, I mean, it's hard.
I don't know I'm sure the mostspontaneous thing I've done I
can't even think of right.
But as I was thinking aboutthis, I was like I don't even
really know what the definitionof spontaneous is.
So I was thinking like doing anIronman, but I'm like it's not
really spontaneous.
You spend like six months.
Sure, you don't just like I'mgoing to do this yeah.
Like, oh, drive into Del Taco toget lunch.
And then you're like you knowwhat?
(21:24):
No, I'm just, I'm going to keepdriving, I'm just going to go
do an Ironman, right?
Yeah, so it takes.
I I mean, I looked up theactual definition of him, uh, of
uh, spontaneous, and it's likebasically the result of a sudden
inner impulse or inclination.
(21:45):
Um, so, yeah, I don't even knowif that is the most spontaneous
, but, um, I'll run with it.
Uh, what about?
Aaron Hoisington (21:50):
you Honestly, it was funny when I was I wrote
this down.
I was like I wouldn't.
I don't vision you or I don'tthink you are and I don't think
I am super spontaneous, like Idon't think we're just like cool
, let's just do this, like let'sjust go and do.
And so it was really hard forme to come up with something
like this when I was.
I always think of these thingsand I'm like, oh shoot, I also
have to answer this question too.
(22:10):
So, um, I think for myself wasprobably probably moving to Reno
when I did, after I graduatedcollege, like I had a little bit
of a job lined up down here.
But I was like, like six monthsbefore I graduated, I was like
you know what?
This is something I'm going todo, let's commit to doing this.
And once again, I had like sixmonths to plan and so I was able
to.
Everything just kind of fellinto place.
(22:32):
But I remember like drivingdown here the first time and I'm
being like holy smokes, like Iwas leaving Idaho and entering
Nevada and I was like did I dothe right thing?
Ryan Nelson (22:42):
Like is this the right thing?
Aaron Hoisington (22:42):
to do Like should I, should I, is this just
something I got a whim on andis it going to be the right
decision?
And you know, 12 years laterI'm still here.
So it might've been the rightdecision overall, but I was.
I was hoping you'd havesomething like a.
They'd be like, oh yeah, Idecided to, you know, do this or
whatever.
And I was like I don't thinkI've ever been that spontaneous.
Whether that's good or bad, Idon't know, but it was just one.
(23:04):
I was curious to see what you'dhave and I'm sure I'd love to
puzzle the listeners to see ifthere's something you guys
consider what is spontaneous toyou, because I think that's a
whole other question.
On cool, I'm spontaneously goingto book this cruise for six
months so I can pay for it Like,all right, sounds good, but
awesome.
Well, appreciate it.
Ryan, as always, thank you forthe time.
(23:28):
Thanks everybody who's checkingus out.
Remember these episodes dropevery Tuesday.
Please set your calendars,watches, whatever you use, to
make sure you don't miss these.
And, ryan, I'll turn it over toyou, as always stay the course.
Speaker 1 (23:39):
Thank you for joining us for the Fiscal Physical
Podcast.
Until next time, happylistening and, as always, stay
the course.
If you have a question or topicsuggestions, please email us at
podcast at alchemywealthcom.
If you enjoyed today'sdiscussion, subscribe to the
podcast to ensure you never missan episode and consider leaving
(24:02):
us a rating and review on yourfavorite platform.
This helps other listeners likeyou find the show.
For more resources, you canvisit Alchemy Wealth
Management's website atwwwalchemywealthcom or find your
fiscal physical the book onAmazon.
We'd be remiss if we didn'tmention that personal finance is
just that personal.
(24:22):
Please don't take anything wesay as advice.
The preceding content is forinformational and entertainment
purposes only.
It's not an offer or asolicitation, nor should it be
construed or relied upon for tax, legal or investment advice.
It doesn't consider yourpersonal financial situation or
objectives and may not besuitable for you.
Welcome to the Fiscal Physical Podcast.
Join us each week as we sitdown with the founder of Alchemy
Wealth Management and author ofyour Fiscal Physical, Ryan
Nelson.
Tune in to gain valuableinsights and practical tips as
we simplify complex financialconcepts into digestible lessons
(00:22):
.
From budgeting to retirementplanning, this podcast is your
go-to resource for masteringfinancial literacy.
Aaron Hoisington (00:33):
Welcome everybody to this week's episode
of the Fiscal Physical Podcast.
My name is Aaron.
I am joined, as always, by MrRyan Nelson, the founder of
Alchemy Wealth Management.
Ryan, how are you on thislovely day?
I'm doing well today.
Ryan Nelson (00:48):
How are you doing?
Aaron Hoisington (00:48):
I'm doing pretty solid.
My man and I hope, all thelisteners out there are doing
well too.
Hopefully, you guys are waitingwith bated breath for this
episode to drop, as it's goingto be a good one.
You ready to jump in, ryan?
Absolutely.
Let's do it All right,excellent, so.
So today we are going to betalking about entrepreneur
essentials.
As I was talking to Ryan beforethis episode, that's always a
(01:10):
tough word for me to sayentrepreneur, not essentials.
I got that one down.
But you know, ryan, these daysyou see many people who are
starting their own business orit gets thrown around a lot on
social media, working foryourself, these different things
.
So I kind of wanted to havethis.
You know, talk about thisspecific topic because correct
me if I'm wrong you are abusiness owner right, yeah, I am
(01:32):
, I am Okay, excellent, veryastute.
I think that you got a leg up onme in that regard there, but
we're going to dive in todayabout what really, you know
being an entrepreneur actuallymeans what people should know,
you know.
You know being an entrepreneuractually means what people
should know.
You know disclaimer like whatwe're going to talk about.
A lot is going to be around thefinancial piece of it, cause
that's kind of what we're tryingto improve that financial
(01:52):
literacy.
But hopefully you guys canlearn something from this and,
um, you know, if you're thinkingabout starting your own
business or working for yourself, kind of decide knowing what
that actually is and knowingwhat the pros cons, what could
all go into that there.
So, ryan, I'll go ahead andturn it over to you, my man.
Ryan Nelson (02:10):
Yeah, let's do it.
So what is an entrepreneur?
Aaron Hoisington (02:14):
It's a great question, because that word gets
thrown around a lot.
Oh, it's an entrepreneur.
What is it in your mind?
I feel like it's somebody who Idon't even know.
I want to say a self-employedperson like a business owner, or
somebody who works forthemselves, but I don't actually
know the official definition, Isuppose.
(02:34):
But I'd be curious to learn.
Ryan Nelson (02:37):
Yeah, I don't know the official definition either.
Let's take a look.
Sounds like it's a.
Aaron Hoisington (02:40):
French word.
I'll tell you that, there yougo.
Ryan Nelson (02:42):
So a person who organizes and operates a
business or businesses, takingon greater than normal financial
risk in order to do so.
Oh, okay, cool.
So that's the officialdefinition.
Looks like that's from Oxford,but yeah.
So to me, yeah, it's actuallypretty close to that.
So I guess I was pretty close.
But yeah, so it's like startinga business and taking on the
(03:04):
financial risk of doing so inexchange for the potential
reward of doing so.
So it's sort of that risk andreward payoff.
So as an entrepreneur, you ownthe business and you're taking
more of the financial risk, getmore of the financial reward.
I don't know that that's eithergood or bad.
I think some people areprobably not cut out to be
entrepreneurs.
Other people are, like,seemingly more natural
(03:26):
entrepreneurs and morecomfortable taking that risk and
reaping those rewards, whereasother people don't really care
to reap the rewards and wouldprefer not to take the risk.
Right, but to your pointearlier, I think, yeah, let's
focus more today on thefinancial side of this, not
necessarily like branding.
We can touch a little bit maybeon legal structure and stuff,
but this would really be sort ofmore the financial aspect of
becoming an entrepreneur.
(03:46):
Perfect, yeah, let's do it.
So one thing I would say isjust a couple of thoughts would
be as you start a business,you're trading that steady
income for theoretical potentialupside, hopefully not sure what
right.
And autonomy.
I think that's really what youget out of being an entrepreneur
(04:09):
is the upside of the businessgrowth and autonomy.
So if you were an employee ofanother business, I mean
somebody else was theentrepreneur.
If Elon Musk is theentrepreneur and Tesla is the
business, then there's lots ofemployees of Tesla.
They don't have necessarilyvery much autonomy, they don't
get to participate as much inthe upside of the business, but
they get a steady income.
(04:29):
Elon Musk you probably hearthese crazy numbers where, like
Elon Musk's net worth will growby millions or billions of
dollars in a single day.
That's him both takingadvantage of the upside, also
being a victim of the risk ofbeing an entrepreneur, and he
has more autonomy.
(04:49):
He seemingly gets his handsinto whatever he wants to
because he has the autonomy todo so.
So again, if you were just totake him as an example of an
entrepreneur, you can envisionthe trade-offs there.
One misconception I would sayis sometimes people think that
working for yourself or nothaving a boss can mean fewer
(05:12):
hours or less stress.
I don't know that that'snecessarily true.
I think, especially at thebeginning, most entrepreneurs
probably work more hours andhave more stress.
Theoretically it's possibleprobably to get to a place where
you could maybe work less hoursand have less stress, but I
certainly wouldn't say that allentrepreneurs in general work
(05:34):
less hours and have less stress.
Aaron Hoisington (05:35):
Yeah, I'd say that's one of the things you see
circulating in social mediaTikTok, all these Work for
yourself, work 10 hours, work 15hours a week, make 100,000.
You're like, well, how long doI have to grind for like 60
hours to get this off the youknow?
60, 80 hour weeks to actuallyget this off the ground, to be
able to maybe work less?
Ryan Nelson (05:55):
And.
Aaron Hoisington (05:56):
I feel like I don't want to.
I'm sure it's probably outthere, but it seems pretty rare.
You we've been my wife and Iwe've been reading this book on
how Netflix got started, and theamount of hours that those guys
put into this company at thestart are just incredible and
you think about like, oh yeah,you started your own business or
you're an entrepreneur.
If it's going to be successful,you're probably working quite a
(06:20):
bit, at least in the first partof it, maybe throughout the
whole thing, who knows, but it'snot always hey, cool, I'm just
not going to work anymore CauseI'm a business kind of thing.
Right?
Ryan Nelson (06:30):
Yeah, exactly.
Uh, it kind of reminds me ofthat quote we used a couple
episodes ago.
Uh, that founder of McDonald's,uh Ray Kroc, when he mentions
being an overnight success andhe's like yeah, it was an
overnight success after 30 yearsright, so yeah definitely,
after grinding for 30 years, youcan become an overnight success
.
Maybe you get less stress atthat point and so.
But another interesting thingis you kind of go from like
(06:53):
having one boss that you reportto to like having every client
in some way be your boss, right?
So again, just another littleinteresting thought there.
But yeah, so that's kind oflike what entrepreneurship is in
general maybe, but let's dive alittle more into the financial
side of this Sounds good.
So some of the startups so likestartup considerations.
So if, for example, if a clientwas coming to me and asking hey
(07:16):
, I want to start a business XYZ, help prepare me to be in a
position to start business XYZ,right?
What I would say is we probablywant to focus on having a bigger
emergency fund.
So in general, we would talkabout emergency fund being
between three and six months ofspending.
I think we had an episode onthat back, probably almost a
year ago now on emergency fundsand again, rule of thumb three
(07:39):
to six months.
If we're going into somethinglike this, where our income will
be much more volatile andunknown, we probably might want
a much larger emergency fund.
So we may tweak that and say,instead of wanting three to six
months of emergency funds.
Maybe we want something betweensix and 12 months of emergency
(08:00):
funds.
I know in my industry there'ssort of a well-known best
practice that if you're going tostart a financial planning firm
you should have 24 months ofrunway.
So again, I'd say think biggerthe better.
Six to 12 months is probablyideal for a lot of businesses.
Depending on the business, youmight need something even bigger
.
So even up to two years ofemergency savings built up,
(08:23):
which it's a tall ask.
Aaron Hoisington (08:26):
Yeah, that's a lot of yeah, not everybody just
has that money lying around.
Ryan Nelson (08:30):
Yeah, and obviously a lot of this has to do with
what business you're going into,what experience you have.
If you're working at a saloncutting hair and you go out and
start your own salon and you'reable to take all your clients
with you, so you already have afull book of business, you may
not miss a beat, right Right.
If you're starting a brand newcompany in a brand new industry
(08:51):
and the sales cycle is sixmonths long, you know you're not
even going to get your firstpay.
If you find a client on day one, you're still not going to get
paid for six months.
You're going to want to have alot.
It's going to be a lot longerrunway or a lot sort of longer
pre-revenue period, so thatperiod before you start making
revenue.
So just think about thebusiness you're looking to go
into and how much emergencysavings you would need to offset
(09:14):
that pre-revenue period.
Smart.
And then the other thing I'd sayto pay attention to is there's
a lot of upfront costs.
There's legal costs.
Potentially you might need alawyer to read your current
employment contract, set up abusiness entity for you.
There's technology costs.
(09:35):
You're going to need potentialoffice space, there's insurance.
So there's a lot of costs youwould have upfront.
Even if you're in thatpre-revenue period, so not
making any revenue, you mightstill have all of these costs.
So you may go from a businesswhere you were an employee and
the business was covering allthese costs to now you having to
cover them all and you go frommaking a steady paycheck to no
(09:55):
money for a period of time.
Right, so there can be quite abig financial burden there and
I'd say, just be aware of it and, as long as you plan
accordingly, shouldn't be anissue, but definitely something
to think about there.
Aaron Hoisington (10:09):
Yeah, no, absolutely.
Those are some great call-outstoo, of just thinking about the
idea of potentially I mean,everyone's going to be in a
different situation but goingfrom a steady job to where
you're collecting a paycheckevery two weeks or weekly,
however you get paid, and thenpotentially not making money for
six months or something likethat, or a year or something
like this, to put in thatinvestment and having that just,
(10:31):
I guess, stress over the head,because who knows if it's going
to be successful, you don'tspecifically know.
So I think that you called outoriginally not everybody's maybe
cut out to be an entrepreneuror being able to, because you
have to handle that, not onlythat financial risk, but the
stress that comes with it aswell too, and I think that's a
big piece of just life ingeneral.
Are you cut out to handle thatstress of the potential reward
(10:53):
down the line?
For sure, I don't know.
Yeah, right.
Ryan Nelson (10:55):
Absolutely.
Then another thing I would sayis it's probably best to consult
your attorney and your CPA oraccountant on this stuff.
But you're going to want toseparate your business finances
from your personal finances.
So you shouldn't be running thebusiness expenses and the
business profits through yourpersonal savings account, right?
(11:16):
So you'd need to set that upand make sure you're sort of
running your finances throughthe right sort of legal entity
and bank accounts.
And that changes from your taxesas well.
If you're used to receiving aW-2 paycheck, your employer is
probably withholding taxes fromyour paycheck and sending them
(11:36):
to the government, right?
When you're your now ownemployer, if you're not giving
yourself a W-2 paycheck,nobody's withholding taxes.
And so now at the end of theyear, all of a sudden you could
find like let's make our numbersreally easy If you made a
hundred grand and no taxes werewithheld, well, you're going to
owe taxes on a hundred grand,right.
And the other thing with thatis, if you weren't paying them
(11:59):
sort of in the right quartersthroughout the year, the IRS may
even look back and say, hey,not only did you not pay us,
we're going to basically chargeyou a penalty for not paying us
on time Sure.
So definitely you'd want towork with your CPA and make sure
that your finances are runningthrough the right accounts and
you're paying your taxesappropriately, and it may be a
(12:20):
less automated process thanyou're used to being a W-2
employee currently.
Aaron Hoisington (12:25):
Yeah, I think about that and you raise a great
point of you know when I filemy taxes normally, like it's
very simple for myself and mywife.
We have a couple of W-2s, claima couple of things and, bing,
bing, boom.
I can finish this in like 15minutes.
Sure, like everything is justimports in.
Now they make it so easy.
Shout out TurboTax.
Would love you for you to be asponsor.
But just in general, likehaving to now think about all
(12:51):
these different you mentionedrunning the money or filtering
the money through your businessaccount specifically.
Just even that, I'm just like,oh yeah, I guess I just wouldn't
put that into my checkingaccount.
I would have to go through thatspecific account and just
setting that up.
In general, I'm like, yeah,that's a lot of stuff to think
about, for sure.
Ryan Nelson (13:09):
And then what's also interesting is there's what
we sort of refer to in yeah,most of us just call it what's
called the self-employment tax.
And so, like you, for example,you're a W-2 employee, right,
and so as a W-2 employee, you'repaying, say, half of Social
Security, and your employer ispaying half of the Social
Security tax right and FICA.
(13:30):
So now, as your own employee,you have to pay that all
yourself.
You're the owner, you're theemployee, you're everything
right, so you have to pay thatall yourself.
So that's what we call theself-employment tax.
That's 15.3%.
So if you're normally in, say,a 22% tax bracket, you're going
to pay your normal 22% tax.
You know, as we discussed inprevious episodes, right, it's
(13:53):
kind of a tiered system.
It's a progressive system, wecall it.
But either way, you're going topay whatever you paid to the US
government in the form ofnormal sort of income tax.
You're also going to pay thisself-employment tax of an
additional 15.3%.
So that's an additional taxthat a lot of people don't think
of or consider when they'restarting their own business.
And most people sort ofintuitively remember and know
(14:14):
they have to pay income tax.
Oftentimes they're not thinkingabout this 15.3% tax, which
adds up right.
Aaron Hoisington (14:21):
You think about your normal tax rate, you
add another 15.3% tax on.
Ryan Nelson (14:24):
there it adds up and if you're trying to compare
how much you would need to earnas a business owner to sort of
break even compared to whatyou're making now, you might
have to earn actually more thanyou think when you start taking
all these variables into account.
Aaron Hoisington (14:40):
No, that's it.
I can't remember if it was inyour book or somebody had
mentioned the self-employmenttax before.
I don't know, and I rememberbeing like, oh shoot, that's
right, that's what my employercurrently covers.
Ryan Nelson (14:50):
I suppose, for.
Aaron Hoisington (14:55):
Interesting, that adds a little pretty penny
on an extra 15%.
You're like cool, I got to makea little bit more to offset
that potentially yeah exactly itadds up.
Ryan Nelson (15:05):
And then another thing, as far as business entity
goes, I would say again anotherthing to chat with your CPA and
your attorney about, butthere'd be considerations of
whether or not you want tooperate as a sole proprietor or
an LLC.
Do you want to file your taxesas an S corp?
So there's different ways andentities you can set up Probably
too detailed to get into onthis podcast, but certainly
(15:26):
something you'd want to justthink about and have in the back
of your mind and consult theappropriate professionals to
make sure you're addressing.
Those types of conversationscan have huge tax implications
and what I find is most peopledon't address those early enough
.
So I would say, just know andbe aware that your legal entity
is important and affects yourtaxes and you should be talking
(15:47):
to the right people about that.
I don't know that we need to goany deeper into it today.
Just be aware, yeah.
Aaron Hoisington (15:52):
It seemed like one of the common themes
throughout this is ensure thatyou either hire the right people
or you consult with the rightpeople before you just decide
like, okay, cool, let's do this.
And I would say, probablynowadays, the resources out
there are probably much morenumerous and more available.
I would guess versus 20, 30years ago or whatever.
I mean you could plug into chatGPT, like how do I start my own
(16:15):
business and it'll probablyshoot you out a bunch of stuff
which is great, but at the sametime it's like okay, cool, now I
know potentially where to findthis information and what's my
specific situation and what'sbest for me and I think you hit
it right.
Potentially an attorney,definitely a CPA, ensuring that
you get all your ducks in a rowas early as possible.
So down the road you're like ohshoot, I forgot to pay XYZ tax.
(16:38):
Whoops, kind of thing you don'tget burned by something along
those lines that potentiallycould jeopardize you.
Ryan Nelson (16:44):
Yep, exactly.
And then the other thing Iwould say to just be aware of as
an entrepreneur is retirementbenefits, long-term focus.
So right now, most W-2employees, they're getting
health insurance through theircompany.
They're getting a 401k with a401k match through a company.
Again, just remember, once youare the owner and the employee,
you're everything.
(17:04):
Now you're responsible forpaying for your own health
insurance.
If you are a one-person shop,you're not even going to be able
to go get a group healthinsurance policy similar to what
your employer has.
You're going to have to just goto the marketplace and find
like it's kind of a singleperson or family policy and then
same with like a 401k match.
(17:24):
As the business owner, the coolthing is you get to pick up,
set up whatever businessretirement plan you want,
structure it however you want,which is nice.
The negative side is the matchthat you're like paying yourself
.
Aaron Hoisington (17:36):
it was your own money right, it's coming
from your own business right?
Ryan Nelson (17:42):
So of course there's trade-offs there, right?
If you're participating in yourbusinesses and your current
company's 401k, that's kind oflike free money, right, that
you're getting Once you start upyour own 401k.
It feels a lot less like freemoney, it feels like your own
money right.
So benefits to being able to setup the plan you want, which is
a huge planning benefit.
Anytime I'm working withbusiness owners, the fact that
we can set up the exact rightplan for them is a huge planning
(18:04):
plus, so I love it.
I love the opportunity to sitdown with business owners and
figure out what plan makes senseand get it implemented, and,
again, it's a huge benefit tothem.
But do also acknowledge that,yeah, now you're responsible for
the 401k fees.
You're responsible for the 401kmatch, all of that.
You're responsible forproviding the health insurance.
So, yeah, just something elseto think of and then maybe to
(18:25):
put a bow on all of this.
The other big benefit of beingan entrepreneur is you know your
business becomes an asset aswell.
Oh, okay, so in theory, if youown your business, you could
theoretically potentially sellit in a year or five years or 10
years, 40 years, right, andthat's a benefit.
It's a benefit that you'reworking towards.
And then there's other peoplewho, if they think about all
(18:59):
these pros and cons, they say Iwould feel a lot better not
being an entrepreneur, being anemployee right and yeah, I
really don't believe either isbetter or worse.
Aaron Hoisington (19:07):
I think just different people will gravitate
towards different solutions oncethey know the pros and cons,
yeah, no, and I think thatthat's a great call out of you
know you never know what's bestfor an individual, best for a
family when it comes to thosecertain things and what your
responsibilities are.
What you're looking for Somepeople you know might enjoy.
Like cool, I have this safetynet of, like I know, my
employer's covering X, y, zversus being totally responsible
(19:29):
for that overall.
Just out of curiosity, ryan,this popped into my head now Did
you ever think you'd own yourown business?
Was that like something yougrew?
Ryan Nelson (19:38):
up.
Maybe I should just say thepersonal section.
But I asked it now, so we'regoing to go with that.
I don't necessarily yeah, Ican't think back in middle
school or high school orsomething necessarily like
having a goal to own my ownbusiness or thinking I would.
I guess it was a slow, gradualprocess, yeah.
So yeah, I didn't necessarilyhave like a long-term goal of
accomplishing that.
(19:58):
It just sort of differentdominoes fell and it ended up
making a lot of sense and Ithink my personality is a good
fit for it.
But yeah, it wasn't necessarilya long-term goal.
Aaron Hoisington (20:08):
Yeah, no, I was just curious if that was
something that just purelycurious, but awesome, and that
was a great breakdown there.
Hopefully you guys kind oflearned something specifically.
Maybe, if nothing, you takeaway what an entrepreneur is and
maybe if it's something you'vebeen jonesing to explore or
checking out, definitely do yourresearch on it and make sure
it's right for you and if that'sthe place you want to go, more
(20:29):
power to you without a doubt.
But excellent, we'll go aheadand take a pause here.
We'll be back on the other sideof this and everybody hang
tight.
Speaker 1 (20:36):
And now to put the personal in personal finance.
Aaron Hoisington (20:43):
Welcome everybody back to this side of
the fiscal physical podcast.
I'm still here with Ryan and,as always, we're going to do a
little bit of a personal sectionhere.
So, Ryan, I have a question.
When I was writing this down, Iwas I was curious to see what
you were going to say to thisone here.
But what's the most spontaneousthing you have done in your
life to date?
Ryan Nelson (21:04):
Yeah, I mean, it's hard.
I don't know I'm sure the mostspontaneous thing I've done I
can't even think of right.
But as I was thinking aboutthis, I was like I don't even
really know what the definitionof spontaneous is.
So I was thinking like doing anIronman, but I'm like it's not
really spontaneous.
You spend like six months.
Sure, you don't just like I'mgoing to do this yeah.
Like, oh, drive into Del Taco toget lunch.
And then you're like you knowwhat?
(21:24):
No, I'm just, I'm going to keepdriving, I'm just going to go
do an Ironman, right?
Yeah, so it takes.
I I mean, I looked up theactual definition of him, uh, of
uh, spontaneous, and it's likebasically the result of a sudden
inner impulse or inclination.
(21:45):
Um, so, yeah, I don't even knowif that is the most spontaneous
, but, um, I'll run with it.
Uh, what about?
Aaron Hoisington (21:50):
you Honestly, it was funny when I was I wrote
this down.
I was like I wouldn't.
I don't vision you or I don'tthink you are and I don't think
I am super spontaneous, like Idon't think we're just like cool
, let's just do this, like let'sjust go and do.
And so it was really hard forme to come up with something
like this when I was.
I always think of these thingsand I'm like, oh shoot, I also
have to answer this question too.
(22:10):
So, um, I think for myself wasprobably probably moving to Reno
when I did, after I graduatedcollege, like I had a little bit
of a job lined up down here.
But I was like, like six monthsbefore I graduated, I was like
you know what?
This is something I'm going todo, let's commit to doing this.
And once again, I had like sixmonths to plan and so I was able
to.
Everything just kind of fellinto place.
(22:32):
But I remember like drivingdown here the first time and I'm
being like holy smokes, like Iwas leaving Idaho and entering
Nevada and I was like did I dothe right thing?
Ryan Nelson (22:42):
Like is this the right thing?
Aaron Hoisington (22:42):
to do Like should I, should I, is this just
something I got a whim on andis it going to be the right
decision?
And you know, 12 years laterI'm still here.
So it might've been the rightdecision overall, but I was.
I was hoping you'd havesomething like a.
They'd be like, oh yeah, Idecided to, you know, do this or
whatever.
And I was like I don't thinkI've ever been that spontaneous.
Whether that's good or bad, Idon't know, but it was just one.
(23:04):
I was curious to see what you'dhave and I'm sure I'd love to
puzzle the listeners to see ifthere's something you guys
consider what is spontaneous toyou, because I think that's a
whole other question.
On cool, I'm spontaneously goingto book this cruise for six
months so I can pay for it Like,all right, sounds good, but
awesome.
Well, appreciate it.
Ryan, as always, thank you forthe time.
(23:28):
Thanks everybody who's checkingus out.
Remember these episodes dropevery Tuesday.
Please set your calendars,watches, whatever you use, to
make sure you don't miss these.
And, ryan, I'll turn it over toyou, as always stay the course.
Speaker 1 (23:39):
Thank you for joining us for the Fiscal Physical
Podcast.
Until next time, happylistening and, as always, stay
the course.
If you have a question or topicsuggestions, please email us at
podcast at alchemywealthcom.
If you enjoyed today'sdiscussion, subscribe to the
podcast to ensure you never missan episode and consider leaving
(24:02):
us a rating and review on yourfavorite platform.
This helps other listeners likeyou find the show.
For more resources, you canvisit Alchemy Wealth
Management's website atwwwalchemywealthcom or find your
fiscal physical the book onAmazon.
We'd be remiss if we didn'tmention that personal finance is
just that personal.
(24:22):
Please don't take anything wesay as advice.
The preceding content is forinformational and entertainment
purposes only.
It's not an offer or asolicitation, nor should it be
construed or relied upon for tax, legal or investment advice.
It doesn't consider yourpersonal financial situation or
objectives and may not besuitable for you.
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If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.