Afford Anything - Q&A: How to Invest in Your Community (by Finding the Third Option)

Episode Date: September 2, 2025

#639: Aisha is excited to share how some life-changing advice has played out for her career. She wonders now: what limiting beliefs has Paula and Joe had to overcome in their businesses? Lesley is attracted to community bonds as a way to build collective wealth for the underserved. But do the same risks exist as they do in the traditional bond market? An anonymous caller is intrigued by the promise of Employee Stock Ownership Plans. Is this the answer to a smooth exit from her business that also leaves a legacy for her employees? Former financial planner Joe Saul-Sehy and I tackle these three questions in today’s episode. Enjoy! P.S. Got a question? Leave it here. Resources mentioned in the show: Aisha's original call in Episode 473 Learn more about your ad choices. Visit podcastchoices.com/adchoices

Joe, before you started your first business, did you had limiting beliefs? I was 16 years old and I was starting a disc jockey company with my brother. While I was very confident that we could be better than the DJ at the wedding I had recently attended, which was why we wanted to start it because this DJ sucks so bad. I was like, I could do that better. Then my dad's like, well, maybe you guys should start a business. And, you know, immediately you're like, I'm 16 years old. How can I do that?

So, yeah, tons of limiting beliefs. I'm too young. I'm too an experience. I don't have any money. I don't know what I'm doing. Don't know anybody who'd run their own business. So everything from imposter syndrome to lack of experience. Wow. Well, we are going to talk today to someone who is wondering if we can elaborate a little bit on limiting beliefs. But this is someone who has just had a big victory. We're also going to talk about community bonds and how to merge the way that you invest your money with your desire to support the community. And we are going to to talk about ESOPs, employee stock ownership plans. All that in one episode? All in one episode.

Welcome to the Afford Anything podcast, the show that knows you can afford anything, not everything. This show covers five pillars, financial psychology, increasing your income, investing, real estate and entrepreneurship. It's double-eye fire. I'm your host, Paula Pant. I trained in economic reporting at Columbia. Every other episode ish. I answer questions from you, and I do so with my buddy, the former financial planner Joe Salci. I just got back from a run and feeling a little beat up, but ready to sit on my butt and answer some questions. You're training for a marathon, yeah?

I am. I'm trading for this thing about Disney World called the dopey. And I think you've got to be dopey to run it because on, and I think that's why they call it the dopey, because listen to this, on Thursday you run the 5K, on Friday you run the 10K, on Saturday you run the half marathon, and on Sunday, you run the half marathon. Sunday you run the marathon. And I've wanted to do it for a long time. And yeah, coming in January. You lost me at you run. But with that said, our first question comes from Aisha. Hello, Paula and Joe. This is Aisha from episode 473. I thought that I would call in with an update and a new

question. It's been a year and a half since my call to you. And your answer was just the thing I needed to get my mindset right and turn my experience around. So in the last year and a half, I have some really great news to share. Number one is that my original conundrum was thinking about a full-time MBA program at a top school versus a part-time MBA program at a lower-ranked school. That was kind of my initiating question, but really my question was, how do I get to a place where I'm not necessarily experiencing such negative feedback in the sense of respect and some of the power dynamics that exist in the industry I was in as a woman of color. I worked really hard and wasn't seeing some of that hard work paying off. And I was just curious about how to turn that around. Well, I actually found a

situation that lives in between them. I think that Joe himself has said a lot about his work with clients and looking at a third way and maybe a fourth, even a fifth. So I, um, I, did find that way. I am actually starting my MBA program this fall. It's a part-time program at a top school, a top 10 school, actually, and number one in my area. I thought that was a really cool solution. I would have never thought of it had I not listened to your advice. And so I'm really, really, really great. You all have really changed my life for the better. And I think that those of us in the financial independence world are super lucky to have you. I also decided to find my own people and switched industries. So I went from kind of a more media background,

and now I'm working on renewable energy, where I get to make the world a better place. And I found a women's organization that is 20 years old where I'm surrounded by people who want to uplift me and celebrate me exactly the way that I am. So your advice was spot on. You all are really out here changing lives. Just know that I took your advice to heart and really turned things around. So I'm actually calling from New York City. I'm here for the 20th anniversary. of my Women and Energy group that I am now a part of. It's just made me realize, you know, the sky is the limit. So I would love to hear from you all about what do you think are some limiting beliefs

that you all have had to work through? How do you think about your journey as you have changed careers, maybe industries, maybe functions? I would just love to hear a little bit about how maybe transformation has worked in your life. I'll leave that open-ended. I hope that you know how impactful your work is. and I look forward to many, many more episodes to come.

Aisha, thank you so much for calling with that update. And congratulations on everything. I am so, right? So happy for you. So proud of you. That is so incredible. You're already in such a good place and you've got so many more great things to come.

And a part-time MBA program, a top 10 program, that's incredible. Life-changing. Absolutely life-changing. I'm so happy for you. Congratulations. I love that she found Paula the third thing. I mean, the choices she gave us were top program full time or a middling program part time. Right. And why not find top program part time. Right. Exactly. And that way she got to balance, you know, a lot of the things that she wanted to balance. And it just, it's perfect. It's absolutely perfect. I love this. So congratulations. Also, you know, we're going to talk a lot, I think today. It's so funny how we have these weird themes that we don't create on purpose. We just take the questions as they come. People are going to hear this theme of community.

all day to day. And the fact that she was able to find her community to really define an area of work that spoke to her more, that's a powerful thing. And it's something that we shouldn't overlook. I think a lot of the time when we are feeling lost at our job, we think the only option is to drop out and retire. And often it's just finding work that suits us better. Right. So let's talk about her question, limiting beliefs, because I think that this is something that's going to apply to a lot of people in the audience. Before I had ever heard of the framework, the term, the phrase limiting beliefs, I wasn't even consciously aware that there are a set of unconscious beliefs that all of us are walking around with, that we accept as true without challenging and use it unconsciously to hold ourselves back. the reason that we buy into them is because there are kernels of truth in them, but wisdom is the ability to hold multiple seemingly contradictory ideas simultaneously. And so it can sometimes be

true that X obstacles exist or X barriers exist and also why opportunities exist and ways to overcome those exist. We often have these rule sets that we picked up and internalized over time. And to your point, Paul. These so often conflict with each other. I was working on a minor in philosophy while I was in college. Wait, I had a minor in philosophy. Did you really? Yeah. Do you know what the big question is, is why? But seriously, my goal as a budding writer was I was interested in motivation, and I thought that was psychology. It turned out it's far more philosophy living in the United States. No matter what your background is, if you live here, there's a strong Judeo-Christian outlook of the world. And that's going to enter your philosophy. And then whatever your parents and your upbringing, what you had there,

and then people that you met. And it's funny how, as you see these philosophies conflict with each other, we're carrying around half truths all over the place, which create problems for us when we think, do I believe that? Do I not believe that? Or how, you know, some people rub you the wrong way or some things people say rub you the wrong way is often because of this mixed up belief system that we're carrying around subconsciously. Right. Exactly. So in terms of limiting beliefs, I very much for a long time believed that people who were successful were much smarter than me and much harder working than I am and more focused and more disciplined and that they were just better in all of these different regards. And what I don't think that I realized is,

that they took certain risks that I was too scared to take, that they bet on themselves in ways that I was not willing to do so, or when I was younger, in ways that I was not at the time able to do so. And I think one of the things that really broke me of that was when I went to grad school. Because I had heard stories about students who come into the Ivy leagues and get depressed because at their high school, they were always at the top of their class. And then they go to college at some elite institution. Everybody was at the top of their class. Yeah.

And so then all of a sudden, for the first time in their life, they're in the middle or the bottom of their class. They're trying as hard as they can, but they're like middle to bottom of their class because they're in just a much more competitive classroom setting. They get really, really stressed out and depressed. You know, I'd heard stories of that. I think that might happen at the undergraduate level. but I mean, at least for me when I went to grad school, I kind of looked around and went,

wow, this is what I was so intimidated of? This is not intimidating. Granted, I was in a cohort of people who were predominantly in their 30s or even early 40s. So I was in a cohort of people who had more experience. And so we weren't just competing on grades. Well, we weren't competing. We were bringing a huge variety of professional backgrounds. Some people had been lawyers, some people had worked in business. I mean, there was this huge mix of professional backgrounds. And so I think that kind of rounds out the picture because when you're younger and the only thing that you and your age cohort have ever competed on is grades, then you really don't have any life experience to anchor you. All you have is your report card. But I think that when you get into your 30s, like when

when you get a little bit older and you have professional experiences, something beyond just the report card, I think that creates more confidence and a much healthier outlook because you're not just comparing GPAs anymore. Now you're collaborating on professional experiences. My biggest limiting belief, and it's not really a limiting belief, it's just a limiter, has always been fear, Paula. I am very afraid of everything, everything. Every step that I take professionally is staring fear in the face. I think there's no way what I'm thinking of is going to work. I think that I'm not the person to do it.

I think, why do I think that I'm so special that I would get this done with so many other people who failed to do this thing? It is just this general fear, much more than a specific thing. But I've also found that staring that fear in the face has always proven very, very valuable and has yielded huge rewards to just look at the fear and feel the fear and do it anyway, just do the thing. What was amazing for me was when I made the first really huge decision in my life, which was when I was just drowning in debt and I was horrible with money, even though I'm teaching other people how to be great with money. and I realized that the laws of the universe did apply to me too. I remember that day, staring into the void and going, it just has to change. But the confidence I got from how much easier it was to turn around my financial situation than I thought it was going to be, where even weeks into it, Paula, nothing had really

changed on the balance sheet, but just the fact that my overall attitude had changed toward the debt, the fact that I had mapped it all out. all of a sudden it became this fantastic game when I looked at it. That gave me the confidence when I was 40 and seemingly getting into the gravy years when I'd already been a financial planner for 16 years and now things were going to get exceedingly easier. Money was going to flow. You ask anybody 15 years into any career, that's when really you start reaping the rewards, right, of all this. I decide instead to sell my business and become a high school teacher. But I looked that fear in the face because when I'd done it before, it had yielded so many cool results.

And sure enough, that took me on this wild journey of thinking I was going to be a high school teacher, realizing that I like to teach and that wasn't going to be the thing. Relying back then on my media background to begin a blog, that blog became the podcast. Then I got to help up on the afford anything podcast. Like, that's pretty much the pinnacle of my life. But it's this weird winding road, but staring at. the fear of can I actually do something different than what I'd done before and stare that fear in the face. The big change of my life has been when I look in the face of fear, I realize time and again that who I was yesterday does not have to define who I am tomorrow. Those are two totally

separate things. We don't live our lives that way. We live our lives. We wake up and I'm like, well, I'm Joe podcast dude. I got to get up. I got to do the podcast. You know what? Every day I can go, F this. I get to choose. Every day I get to choose.

Because I chose then to do this line of work, I started then interfacing more often with people like you who stare into the face of fear quite a bit, who own their own business, who do these wild, crazy adventures. You know, people that live in a van, which is something I would have known. never done. People that decide to move to another country, people that decide to retire at 35 years old, people that do these crazy things, start new businesses when they're 70. I mean, all these inspirational people that you and I get to talk to all day also has changed my life, surrounding myself with people that are doing these inspirational things, were the reason why now I've run, this will be

marathon number 14. Wow. I would have never run one marathon. It's the reason why Cheryl and I packed up all our stuff. We sold all her stuff in an estate sale and sold everything and decided we were going to become digital nomads. That was crazy. And for me, the cool thing about that, that sucked, which was awesome that I got to playtest that. I think this idea that I learned way too late in life of ask who, not how, that we've talked about here. Yeah. That even springs from that. I'm surrounded by so many smart, inspirational people. why would I ask how to do something when I can ask who's the resource that can at the very least teach me how to do it or if it's not my core talent that can do it for me. Yeah,

especially in running a business, that has been a game changer that ask who not how. But it's funny for me, Paula, how that's been like a funnel. You know what I mean? It had to start at that top of just learning to stare fear in the face and then learning staring fear in the face is fun. And then realizing that who I was yesterday is not. who I have to be tomorrow. And then that led to surround sound of these inspirational people and trying to be the dumbest person in the room. Like it's funny, to your point, you get intimidated.

You go to an Ivy League school and you're, quote, the dumbest person in the class or maybe middle of the class. And when you're young, you think that's horrible. And when you get a little bit of wisdom, you're like, that is exactly what I want. Yeah, exactly. The goal is to always be the dumbest person in the room. Yeah. If I could learn from all of you, like that is so kick-ass. So for me, fighting the limiting belief has been the worst thing and also the best thing of learning how to fight through the fear.

I still feel the same fear. I just treat it differently now. Joe, that was a great circle back. Look at that. Like, I had not connected what you were talking about with what I had said until you linked the two together. But yeah, absolutely. You know, the undergrad's who suddenly feel like they're the dumbest kid in the room get really depressed. Because when you're 18 years old or when you're 19 years old and you're experiencing that for the first time, that is a common reaction. But then if you're in your 30s or 40s or when you're twice that age, when you're double that age, you might have that same experience of being the dumbest person in the room. But you welcome it. In fact, you intentionally sought out that room for that precise purpose.

Which also then Paula brings up another thing, because as you're saying that, I'm also realizing that in our basic day-to-day lives, it isn't what happens to us. It's how we respond that truly is going to change the game, which is kind of what Aisha is talking about. Yeah, it's a bias towards action. And it's a bias towards asking, how can I? You know, rather than I can't, how can I? There's that expression. It's, Joe, to what you said earlier about, it's not what happens to us, it's how we respond. There's an expression that I really love, which is it's not your fault, but it is your responsibility.

That's fantastic. I think about that a lot. That is fantastic. There are a lot of things in life that it's not your fault, but it is your responsibility. And there's a lot of power that comes from embracing that. So Aisha, thank you for the question and congratulations again on everything that you have created. Because you have created that. And you've come so far in a year and a half.

I can't wait to see what happens in the next year and a half and the year and a half after that and the year and a half after that. We're going to take a moment to hear from the sponsors who make this show possible. And when we come back, we're going to discuss more community. We're going to discuss it in the context of community bonds. The holidays are right around the corner, and if you're hosting, you're going to need to get prepared. Maybe you need bedding, sheets, linens. Maybe you need servware and cookware. And of course, holiday decor, all the stuff to make your home a great place to host during the holidays.

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It's about not being just one thing, but many things for our customers. Big Bank Muscle, FinTech Hustle. That's your commercial payments of fifth-third better. Welcome back. Our next question comes from Leslie. Hi, Paula and Joe. Leslie here again. I'm longtime listener, second-time caller, and I make time to tune in regularly,

even as a mom of soon to be four kids. And I wonder this time if you have any knowledge or perspective about wealth building strategies that are enacted at local community levels. For example, community wealth building or rural wealth creation are two approaches that I'm interested in. And from what I understand and have read sometimes strategies like community bonds are are embedded in these broader approaches. And I think Paula, in a recent episode, you had indicated some metrics that were a bit concerning for that asset class. And I'm just curious if you know

much about community bonds and if those concerns apply in this context. I know you two are much about personal finance, not necessarily focused on the community level, but I'd love any perspective or knowledge that you may have. And yeah, personally, I understand. act a lot of wisdom espoused by YouTube. But the reason I'm asking about these approaches, is there's just related to some work I'm doing with a community? Thanks, you too. Leslie, thank you for the question. Let's start by defining what a community bond is. And then we can talk through the pros and cons of if you want to invest in your community in this manner, or if you want to reframe it in a different manner, because there are a couple

of competing philosophies. And as we often do on this show, I'm not going to tell you among these different competing philosophies. I'm not going to tell you which one to do, but I will present all of the competing philosophies so you can make that decision for yourself. But let's begin with the definition of a community bond. A community bond is actually really simply, there is a project in your backyard. Often this will be through a nonprofit or some community group and they need to raise funds for it. So in exchange for a set interest rate that you'll receive, you get to take part in putting something together in your backyard. You'll know the scope of the project. You know exactly what the money's going for. And this is truly the upside, right? Is that you know exactly what this

money is being used for. Often you know the people that are involved in the organization that you're loaning the money too. So being able to hand off money to people that you know in your backyard where you live to do a thing where you can see the impact or non-impact of that often is attractive to people versus putting money into some faceless thing where the money ostensibly goes somewhere, helps somebody, but I'm really not sure who that person is. These loans, like any other loan and truly a bond is a loan. So anybody not familiar with bonds, when you hear the word bond just think it's a loan. And like any loan that you take from a bank, you're now the bank. And they're going to say, hey, we will pay you X interest rate,

which like is a mortgage or, you know, a personal loan that you took out. There'll be a set payment plan. They're going to pay you X amount per year. In some of these loans, Paula, they don't pay you anything, a dime of it until the end, where they'll pay it all off at once with interest. So you want to know what the payment terms are. They will call that payment, the coupon on the loan. The way I think about a coupon, by the way, if you've ever seen these things at a laundromat or a grocery store where somebody has created some type of offer and they have all these little tear off things at the bottom. Yeah. It's like a little coupon book. Right. That's the way I think of coupon is that they're going to use the coupon then to pay me every month back X amount. So the coupon is

the amount that they're paying you on a monthly basis. Or you can just think of it as a payment, essentially. Well, yeah, coupon equals payment. So what's the payment going to be? What's the payment structure? Sometimes it's quarterly, sometimes it's monthly. Like I said, sometimes it's just one big, fat payment at the end. Sometimes it's two payments over a 10 year period, one at five years and one at 10 years. So you want to know, though, the coupon schedule of how they're going to repay you. That'll be important. And then, of course, the interest rate and how that works. The last thing is something to check with your tax advisor on. Some of these projects might be tax deductible. So you'll want to check with your accountant, your tax team about, hey, in my situation,

is this something I might be able to get interest from tax-free? Now, a couple of things that you want to think through. Like philosophy number one, it's great to put your money towards community bonds because it's a way to give a loan to something that you care about. And if that is what you're pursuing, then know that that's what you're pursuing. This is not necessarily an investment, so to speak, in the conventional sense of a competitive investment that you make for the purpose. of maximizing returns, but it is a hybrid method of generating some return while also

putting your money towards something that you believe in. It's a values-oriented use of money that may generate some return. That's one philosophy, and that's one way of looking at it, and I think that's absolutely valid, and if that's what you want to do, then great. That's wonderful. There's a competing philosophy as well, a different philosophy that states that there could be greater economic efficacy in investing your money in order to maximize returns and then donating those returns in the form of charitable contributions. And in fact, you can do that by donating appreciated stock directly into donor advised funds, which is what I do. I have a donor advised fund at Schwab. Joe, I think you do that as well.

And I don't mean to position donor advised funds as a competitor to community bonds because they're not in opposition. They're not in competition or opposition to one another. You could certainly do both. But given that money is a limited resource and you only have so much of it and that there are inherently tradeoffs that you make when you're allocating capital. Would you rather allocate capital towards community bonds or would you rather allocate capital towards stocks that could appreciate that you could then. move into a donor-advised fund. You know, I spoke earlier, Paul, about what the upside is and why people might want to do that. Let's talk about just specifically what the downside could be and what the risks are here.

Because you're helping a community organization and these organizations, generally speaking, don't have lots of money. They are asking you specifically because they probably can't get traditional financing for this project elsewhere, which means the risk is almost always fairly high that you may not get repaid. And the return that you're going to get on this money is nowhere near the risk that you're taking. You're going to get a lower return in exchange for a good feeling and social impact. If I would have put that money in a diversified investment elsewhere, I would have gotten a lot less risk, a ton less risk that my money is going to go by-bye. And on that note, you know,

the thing that I also just said is the downside. There's no diversification at all with your money. And generally, they don't need 20 bucks, 50 bucks, 100 bucks. Don't get me wrong, they'll take it. They need thousands of dollars. And for our average listener, if you're going to give five or 10,000 to put toward a community organization that's not going to pay you a ton of money for that, that's dedicating a fair amount of your net worth, of your resources. So there truly is a risk that possibly you won't reach your financial goals because even if they do repay you, it won't be at a high enough return to actually meet the expectation that your plan needs. What if a person were to think of a community bond almost like a charitable donation? It's 100% in my mind the way to think of it.

Yeah. It is almost like you have your brother-in-law who's starting a restaurant, you just want to help out. You make the quote investment, but in your head, this is a gift. Right. This truly is a gift. And in that case, if you think about it that way, then, you know, Paula, you're talking about doing it through a donor advice fund, just donating the money. Yeah. It might be an even more significant contribution to them versus the bond.

Yeah. And, you know, that's why I outlined these as two different philosophies. there's the community bond philosophy on one side, and then there's the donor-advised philosophy on the other. And again, I want to emphasize that I don't mean to try to pit them as opposites, and I don't mean to try to pit them as in competition with one another, because truly they're not, and you can do both. Nothing's stopping you from doing both, but you can't infinitely do both, right? You don't have infinite money, so you can't infinitely do both. And so at a certain point, you do have to decide if you're going to do both, is it going to be

50-50, is it going to be 60-40? What is your bucket of money that you are earmarking towards charitable giving and how much of that will be presented in the form of a community bond versus in the form of a donor-advised fund? You know, Paula, there's another way to look at this, much like Aisha was talking about, right? There's the third thing. If we can look at this a different way, over the years I've spoken to, and so have you, many people in the charitable giving arena, on stacking bedgments and you have here as well. And there was a gentleman named Chris Field who changed my mind on a lot of charitable giving stuff.

He made such a compelling argument that you can give an organization some money. But often because of the fact that they are understaffed and they don't have a ton of expertise, if you have expertise in a specific area, giving that expertise to that group could be a much more significant donation. So in terms of walking trails, guess what I do? I help with publicity and marketing of the event because for stacking Benjamins, I'm on Facebook all day, Instagram. Like I've written press releases before. I get press releases from potential guests. Like my expertise that other people in our organization don't have is the ability to market the events that are around the trail system that we're trying to build.

Well, and if you get a board seat, then you end up doing both. Because if you get a board seat, then you are giving to that board your expertise. But you're also, you know, typically people who are on boards are sort of expected to give some money. I've been on a couple of nonprofit boards. And I have given both expertise and money to those nonprofits. But I think if you weigh the financial contribution that I've made to, and I've made some significant contributions toward putting trails in the ground here in Texarkana.

But the expertise that I was able to add about how to market, how important this is for our community to have these walking trails was far more economic impact than the money that I could have given. Right. So, Leslie, I would ask that. And I know you're about to have child number four. Congratulations, by the way. That is awesome.

And you're juggling a lot. but if there is an expertise that you have, maybe that is a solution for you or a partial solution. Yeah. Can we talk just briefly about how important community is, by the way? Sure. Aisha talked about how changing her community changed your life and Leslie wants to give to her community. There's a wonderful documentary that I encourage everybody to watch called Join or Die.

And the first half is about how even if you're an introvert, how important it is to get involved in your local community. And we're all fighting with each other on social media about national politics that we largely can't control when the Rotary Club, our local Kwanis club, like nobody is attending these meetings anymore on a local level. And that's when we can learn to lead. We can learn to follow. We can learn to find people that we disagree with and talked about in a healthy way instead of screaming in all caps on our computer about what I'm They're on. Keyboard warriors. Those keyboard warriors, man. I mean, people get so angry and there's people being paid to make us angry at each other. And it's hard for me. I've got this friend Bobby, who without getting into politics and stuff, Bobby and I have never seen eye to eye. Oh, you told me about Bobby after we stopped recording the other day. I remember. And Bobby's one of my best friends. And Bobby's amazing. But the fact that I know Bobby and that Bobby would do anything for me,

you know what? I can live with the fact that Bobby and I on a national level look at the world completely differently and I can still go have dinner with Bobby and have a fantastic time and see past that, which I think increasingly we're finding it hard to do. Right. Yeah, exactly. Well, and people say, oh, you know, it's not about divisiveness. It's just about I don't trust people who think differently than I do. Like, no, that's pretty divisive. That is very divisive. Right. But even without all that, that's the first part of this documentary. By the way, you can watch it on Netflix. The second half of it, though, Paula, I think is more impactful for what you and I do.

Do you know that if you are in an organization and you're working in your community in a group that is beyond you? It's bigger than you. You have a 50% smaller chance of dying this year than you have if you don't. longevity is tied to community. Longevity and happiness are tied to being involved in our local community. So the whole second half of this is how beneficial it is for you as we tend to isolate as we get older. We have trouble making new friends as we get older. It's a fantastic thing that Leslie and Aisha are really tying into in this episode,

that community is really where it's at. Yeah. But Leslie, I love the question and I love the conversation that it spurred. So thank you for the question. Best of luck with everything. Our final question today comes from Anonymous. Hi, Paul and Joe. I'm an owner of a small business, an LLC with one other partner.

My business partner is older than I am. I think he may be ready to retire in 15 to 20 years. I will be work optional by then. So I'm thinking about keeping as many options open as possible for what I should do at that time. I know that's far in the future and a lot may change. For example, I may still love running the business enough to keep doing it for another 30 or 40 years from today if I wanted to. But I've also been hearing about ESOPs as a way to reward and retain employees. We have an amazing team and I really don't want to leave them hanging if we did decide to.

sell the business at that time. What are the pros and cons of setting up an ESOP for a small business? We don't want to get bigger than about 10 employees. How might it impact my exit strategy options down the road? And are there alternatives that I should look into? If we do decide to move forward with an ESOP, where do we start? What kind of professional should I look into to help with that? And how do I vet them? Thank you for any insights you might be able to share. Anonymous, thank you for the question. And before we get started, we have to give you a name. Oh, man, we do.

Right. Joe, have you watched any interesting movies lately? No, but you know what? She's talking about being a business owner and about making some great moves over the course of the next 20 years to really bond herself with her employees, which is really cool. And a person who's done that for a long time over her career. is Martha Stewart. I think Martha Stewart is a great older business person who is successful today because of the series of things that she did to bind herself to her audience.

She's doing these cooking demonstrations on TV and she's giving people these recipes for free. And because they worked and because people liked it and because she was so giving her audience trusted her. And even think about this, like, how canceled would you be if you went to jail? Right. Martha went to jail and came back and is arguably more popular now. Right. Stronger than ever. Yes. And don't get me wrong. I do think it's BS. Why she went to jail. That's a whole different thing that Mr. Eliot Spitzer put her in jail, which I think was more politically motivated. But anyway, without getting into that, I think we call her Martha. Martha, wonderful. Well, Martha,

I love the idea, the intent behind giving ownership to your employees, but there are some complications and some huge costs that are going to come with this. So ESOPs are going to require annual valuations. They're going to require administrative fees. They're going to require huge legal costs, huge setup costs. And for a 10-person company, and I don't know what your annual revenues are, maybe you are an incredibly high revenue, highly efficient 10-person company, but there's a decent chance that those costs are going to be disproportionate relative to payroll. So that was the first thing that came to mind when you said,

when you started talking about it. I actually think that they can also be phenomenal, just 100% phenomenal. I think that's the first thing. Yeah. is that you have to work with professionals. And when you ask who to who your who would be, right? Ask who not how. Yeah. Your who is going to be CPAs, but with a strong bent toward law. So this is specifically one of the areas where a tax attorney knows the combination of the

legalese that you're going to need and the tax law of. setting it up. This is a CPA firm tax attorney and 100% they should be a firm that has done this over and over and over because, Paula, to your point, it's going to be very expensive, which is why the first thing the attorney is going to do is what's called a feasibility study. Do you have the cash flow that it's going to take to make these huge costs, not just cost to your company, but also the amount of money that it's going to take to continually fund this so that your employees are able to buy stock. So you may be putting more treasury shares of the company into the stock pool to make room for the employees to buy the stock. There's lots of ways to carve out the money

that you're going to need as a company for your employees to be able to buy the stock. but that means high cash flow for your company. It means that you have significant cash reserves and Paula, to exactly your point, big startup costs, the ongoing cost is the juice worth the squeeze. Right. So feasibility study is going to be number one. And that feasibility study is not free. Right.

But the good news is it's an insurance policy, Paula. You might pay a little money today. By little, I don't mean a little. I mean comparatively a little, but still a lot. You're going to pay a bunch of money today. And if the attorney says no, that's fantastic news because rather than implement it, and then five years from now, you're in over your head. But if you do do it, a lot of times, what is it that employers complain about?

My employees think too much like employees. They don't think enough about owners. Who is it who said, show me the incentives and I'll show you the outcome? Oh, wow. Yeah. I don't know who that is, but I love it. Yeah, somebody said that. I don't know who to attribute that quote to, but that was not me.

If you can actually make people a part owner of the company, you're not telling them to act like an owner. They are an owner. And now as an owner of the company, I think people do look at the company a little differently, especially in a 10-person company when I'm trusting you with some ownership of the company. Now when you're there without me, it's the outcome affects you as well as it affects me. I really like that. Well, without all of the administrative overhead, the less. administrative way to go about this is to implement some type of a profit share plan. And that's something that you could do right now.

You don't have to wait until later in the future. And that also can have the show me the incentives and I'll show you the outcome. It also can create that incentives for employees to start thinking more about the profitability of the company. And similarly, you know, stacking Benjamins being a bootstrapped company, there's no way that I could do. I actually looked into this for stacking Benjamins and employer ownership plan because I do think, Martha, that this would be huge. But I went, yeah, there's no way we could do that. But,

you know, what we do is we significantly invest in the professional development of everybody so that even if you leave stacking Benjamins, you come away with a lot more skills that are marketable. Right. Yeah. To take with you wherever you go. Yeah. And I found that investing in your people so that they are better at what they do pays huge dividends. We do the same. We have. We have. heavily, heavily invest in training. Like, we really want our people to learn, learn new skills, get certifications. You know, get paid to get certifications on our dime. There's a great management guru who I've loved over the years, Tom Peters, who's written

a ton of different books. Tom talked about two different managers. Manager number one gets their employees ready to leave all the time. Helps them with their resume, helps them build their resume, helps them basically, Paula, leave the company. And then there's the other manager who stomps their foot on people, always takes all the credit, doesn't want their people to get any credit because they're worried that the people will leave. And Tom said, what's amazing is manager number one, the people don't leave. Right. Yeah. Manager number two, they leave as fast as they can. Because there's nothing

in it for me. Right. So I think, Paula, you bring a good point that there also is, in this circles back to Aisha's the thing we did with Aisha a year and a half ago. That's the question number one. Oh, no, literally a year and a half ago. Yeah, literally a year and a half ago, we said, is there a third way to think about this? And the third way to think about this, Martha, is, is there a way to incentivize your people, which isn't as expensive to the company? Right.

Yeah. As an employee stock ownership program. Yeah. Ooh. Wow. Great circle back. Because, yes, I love the thinking and I love the intent. but the administrative burden, the administrative cost of an ESOP is going to be astronomical,

especially in the context of a 10-person company. Well, I wouldn't let us talk us out of it, though. I would still walk through it. Please walk through it. Find the attorney, at least have a meeting. Almost all attorneys, tax attorneys, give a free, like one hour, 90 minute, whatever, free consultation. Make sure that's free ahead of time, by the way.

I did go to one meeting when I. I was a financial planner with clients, and it wasn't free. And my client's got a bill at the end of that meeting. Yeah. I've been to a couple of initial consults with attorneys that have been $500 just for the initial consult. The first thing to ask is, what's the charge for this meeting going to be? Right.

Yeah, yeah, yeah. And I'm okay with paying for that meeting as long as I know ahead of time. The BS in this meeting, Paula, was that neither me nor my client knew that there was going to be a fee for the meeting. Right. And the attorney was cracking jokes, like inappropriate jokes in the, meeting. Yeah. My client called me and goes, what else going on, Joe? You recommended this guy and he charged you. And so I call the, I call the accountant. It's like, well, I didn't get paid for my

time. I'm like, yeah, but you could have told us. We wouldn't have sat through your dumb jokes. Right. Yeah. So, Martha, I would still go down the road of exploring this. Yes, I agree. Go down the road of exploring this, but know that there are also third options if this is too expensive of a route to pursue. Well, and it does that to be either or, right? I mean, I think employee stock ownership program could be icing on the cake. If you truly have the money to do that and professional development and training, even better.

Right. Or a profit sharing plan. Yeah, agreed. So thank you, Martha, for the question. Cho, we've done it again. That was so fun. Thanks again, everybody, for some really great questions and great comments. I love the fact that this episode was as much a discussion.

question. Right. With two people that originally sprang from thoughts on stuff that you brought to the table. So nice job, everybody. Yeah. And please, I encourage you all to call in with comments, questions, afford anything.com slash voicemail is how you can leave feedback, comments, questions. We love to hear from you. So thank you so much. Joe, where can people find you if they want to hear more from you. I would point people, Paula, to our last Monday and Wednesday episodes on the Stacky Benjamin Show. Thanks to all of you for tuning in. If you enjoyed today's episode, please head to Afford Anything.com slash newsletter so you can get our incredible newsletter delivered hot and fresh to your inbox. We publish insights on there that you will not find anywhere else.

So that's afford anything.com slash newsletter absolutely free and a great place to further and deepen this discussion. Thank you so much for tuning in. I'm Paula Pant. I'm Joe Sal Caj. And we'll meet you in the next episode.