Dec 6, 2024
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As a photographer or any kind of entrepreneur, it’s really important to have someone on your team to help you build wealth and plan for the future. That’s why I have my own personal financial advisor, Derek Kilgore. Derek is a wealth management advisor and growth and development director with Northwestern Mutual. He has been working with business owners for the past 8 years, so he understands many of the challenges entrepreneurs face.
During this episode, we talk about everything you need to know when it comes to financial planning and building wealth, including the first steps to creating a financial plan, how to balance saving for the future, which retirement accounts entrepreneurs should have, and more!
This episode is truly going to give you a financial planning 101 kind of feel. And if you decide that you want to prioritize planning for the future when it comes to finances in 2025, Derek is truly the best of the best!
Derek has been married to his wife for 15 years and they have 2 kids. Before entering the financial planning space, he was an entrepreneur in the culinary space. In fact, he started a catering business but realized it was not something he wanted to do long-term.
His advisor suggested he should be a financial advisor, so Derek started his practice in 2017. Since then, he and his team have served around 350 households around the country.
Derek first says to take a deep breath, because yes, it can be stressful, but everything is going to be okay. Once you do that, find a trusted advisor. Financial planning and goal setting can be challenging, so finding someone you trust will help you be successful.
The next thing he suggests is to write down your goals. Why did you start your business? Where do you want the business to go and what is the profit margin to get you those things? Set aside time on your calendar to think about this. If you’ve never heard of The Parkinson’s law, it says that the amount of time you give a task will be the amount of time it takes to do the task. So, if you give yourself 30 minutes to write down your goals, it will take you 30 minutes to write down your goals.
Everybody’s situation is different, so Derek once again suggests finding an advisor you can trust. Everyone has different cash flows, goals, and family situations, so Derek’s suggestions for one person may be different.
However, he does advise you to reverse engineer. Think about where you want to get to. For example, if you want to end up at age 65 with a certain amount of money in a certain location, how much money should you be saving to do that? This means you need to be making a certain amount of profit, which means you need to be making a certain amount of revenue. That should tell you how many clients you need or what price point you should be at. Always start with the end in mind.
When expenses are high, monitor your cash flow. It’s hard to know what you have and don’t have without the data. Figure out what’s coming in the door, what the expenses are, what the business needs to pay for, where you can cut things, and what’s left over from a profit standpoint.
The next thing is to pay yourself some amount of money on a consistent basis. Not paying yourself makes you feel like you’re working for free. That can make it easy to get defeated and not continue to grow and serve your clients. So, pay yourself even if it’s less than what you’d like, and you can increase that number as profit continues to increase.
And if it’s not natural for you to put on that CEO money-hat, that’s okay. This is where the benefits of outsourcing to a trusted advisor come into play.
There are a lot of options out there, but Derek shares the difference between a Roth IRA and a traditional IRA. With a traditional IRA, you get a tax deduction on the money that goes in, so you don’t have to pay any income tax on the money. It then grows tax-deferred as it’s invested. When it comes out of the IRA once you’re retired, you then pay taxes on the money at an ordinary income rate. So, no taxes on the way in, no taxes on the way up, and then taxed on the way out.
With the Roth IRA, you pay your taxes as it goes in. It grows tax-deferred and when it comes out of the retirement account, it’s tax-free to you. So, when it comes to these IRAs, you have to decide if you want to pay taxes now and never again or avoid taxes now and wait for them in retirement.
Typically having both is really helpful. This is called tax diversification, and then you can fund a SEP IRA or you can fund a solo 401k. The good news is that they’re all pretty interchangeable. So, if you have a traditional IRA, a Roth IRA, or an old 401k, you can transfer those dollars across the table and consolidate them together.
If someone’s saving 20% of their gross income, they’re typically going to be okay and on track for their long-term goals. Ideally, 20% of gross income is being saved into multiple locations – short-term goals, long-term goals, retirement, kid’s college fund, etc. For example, if you’re making $100k, saving $20k a year would be the target.
It’s both, and it depends on the situation. Individual accounts would come from your own income whereas the SEP IRA or the Solo 401k, some of those contributions come from the business as the owner and some can come from you as the employee.
You can also put your spouse on as an “employee” and then fund their retirement account through the business because they’re also an employee. So, there are lots of ways to maximize tax benefits and retirement benefits, but again, sit down with a planner and talk through these things.
You can start with a free 30-minute consultation to figure out where you’re at, what your goals are, and to talk more about your business. Derek understands he may not be the best fit for everyone, and if it’s not him, he can find someone else to support you.
Start with your why. Know what you’re doing this for and why you’re working so hard. The clarity of your vision is directly tied to your level of endurance. If your vision is super clear, you can withstand a lot.
Paint a picture of what your future looks like. Where are you living? What’s your relationship like? How much money is coming in? What does your life look like? Painting a clear picture can be super inspiring.
Win the morning, win the day. If you take 30 minutes or an hour to sit in quiet and either have some prayer time, meditation time, or reflection time where you’re thinking about the day ahead, you will show up so much better.
Connect with Derek:
Derek’s Phone: 303-579-7341
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