Welcome to the Insurance Leadership Podcast, where we bring you insights and discussions with some of today's top business leaders and experts. In this episode, we are thrilled to have Sam Dogen, author of Buy This, Not That, and founder of the popular personal finance blog "Financial Samurai.”
On this episode, Sam shares his expertise with Ryan Eaton, as they delve into the intricacies of business management, personal finance, and the current state of the economy. With a focus on practical tips and strategies, they discuss how to navigate the challenges of a volatile market and position oneself for success both personally and professionally.
Whether you are a business leader, entrepreneur, or simply looking to improve your financial literacy, this episode offers valuable insights and principles by which to live.
Personal Finance
To secure your financial future, you must manage your finances effectively. The task can be complex and overwhelming especially if you lack financial experience and knowledge. A personal financial advisor can help you navigate securing your future. Their expertise will help you achieve your long-term financial goals by managing your money effectively.
Your overall net worth asset allocation is one of the first things a personal financial advisor will assess when reviewing your financial situation. Your assets are divided between stocks, bonds, and cash, among other investment vehicles. Your advisor will also consider your age when determining your investment strategy and the level of risk you can comfortably handle.
Dogen emphasizes the importance of net worth and asset allocation by age. Throughout his book, Buy This, Not That, he explains how to allocate assets according to age and financial goals. Individuals can use this framework as a guide to become financially independent and secure.
The services of a personal financial advisor can be invaluable to anyone seeking financial freedom and security. The expertise and guidance they provide can help you develop a financial plan that suits your needs.
“The great thing about now is the short-term rates are so high that hoarding cash is actually quite a prudent move.”
Teaching Responsibility and Savings Taxes
With his expertise in personal finance, Sam is a well-known blogger and author. Throughout his book, he discusses the benefits of employing your children at your business.
Having your children work for you can benefit both your business and your child. It gives children the opportunity to learn the importance of showing up on time, being responsible, and working hard. Also, it can help them start saving and investing early by enabling them to take advantage of the standard deduction limit without having to pay taxes.
In addition, employing your children may result in tax benefits for your business. The taxable income of your business can be reduced if you pay your child a reasonable wage. For small businesses looking to reduce their tax burden and keep costs low, this can be particularly advantageous.
However, Sam warns that employing your children should be done in an ethical and legitimate manner. You should ensure that your child does real work for the business and that the wages paid are comparable to what an outside employee would earn.
The potential benefits which employing your children can provide to both your business and the child are highlighted by Sam's views on employing your children. If it is done ethically and legally, all parties will benefit.
“Employing your children at your business is a win-win situation. You teach them valuable skills and work ethic while saving money in taxes.”
Rethinking The Role of Cash
In today's world, Sam discusses the importance of liquidity. As a result of modern technology, he believes that the importance of having cash on hand has been overestimated. In a world where money can be transferred, treasury bills can be invested, and high-yielding accounts can be obtained, Dogen argues that it's not a good idea to keep too much cash on hand.
He recommends having just one month's worth of expenses in cash since it allows you to invest any excess funds and earn a higher return. Having experienced a capital call crunch that forced him to dip into his cash reserves, Dogen speaks from experience. As soon as his cash reserves were depleted, he became very motivated to generate more income.
Dogen's advice goes against the popular belief that having a large emergency fund is essential to financial planning. Despite this, he says you can still access your cash reserves when needed with some foresight and smart investing.
Overall, Dogen's perspective on cash's role in modern society challenges traditional financial advice and encourages individuals to organize their finances differently. With technology and high-yield accounts, individuals can potentially earn more while remaining able to access the funds they need in case of emergency.
“The traditional advice of having a large emergency fund in cash is outdated.”
In Conclusion
Personal financial advisors can also assist with budgeting, debt management, retirement planning, and tax optimization. By setting realistic financial goals, developing a plan, and tracking your progress, they can help you succeed.
One benefit of working with a personal financial advisor is that they can provide objective and unbiased advice. The only goal of these financial advisors is to help you achieve your financial goals. Investing in speculative assets without proper research or due diligence can also lead to common financial mistakes, such as overspending, taking on too much debt, or overspending.
As business owners, emphasizes the importance of growing revenue, and margins, and keeping costs low to improve operational efficiency. Employing your child to do real work for your business not only helps them learn and build a work ethic but also allows them to earn up to the standard deduction limit without paying taxes on that income. The business also gets a deduction for this expense. The child can then invest a portion of that income into a tax-free Roth IRA which can continue to grow over time.
When making investment decisions, investors should prioritize liquidity to ensure they can access their assets in case of emergencies or unexpected expenses. Generally, liquidity refers to the ease with which an asset can be converted into cash without significantly losing value. Investing in illiquid assets can make it difficult for investors to access their funds when they need them. The risks associated with liquid assets such as stocks, bonds, and mutual funds should therefore be considered by investors when investing.
What’s Next
Be sure to tune into next month’s episode as we continue our discussion with Rick Holmes, President of Lakeshore Benefit Alliance, and David White, President of Morgan White Group, as they discuss MWG’s newest product InPocket Plan.
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