Rich Habits Podcast - 12: Tax Loopholes for Children, Funding Your Small Business, & Selling Losing Stocks

Episode Date: May 16, 2023

In this episode of the Rich Habits Podcast, Robert Croak & Austin Hankwitz share their perspectives marketing, optimizing, and funding your small business -- as well as answering questions about tax loopholes, making your money work for you while saving for taxes, and selling losing investments. --- Be sure to check out Public's new ⁠⁠⁠High Yield Cash Account paying 5.1% APY.⁠⁠⁠ This is higher than anything else on the market and is FDIC insured up to $5M. ---Earn 5.1% APY using a Public HYCA, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here!⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Opt-in and share your email, ⁠⁠⁠⁠⁠⁠click here!⁠⁠⁠⁠⁠⁠Learn more about our ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠4-module video course!⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Download our FREE Budget Template, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here!⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠To learn more about Robert: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://stan.store/RobertJCroak⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠To learn more about Austin: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://stan.store/austinhankwitz⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Contact: [e-mail] ---Hankwitz Group LLC has an existing business relationship with NEOS Investment Management LLC. The opinions expressed are those of the author, and the author owns several NEOS ETFs.

Hey everyone and welcome back to the Rich Habits podcast. My name is Austin Hankwitz and I'm joined by my co-host Robert Croke. Robert is a seasoned entrepreneur in his 50s with more than 200 million in company exits under his belt and I'm an entrepreneur in my late 20s with a background in finance and economics. Since quitting my full-time job and corporate finance a few years ago, I've built a seven-figure media business and actively advised some of the most well-known fintech companies around the world. As the show name might suggest, every episode we talk about rich habits as they relate to business, finance, and mindset. However, we try to bring you two unique perspectives. One from an industry veteran, Robert, and the other from myself, someone who's still in the process of building wealth and figuring it all out. Robert, what are we going to be talking about today? We're going to be talking about the three biggest mistakes I see small business owners make specifically as it relates to marketing, optimizing your website, and sales funnel.

and funding your business. Marketing, optimizing the website, and that sales funnel, and funding your business. I feel like that last one's really important, right? Funding the business. I'm eager to hear about that one. So let's start with marketing. What are mistakes small business owners are making as it relates to marketing? I see so many small businesses that I deal with on a daily basis that bring me in for consulting or they book one-on-one calls with me. and it really comes down to they think if they have like the intern or the girl at the front desk posting pictures on Instagram that that's a marketing strategy. And at the end of the day, it just isn't. And there needs to be a much more thorough macro approach when you're doing marketing, even for the smallest of businesses because you need eyeballs and you need conversion. You know, I always tell these people, look, you need to hire an agency, even if it's with a small budget, because at the end of the day, the sales increase most of these. small businesses are going to see through eyeballs and conversion will generally offset the additional

spend. So for me, I just think it's very important that small business owners really take it seriously and have an actual marketing strategy rather than just throwing it out there and say, hey, this friend of mine's kid could do our marketing strategy through Instagram because it's just not true and it won't work and it won't convert. I totally agree. And I think what's really interesting about this point, Robert, is we all know social media and marketing through social media is incredibly important because likely you're listening to this podcast because you found myself or Robert on social media, which means we've done a pretty decent job of marketing ourselves on social media, right? We are able to really move the needle forward as it relates to our

call to actions and the products, quote unquote, we sell, which is this podcast. So if you're able to figure it out, it can definitely move the needle and work. Now, something I've seen recently on TikTok that I think is really powerful is the new shopping tool. If you haven't seen this, essentially, if you sell a hard product, a good example of this as deodorant. I saw this video of a guy. I think it's called Java something. Anyway, he makes organic deodorant using coffee, which is really interesting. And he sells it through TikTok. So quite literally, he talks about the process of making this deodorant. So he's documenting that experience. And then there's a little button on the screen you can click on and you can sell the deodorant directly through

TikTok or any product, right, through TikTok to your customer. So if you haven't heard of this yet, definitely take a look at it. Google TikTok shopping tool or something like that. I'm sure there's some very easy parameters you have to meet as a small business owner to take advantage of that, but I love that feature. Now, talking more about optimizing websites and that sales funnel, right, really beginning to have your customers convert on your products. Walk me through what that means from your perspective, Robert. Yeah, it's just really important because so many people will have just a random person building their website with no strategy in mind. And what happens a lot there is they don't have their pixel set up right or they're not fully optimized for SEO for the search

terms of their business or they just don't understand it at all. And at the end of the day, it's kind of like what we talk about with finance. You shouldn't be trusting the heart of your business, which is marketing, to some random person just like you shouldn't let some random person control your money without going through the strategies with you to optimize that. And that's why it's very important for people to understand, even when you're first getting started, is that you need to understand and have a strategy even for your SEO, which is search engine optimization. It's very important because you can have the best food, you can have the best barbershop, you can have the best, you know, roofing company, but if you don't have eyeballs that are being converted through your funnel and your search

engine optimization, you're going to struggle. Are there any places you might specifically recommend that small business owners look to perhaps find an SEO professional? Yeah, I think you just have to search a lot of times people are looking locally. And so I think that's a good place to start is asking around to other people. What I would tell clients a lot of times is say, okay, what are your competitors doing that are kicking your butt and what are they doing better than you? And a lot of times I just had this happen with a real estate developer who had a terrible website. He had no search engine optimization. So I showed him through a screen share and we went through seven different call to action Google searches that customers would do and he didn't show up at all in any of them.

And he was shocked. He was like, wow, he goes, I wondered why we've slowed down over the last two, three years because he felt that word of mouth was enough. And I showed him that two or three of his competitors were just crushing him with all of the general search terms, which would be, you know, custom home builder Nashville, custom remodel, kitchen remodel Nashville, all of these general search terms that you think business owners would understand what people are going to put in to Google or to Bing to understand how to find the right person. None of that was related to this guy's business. And so it's just so important to look at that. at your competitors, see what they're doing, and then try to find out how to maximize your efforts

by finding a professional to do it better for you. And I just want to remind everyone as well that TikTok SEO had headlines all over the place about six to nine months ago, and it's definitely something you should consider, especially if you were selling more of a service than a product. So, for example, I was helping public.com with their TikTok SEO about nine to 12 months ago. For them, We're very focused on whenever someone would search a question like what is an IPO or what is the stock market or what's the S&P 500 or what's a mutual fund, they wanted their videos explaining those very specific things to be the first things that popped up. And so if you're a small business owner looking to optimize on TikTok with their SEO, you know, kind of the search bar, the three things that really helped public.com that I learned over time do that was one, text on screen, two, the caption on the video itself, and three, the words that were spoken during the video.

And make sure you're using the closed caption editors, so the words that are spoken align with the auto-generated ones as well. So if you're a small business that is on TikTok trying to sell a product or a service, definitely think about optimizing your videos for search questions, similar to what Robert was just talking about with one of these very key, very clear CTAs along the way. So the last one we have here, Robert, is the lack of funding. And I think this is probably the one that's most important because there's so many different ways that small businesses can fund their businesses.

Walk me through maybe two or three examples of ways that they can fund it, as well as why it's so important to have funding for your small business in a meaningful way. Yeah, let's start by backing up on that point. We both agree that it's very important, but so many small business owners don't realize that. And then what happens is they end up moving at a snail's pace and sometimes missing out on real growth because of the lack of funding. Because they feel they want to bootstrap it or they're afraid that they don't have the credit or they don't understand the program. So it really is problematic, especially if you're in like a trending market or you're in a services space business where everyone is super sharp. You're just going to either fail or fall severely behind without proper. funding because speed is so important in so many business sectors. And if you don't have proper funding

and you're waiting till the month end to get, you know, some invoices paid so you can move ahead with some marketing, it really just all ties together. I deal with so many small business owners. I probably talk to 20 or 30 a month that are either clients or have me consult. And it's the same problematic stuff. Lack of funding, lack of marketing, because they all think they don't need as much marketing as do. And it really comes down to that if you don't own these situations and fix them, you're just going to move at a snail's pace and it's going to be problematic. So to touch on where to get funding, you know, I like Chase Bank a lot. They have some really good programs for business lines of credit and also credit cards for business. But also I strongly suggest most small business owners

to go to their local credit union. Because with some of these credit unions and smaller banks, you can actually build a really nice relationship. So they're going to want to grow with you. They're going to give you some preferential treatment on some of these programs, but also never be afraid to look at SBA loans because you can go right to the SBA.gov website and look up the programs there for small business because there's so many different options. So it's one of those things where the funding part is so important so you can move quickly and efficiently and make sure that when you do catch the tiger by the tail and you see that growth, you see that spike in business, that you can really move on it by having the funding. I myself have made many

mistakes where I was underfunded and things took way too long to grow because I was like, no, I don't want to go get a loan. I don't want to bring in a partner. I can do this on my own. So all of these go hand in hand that if you're properly funded and you have a strategic plan throughout your marketing and your website and your service offerings, you're just going to move quicker and more profitably. The only perspective I have on this is actually a podcast episode I recorded on a different podcast that I co-host called Mind the Business, Small Business Success Stories, produced by IHeart Radio.

I co-hosted alongside Janice Torres, if you know who she is. And the first episode of that podcast is all about funding your small business. We talked to someone who raised, I believe it was, more than $3 million from angel investors, but we also talk about grants, business credit, business credit cards, things of that nature. So if you are actually looking for funding and you're trying to achieve that, go listen to that episode. It might be really helpful for you. This episode of Rich Habits podcast is brought to you by NEOS investments.

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This has been an awesome conversation, but it's going to get even better because we've got question and answers coming up, Q&A. So our first question actually comes from Nat. Nat asks, how can I start investing on behalf of my children? Now, this is a really good question because it directly ties to what we're talking about here with small business owners. So, Robert, I think you have the answer to this. Walk me through it. Yes, this is one of my favorite strategies for parents with children and also parents that have a company. And what you can do is set them up with

a custodial Roth IRA. And this is a great strategy because you can put them on payroll up to $12,500 a year per child. And this is amazing because what you can do, you don't even have to put them, run them through payroll. You just claim that $12,500 a year out of your business profits and it's tax free for you and tax free for them through the custodial Roth IRA. So I really, really love this strategy. Any of you that have children and have a business, you have to implement this. And if you max out the retirement account annually from ages 10,000, you're 18 roughly, they'll have $87,000 when they graduate high school, then literally millions when they're ready to retire. So I love this strategy. And one of the pro tips I tell people, so great

question that, is to also add those children to your credit cards as well. That way you make them a signer on your credit card. And then when they turn 18, they've got the money already. They've got credit built already without even ever using the credit card because they're a signer on these credit cards with you, the credit cards you control, and they are set up because they have a good credit score already, and they already have all of these funds tax-free in their custodial Roth IRA. Absolutely. That was a really good walkthrough. And just to remind people, too, if you don't have a small business, but you still want to be investing on behalf of your children, you can open up a custodial account, just a normal taxable account. You can also open up a 529 account, which is essentially

investing for their college fund. So there's a ton of different ways to think about this, but if you do have a small business and you are incorporated doing that custodial Roth IRA, which is an incredible way to build welfare children, is my favorite option as well as Roberts here. Okay, next question comes from Jenna D. Jenna asks, I'm self-employed and I put aside 30% for my taxes. This honeypot has now grown to over $30,000, but it isn't exactly working for me because it's sitting in my checking account. Where should I park this instead so I'm doing the most with my money? So if it were me, I would really try to optimize that.

But that's just the super nerd talking, right? When it comes to optimizing, really optimizing, what I'm thinking about is parking that money inside of the CSHI ETF, which is a Neos Investments ETF, but it's their cash alternative ETF. And this ETF is essentially invested into T-bills, you know, short-term treasuries and other things like that, that is yielding over 6% annually. That's a lot of money and a lot better than the 0.1% your checking account is paying you.

So if I were doing this, I would absolutely try and optimize it as much as I could, which means putting it into a taxable brokerage account and then taking that money and investing it into CSHI, right? This is, again, a cash alternative ETF. It's not going to go up or down. It's cash, and it's going to yield you, aka pay you. a dividend of around 6%. What about you, Robert? What would you do with $30,000 set aside for

taxes to best put your money to work? Yeah, I really love that, Austin. I think that's a great tip. But if you want to be a little more conservative, I really like looking at kind of two strategies here. One would be a high-yield savings account. We like We like Wealthfront and Marcus. Those are both

pretty good ones. But also looking at the Treasury bills through public.com, because both of these strategies are paying above 5% right now, yet they're really liquid. And what I like about the Treasury bills as well is that those you can avoid paying, you don't have to pay taxes on the city and state earnings from the Treasury bill. So I think if you wanted to be a little more conservative, I like those two as well, but CSHI sounds amazing also. I do like not paying taxes. That's actually one of my

favorite things in this world. All right, let's see what Leo F asks. So, Leo asks, I have two underperforming stocks, Moderna and Square. Should I cut my losses now and put that money into an index fund instead? The number one thing to remember is never get married to an investment. You really just want to have your money as part of a larger portfolio. So I think it's a good idea to cut your losses, especially because you can realize the break on your taxes. When you do sell something like that, you would have those losses to offset future gains. I think it's important to always realize that you're not going to be right every single time when investing in there is inherent risk.

So I think you just have to look at it and look at the future of those two companies specifically and ask yourself the question. Do you see a bright future for them or do you feel it's going to keep going down and down and down? Investing should not be emotional. It should be totally based on the numbers for that individual investment. If you want to move it into the S&P 500, right, an index fund as you ask. I totally agree with that. I think you should absolutely do that and versus, you know, throwing it into maybe another single stock idea. Two ETFs to actually have exposure to the S&P 500. My favorite two are V-O-O, which is Vanguard's S&P 500 ETF. It's got a very, very low expense ratio.

So it is the cheapest way to have exposure to the index. And then there's also SPYI if you're more focused on generating passive income inside of your portfolio. The expense ratio is a little bit higher, If you care about passive income, then you'll definitely pay it because it's certainly worth it, in my opinion. I agree with Robert here. Cut the losses, especially if you're able to kind of realize that as sort of a tax break, quote unquote, right? Essentially, I think bringing down your taxable income by about $3,000, I think is the total amount there. Again, I'm not a CPA, though. Don't trust every word I say.

So definitely consult with a professional before you make any investment decisions. And one more takeaway on that that I'd really like to address with Leo is that you hear me all of the time. on our lives when I'm with Austin on my own channel of me discussing that I believe everyone should get to $50,000 or $100,000 in diversified funds in a portfolio of these index and ETFs before you start messing around with individual stocks. You know, so many people think when they're first getting started in investing that they're just going to go buy these hot stocks that Billy Bob or their uncle told them to buy. And then a lot of times they get it. discouraged with investing because they started off on this stock tip journey and in a place where

they should really be buying these index funds and leaving it to the pros to manage their funds with the people that are much smarter than we are that have these incredible algorithms to get you started. And that's why I'm always preaching to people and hopefully they're listening to make sure to get to that 50 or 100k earning money and really crushing it through the S&P 500 before you go out on the individual stock journey. That's my opinion. I think it's a really smart way to build wealth and not get started on a bad note.

I couldn't agree more, Robert, and what an awesome way to wrap up today's episode. Before we sign off, I just want to welcome and thank the about 2,000 new weekly listeners that have joined us over the last couple weeks. I think Spotify has recently started recommending our podcast, which is really exciting. We've just broken over 226.

ratings on the podcast. So if you are inclined to give us a rating, you know what your family always said. If you don't have anything nice to say, don't say anything at all, which means give us a five star or don't say anything at all. But I will say thanks again, everyone, for turning into this week's episode of the Rich Habits Podcast. A podcast where we try and give you new habits to build wealth. These are very actionable habits, especially for, obviously with this episode being a small business owner. If you are a small business owner, I hope you learn something to any of our new listeners. If you have questions, Shoot us a DM at Rich Habits podcast on Instagram, which is where Nat, Jenna, and Leo all asked us questions, and maybe we pick you for the next episode.

Really appreciate it. And if you do like the podcast enough to share it with somebody, do that as well. We also encourage that. Yes. Thank you so much, guys. We really appreciate you following along and listening and giving us all these great reviews. We're just really proud of this podcast and glad to be on this journey with you guys. Thanks so much.

See you.