TL; DR
If you’re trying to launch a small business but keep coming up against financial roadblocks, Daniel Blue can help. Blue is an author, educator, and entrepreneur who teaches ambitious business owners how to find the funds they need.
He provided some of his valuable insights during a summer 2022 episode of This Week With Sabir, including:
- Use Your Retirement Fund to Start a Business: If you switch your retirement account to a Solo 401(k), you can claim up to $50,000 (or 50% of the total) to build your business. You’ll need to pay it back in 5 years and there are some terms to meet, but it’s a great way to invest in yourself.
- Use Your Retirement Fund to Clear Debts: If you have high-interest credit card debts, consider using your Solo 401(k) to clear them and remove that financial burden.
- Adopt the Right Mindset: Stop trying to keep up with the Joneses. Stop booking expensive vacations or buying designer gear just to show off on Instagram. If you want to make that business dream a reality, you must start investing now.
And that’s just the tip of the iceberg! Watch the full video to learn more, including tips on saving, investing, and improving your financial literacy.
How To Fund Your Business Without Banks
You need money to make money, so the saying goes.
You can’t start a business with hard work and dedication alone.
Someone has to pay for the stock and equipment. Someone has to cover the cost of the developers who set up your website, the writers who create your content, and the marketing teams who promote your products.
If you’re not happy with the idea of borrowing large sums of money from the bank or attracting interest from investors (something I have previously discussed with Matt Higgins), launching a business can feel like an impossible goal.
But there are ways to make that goal a reality, and they don’t involve selling everything you own, taking out large loans, or getting a second mortgage.
For the final summer 2022 episode of This Week With Sabir, I spoke with Daniel Blue, the author of B.L.U.E. PRINT to Your Best Retirement and a man who knows all about investing in yourself.
In the following guide, I’ll take a closer look at some of the topics that Daniel discussed, including how to use your retirement funds to invest in yourself and how to save money to support your business goals.
Can You Use Your Retirement Account To Fund Your Business?
One of the things that Daniel recommends is to use your 401k to fund your business.
Rather than investing in stocks or commodities, you’re investing in yourself.
Most of us have been raised on the idea that retirement funds are for retirement only. They are not to be touched, and doing so may result in heavy penalties and losses.
But as Daniel noted during our discussion, and in this article, that’s not necessarily the case.
If you come from the corporate world and don’t have any W2 employees (other than yourself and your spouse), he recommends converting your retirement account into a Solo 401(k).
It could allow you to withdraw money without incurring any penalties or charges, and you can use it for any type of business expense.
Here are a few things you need to know
- You can take out up to $50,000 (or 50%, if smaller)
- You must repay the money within 5 years
- An interest of 1-2% is charged and repaid to the retirement account
Check out this guide to hidden retirement fees to learn more.
Pay Off Your Debt With Your Solo 401(K)
The average American has between $5,000 and $7,000 in credit card debt, and this is getting higher with each passing year.
Even before the chaos of 2022, debts were climbing at an unprecedented rate. Now, we could be witnessing the start of a generation-defining crisis, so this problem isn’t going anywhere.
If you have a lot of credit card debt, you may be reluctant to start a business. It’s a huge financial and psychological burden, and it’s only natural to avoid any further debts and risks.
But you could also use your retirement account to clear those debts, thus lifting the burden of an extortionate interest rate and giving you some economic breathing room.
Once you have converted your retirement account to a Solo 401(k), you can essentially become your own bank.
The rules mentioned above will apply here, as well. So, you can only take $50,000/50% and must pay it back within 5 years. You’ll also be expected to pay the prime interest rate plus 2%, which equates to over 5%.
However, the money will go into your Solo 401(k) and not to the bank.
This option isn’t suitable for everyone. If you’re paying a low-interest rate or have a high-performing retirement account, it won’t be as beneficial. But if you’re losing a fortune to the bank each month, it’s worth considering.
For more information on how to use retirement accounts to fund your business or clear your debts, check out the above links, as well as this one on retirement plan options.
I also recommend checking out Daniel Blue’s website, where you’ll find links to his other content, as well as his book.
Other Ways To Fund Your Business Without Banks
In the past, I’ve written extensively about ways that you can fund your business or grow your personal brand.
What fascinated me about Daniel Blue is that he didn’t touch upon subjects that I had discussed or written about before. His insights into retirement accounts are rarely spoken about. And that wasn’t the only thing he had to say.
During the first half of our conversation, we spoke about the ways that you can strengthen your economic situation without outside help.
Keep the following tips in mind and you could save the funds you need to bootstrap your own small business.
Be Realistic When Creating Multiple Sources Of Income
If you believe everything that you see on social media, creating multiple revenue streams and a passive income is easy. Depending on who you listen to, you either just need to buy a course, send a wish to the cosmos, or work really hard.
In reality, it’s not that easy.
99% of the ads that promise “easy money” are lying to you and the other 1% are greatly exaggerating how easy it is. Even the influencers who show off their earnings are mostly lying to you.
Some of them are trust fund kids pretending to be really good at currency trading. Some use rented cars, “inspect element” reports, and fake cash to present themselves as something they are not.
In any case, you shouldn’t listen to any of them.
Making lots of money from multiple revenue streams is not easy and you should be wary of anyone who says otherwise. After all, if they really are making that much money, why would they waste their time trying to sell you a course for $19.99?
The real “secret” is a lot of hard work and patience.
The first step to creating multiple revenue sources is to ensure that you have one guaranteed revenue stream.
That will provide you with some stability and ensure you have something to fall back on. It’ll also give you the funds you need to invest in other areas.
As an example, I know of several freelancers who spent years establishing themselves, building a network, and earning a reputation. They were then able to use the knowledge, contacts, and connections they had acquired to expand into other areas.
One launched a string of content websites, a YouTube channel, and a TikTok channel. Another launched their own Shopify business and then bought an Amazon business. Another began a personal brand that eventually led to endorsements and sponsorships.
None of those secondary opportunities would have been possible if they didn’t have that strong foundation.
Forget About The Joneses
We are more materialistic than ever, and a lot of that materialism is driven by the need to keep up with the Joneses and the ever-present fear of missing out.
We want the latest designer clothes because that’s what everyone is wearing. We want luxury watches because they adorn the wrists of actors and rock stars. When we see pictures from a friend’s vacation, we want to jet off immediately and take our own snaps.
There’s nothing wrong with buying nice things if that’s what you like, and there’s definitely nothing wrong with seeing the world. But you have to question whether you’re doing those things because you actually want to or because you’ve been influenced by someone else.
Are you buying that Rolex because you have a passion for luxury watches or because your friend recently showed off a Breitling and you want to go one better? Are you flying to Bali because it’s a dream destination or because you can take some really nice Instagram shots and make your friends jealous?
If you buy a watch because you love watches, you’ll have an investment that will stay with you for a lifetime, something that you can enjoy every time you wear it. If you buy it to show off, it’s meaningless and will be ignored once all those close-up shots have received their likes and shares.
If your dream is to launch a business, none of these purchases are smart. The $5,000 you drop on a vacation could be used to buy stock. The $20,000 you spend on a Rolex could be used to hire a marketing and SEO team.
And don’t try to convince yourself that you need those vacations and luxury goods to grow your personal brand.
I’ve heard this in the past and it’s an excuse that a lot of people are telling themselves, but they are in denial.
I once had an aspiring influencer tell me that he needed to spend $5,000 on an item of jewelry and $10,000 on first-class plane tickets because that’s what his followers expected.
“I’ll be taking photographs”, he assured me, “so it’s a business expense.”
But he only had 10,000 followers and was making about $200 a month.
Thankfully, I was just a friend of a friend and didn’t have any kind of personal or financial investment in him, but imagine how his poor accountant must have felt.
This is an extreme example, but it’s not as uncommon as you might think.
The truth is, you don’t need those things, you just want them. If you want to follow in the footsteps of the influencers who can actually spend $20,000 on a watch and then make $50,000 publishing photographs of it, you need to start small.
Rather than seeking inspiration from young influencers who blew up almost overnight, look to people like Joe Yoon, who started with very little money and no fame and built their brands from the ground up.
More Savings; Less Debt
In a way, debt is like playing the lottery. The numbers are so ridiculous that you should know to stay well away, but they are presented in a way that makes them feasible, and so you eat it up.
Your odds of winning the Powerball are close to 1 in 300 million. It’s the equivalent of everyone in the country having a raffle ticket and then your name being drawn. The chances of winning are so stupidly low that they might as well be non-existent, but people play because they convinced themselves that it could be them.
With debt, you can be charged a ridiculous interest rate and face all kinds of penalty charges, but you don’t care about that because you don’t see the bigger picture. You don’t think, “I’ll repay $1,300 from this $1,000 loan”. You think, “It’s only $50 a month—that’s nothing.”
Over the course of a lifetime, the average American will spend over $9,000 on credit card interest alone. And when you include the total interest from mortgages, personal loans, student loans, and auto loans, that jumps to over $130,000.
In some states, that’s enough to buy a family home. It’s also enough to launch a business and fund it for several years. But instead, that money goes straight to the bank.
It’s hard to comprehend that figure because it’s hard to see the bigger picture. You’re not seeing 6-figures worth of interest; you’re just seeing the $30 monthly credit card interest and the $50 car loan interest.
Try to avoid interest whenever you can, and focus on “good debt” (student loans, mortgages) more than “bad debt” (personal loans, credit cards).
It’s never too late to make these changes. Clearing your credit cards sooner and making larger monthly mortgage payments (thus reducing the total interest and repayment amount) can save you money at any stage.
The money that you save should then be invested. That way, your money is working for you and not the bank.
Improve Your Financial Literacy
The reason that debt is so common is that financial literacy is very uncommon.
Credit cards and student loans are pushed on teenagers long before they know anything about APRs. They earn their first paychecks before they have fully grasped how tax works.
It’s nothing to be ashamed of. We’ve all been there. It’s more of an indictment of the American education system than anything else, but you can right this wrong by studying these topics yourself.
There are a wealth of resources out there that can help you, as well as people who have been in your shoes and can guide you through.
Before you sign on the dotted line for a credit card or auto loan, make sure you understand what the terms mean and know what you’re letting yourself in for.
And if you’re not sure about something, ask the person providing the loan. Lenders want your money, but they are also obligated to help you. You can trust them, and you shouldn’t feel ashamed asking them questions, no matter how obvious or silly you think those questions are.
Invest In Yourself—The $100,000 Expert Insight
At the end of my discussion with Daniel, I asked him for his most valuable piece of advice. This is the $100,000 question, as it could earn over 6-figures for entrepreneurs who read, heed, and follow this advice.
Daniel’s advice was to invest in yourself before you invest in anything else.
This means that rather than throwing all of your money on gold, real estate, or stocks, consider using some of those funds to improve your financial literacy and learn more about investing.
A little knowledge goes a very long way in this industry.
Your physical and emotional health are also important.
The stereotype of the successful business owner is someone who’s constantly stressed out. Their phone is always ringing. They never have any time for themselves, and they usually die of a heart attack in their fifties.
This might have been true for the heavy-drinking, heavy-smoking Mad Men generation, but it’s not true anymore.
The most successful people I know are also the most emotionally stable. They have their lives in order. It makes sense when you think about it, as it’s hard to keep all of those plates in the air when you’re constantly stressed, tired, and on the verge of breaking down.
About Daniel Blue
Daniel is a regular contributor to Forbes.com and the owner of Quest Education, a company that helps entrepreneurs obtain capital for their companies, pay off high-interest debt, and use self-directed retirement accounts to invest in alternative assets. With over 10 years of educating small business owners, Daniel has a knack for helping individuals get creative with their finances which lead to life-changing results. Under Daniel’s leadership, Quest Education has reached the 7-figure mark two years in a row with a thousand customers throughout the United States. His book “B.L.U.E. PRINT to Your Best Retirement” is an Amazon Best Seller. Visit him on the web at https://danielblue.me.