Embrace Any Future

About Embrace Any Future

A financial education podcast for corporate, entrepreneurial, and non-profit leaders seeking greater business knowledge, financial strategies, and wealth-building solutions. embraceanyfuture.substack.com (https://embraceanyfuture.substack.com?utm_medium=podcast)

Publisher

Rachel C. Ybarra, CPA CGMA

Category

business · business

Language

en

Explicit

No

First episode

19 Oct 2022

Latest episode

6 Dec 2024

Latest episodes

10 episodes in the feed.

1. 

   6 Dec 2024

   S1 E10: Personal Power vs Positional Power

   Host Daniel Halloran explores the crucial distinction between personal power and positional power, revealing how balancing these forces is essential for career growth and financial wealth.

2. 

   26 Nov 2024

   S1 E9: First Find the Company, Then Find the Job

   Financial expert and investor, Chris Miles, shares valuable guidance on finding the right company before securing a job, offering a unique perspective that can pay dividends for career advancement.

3. 

   22 Nov 2024

   S1 E8: How Stocks and Companies Compounds - AI Podcast and Study Guide

   AI-driven hosts, Alex and Zach, break down the intricacies of stock market compounding, delivering valuable insights and practical examples to investors and business leaders alike.

4. 

   18 Nov 2024

   S1 E7 Leadership in the Modern Era

   [00:00–00:12] Introduction: Leadership and Hall of Fame Insights * Overview: Lessons from attending the Hall of Fame dinner at UT Austin. Leadership is not just about professional success but inspiring and empowering others. [00:12–01:12] Lessons from the Hall of Fame: Leadership as a Conductor of Change * Key Idea: Leadership transcends professional and financial success, focusing on empowering others. * Core Principles: * Treat people with dignity and respect to achieve collective goals. * Leverage financial capital, technology, and people effectively. * Set clear visions, influence stakeholders, and build systems for scalability. [01:12–04:01] Leadership Requires Velocity: Case Study * Scenario: * A turnaround CEO took over a year to announce a strategic plan, resulting in a key investor exiting early. * Key Events: * Month 0: New CEO hired. * Month 3: Activist investor joins. * Month 9: New board members added. * Month 12: Investor exits due to lack of progress. * Month 15: Strategic plan finally announced. * Takeaways: * Leaders must seize opportunities swiftly and demonstrate quick wins. * Early progress builds momentum, inspires belief, and ensures stakeholder alignment. [04:01–06:06] The Power of Leverage in Leadership * Components of Leverage: * Financial Resources: Allocate strategically. * Technology: Drive innovation and efficiency. * People: Harness specialized expertise and foster team alignment. * Key Insight: Trust and respect amplify leverage, enabling teams to reach their full potential. [06:06–07:36] Hall of Fame Leaders and the Leadership Imperative * Defining Characteristics: * Agility: Identifying opportunities and challenges rapidly. * Focus: Prioritizing impactful strategies. * Ethics: Maintaining high trust and integrity. * Velocity: Acting decisively to capture fleeting opportunities. * Observation: Slow or bad leadership is incompatible with the rapid pace of modern markets. [07:36–09:12] Building for 2025 and Beyond * Reflection Questions: * Are you leading with velocity? * Are you fostering trust and momentum within your team? * Are you capturing opportunities before they vanish? * Conclusion: Effective leadership today demands focus, agility, and urgency, coupled with respect and dignity. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit embraceanyfuture.substack.com (https://embraceanyfuture.substack.com?utm_medium=podcast&utm_campaign=CTA_1)

5. 

   1 Nov 2024

   Key Drivers of Stock Market Compounding

   Introduction I'm part of a few different online DIY investing groups, and recently, there was a post from a new/first time investor that sparked my interest. How does equity compounding work? I thought I’d share my thoughts in our newsletter for our mentors of corporate rising leaders and mentees. As we start to review our year to date investment results, you are probably wondering, at the marvels of this year’s stock market returns (thus far). Whether you own a private company, a broadly diversified set of public companies through a mutual fund, or an ETF, you’re likely looking at your investments and may be wondering, “Wow! How does this actually compound over time?” That’s today’s topic and podcast. Hopefully, these materials can be instructive and helpful for first-time investors and for rising company leaders working in a publicly traded company, and, to some extent, for those involved with privately held companies. If you decide to listen to the podcast first, you will hear that I went on a bit more than what you will see here. Think of it as I’m having a conversation with you. Be kind to my excitement and rambling. I love this work. Let’s dig in by first covering the basics of interest compounding. The Basics of Interest Compounding Compounding, mathematically, is a wonderful and unique phenomenon. You’re probably familiar with interest compounding, and over the last few years, we’ve started to see its impact more visually. For over a decade, interest rates were significantly low, so if you were a saver, you likely felt the pinch with little to no growth in a bank account or retirement income. However, in the last couple of years, with higher interest rates, we can now see meaningfully what interest compounding looks like in your bank, money market account, or a CD. These are easy places to see compounding in action. Let’s focus on a CD. You can have a CD that pays interest at the end of the term, say a 5% return on your $100. You’d receive $5 at the end of the CD term. However, if you place that $100 in a money market account with a 5% annual return that compounded monthly, you’d earn a portion of that 5% every month. With each month’s interest left in your account, you earn a bit more overtime due to compounding. So why would anyone choose a CD over a money market? With a CD, you lock in your terms. If it’s a callable CD, the bank can call it back if interest rates drop significantly, but otherwise, you’re assured of your interest rate. In contrast, money markets are more flexible, but your rate could fluctuate up or down over that same period of time. So, compounding plays a role in the overall return but varies depending on the instrument and market factors. Compounding in the Stock Market People often try to apply interest compounding to the stock market. If a market has on average a 7% rate of return, then the 7% should be compounded each year. Ha! Life would be easier if it worked that way —allot less stress. But it does not work that way. Expect significant variations each year in the market rate of return. Perhaps the 10-year average is 7%, but not 7% each year. Now that we have gotten past the straight-line method way of thinking, let’s assume you bought a company stock in 2012 for $25, and now it's worth $2,500 a share. You might wonder, "How did this happen?" Below are some of the compounding effects on stock prices, especially if you own multiple shares or reinvest dividends. Understanding Stock Price Valuation A stock price is based on the company’s owner’s equity. The enterprise value of the company includes both equity and debt, but the stock price is determined by taking the enterprise value, subtracting the debt, and dividing by the number of outstanding shares. The stock price in public markets is future-focused. Investors’ price shares today based on anticipated future earnings, considering risks, and expected rates of return. Market participants discount the value to the present based on factors like government debt (a risk-free rate), forecasting, and their risk tolerance. Public vs. Private Markets Public Markets:In public markets, share prices are influenced by a range of factors, including immediate demand, speculation, and forecasts of future earnings. These prices reflect what investors are willing to pay today for anticipated future performance. Because public markets offer high liquidity, shares can be traded quickly and at a “full price” valuation based on the current market sentiment. This liquidity also means that the stock prices are subject to fluctuations driven by a mix of emotional reactions, short-term economic indicators, and diverse investor perspectives on company value and market trends. Private Markets:In contrast, private markets have fewer buyers and shares often sell at a discount due to limited liquidity. Private companies are typically valued at a lower “illiquid” rate, as they lack the same breadth of investors and the rapid buy-sell dynamics of public markets. This discount reflects the challenges that come with selling shares in a private company, where buyers may be hard to find, and restrictions on share transfers may apply. Without the competitive pricing of an open public market, the valuation of privately held shares is influenced more by the company's fundamentals and negotiated terms rather than a wide range of investor sentiments. Private market investors must consider the limited availability of buyers, the potential difficulty of exiting their investment, and other restrictions that may come with private ownership. These factors contribute to a valuation gap between private and public companies, with private shares generally carrying a liquidity discount. Additionally, because private markets are not exposed to the same level of transparency as public markets, the pricing lacks the frequent adjustments seen in public markets. This lack of transparency may attract different types of investors, such as venture capitalists and private equity firms, who often take a longer-term view of a company’s growth potential. Key Factors Affecting Enterprise Value and Stock Price There are numerous factors that sophisticated investors consider. Let’s look at some of these. * Strength of the Balance Sheet: Companies with strong balance sheets—indicating low debt, efficient capital usage, and a track record of positive earnings—attract investors. Low debt means they’re better positioned to generate and sustain growth even in changing markets. Companies with solid balance sheets can also access financing more easily, whether through loans, corporate bonds, or other avenues. Bond rating agencies can help you determine the strength of a company. Also, taking a look at rates bondholders are willing to pay are also an indicator. Remember, bondholders are very shrewd investors and are looking at a company’s ability to pay back the debt. This is vastly different from a stock investor. * Earnings Power: A company’s earnings power is critical to its stock price. This metric is forward-looking and based on revenue growth from existing streams, new streams, or market protection strategies. Key indicators include the company’s pricing power, volume growth, and product quality—particularly for technology products, where innovation can justify higher prices and increased demand. Financial firms, hedge funds, private funds, and individual investors all estimate future earnings for companies, which involves forecasting. Factors that go into Earnings Power include: * Revenue Growth: Revenue can grow through: * Increasing sales of existing products or services * Developing new revenue streams * Protecting existing revenue sources Pricing power, volume growth (e.g., entering new or adjacent markets), and superior technology or products also drive growth. Superior products, especially in technology, attract customers willing to pay more, creating higher volumes and potentially higher prices. * Innovation and Capital Allocation: Companies that reinvest capital in innovation can drive new revenue streams. Capital allocation involves investing in the business wisely, making sure every dollar spent has a meaningful return. This includes hiring decisions, where a company should consider the long-term return on the cost of each hire. * Cost Management: Cost management involves understanding where to cut costs thoughtfully, rather than across-the-board cuts. An analytical approach to costs, rather than arbitrary reductions, is essential for employee buy-in and maintaining stability. Leaders should communicate cost management strategies clearly, ensuring employees understand and feel secure. * Capital Allocation: Effective capital allocation multiplies a company’s financial results. Management should use capital to invest in existing lines, explore new growth areas, pay dividends, or repurchase shares when appropriate. Poor allocation, like buying shares at inflated prices, erodes company value and should be avoided. Good capital allocation decisions drive long-term returns and create value. * Velocity of Growth and Company Scalability: Companies with superior products or services enjoy higher growth velocity and are positioned to capitalize on demand. Management’s ability to recognize these opportunities, along with a company’s scalability, also drives growth. The best companies balance revenue and innovation, attracting bondholders and capital that fuel their growth trajectory. 3.      Importance of Leadership and Ethics * Management’s Role:Management is responsible for capital allocation, cost management, and strategic planning. High ethical standards in leadership are essential, as they influence the culture and stability of the company. Talented leaders can transform into even better managers by stepping up in response to market demands. Stable, thoughtful cost restructuring—rather than blanket cuts—keeps morale and productivity high while optimizing resources. * Company Health and Corporate Culture:For most companies, employees are their greatest leveraged assets. Managers who understand this build strong teams that enhance company resilience, productivity, innovation, and value creation. As shareholders, we should be mindful of how leadership decisions impact long-term value and be cautious of companies without people-focused cultures. Instead, we should drive for managements that know how to lead their employees to exceptional performance. Forecasting Earnings and Multiples Stock prices reflect market expectations for earnings. Forecasting involves various perspectives and may reflect optimism or conservatism. Multiples (price-to-earnings ratios) expand, or contract based on investor sentiment, economic conditions, and management credibility. Multiple expansions may be due to high future earnings expectations, while contractions can stem from lack of confidence or performance issues. Compounding in the Real World Case Studies and Practical Takeaways:To understand compounding, you could study a company’s historical earnings reports to see what management predicted and what actually happened. Many professional analysts analyze a company’s performance over 10+ years to see if it’s delivering on its promises and whether those compounding effects are visible. Stock Buybacks and Dividends:Dividend reinvestments and stock buybacks (when done at fair prices) amplify compounding by increasing your share in a company’s future earnings. But companies should avoid overpaying for shares in buybacks, as this erodes value. Ideally, they reinvest wisely, generating returns that support a long-term compounding effect. Long-Term Market Investments and Index Funds If you prefer to not buy individual stocks, a simpler route to take is owning broad-based ETFs or mutual funds can be effective over long-term horizons. ETFs are generally more tax-efficient in taxable accounts, though mutual funds also provide exposure to diversified holdings. Like stocks, you must be prepared for market volatility, which can significantly affect valuations over time. Investing in index funds, such as the S&P 500, Mid Cap 400, or The Total Market, requires a long-term horizon of 10-20 years to weather volatility. Also, keep in mind the pricing of the overall market. In today’s market, 2024, appears richly valued by several measures include the Shiller PE RATIO (https://www.multpl.com/shiller-pe), with some companies struggling while others exceed earnings forecasts. Source: https://www.multpl.com/shiller-pe When investing in a diversified market fund, remember what companies make up the market’s performance. While some companies may be underperforming, and others are well over performing, market capitalization matters and may affect the total price you are paying for a diversified fund. So, to restate, long-term investments in these funds should be made with an understanding of the inherent volatility and a long-time horizon and the current prices you are paying. As you can see from today’s Shiller PE, the market is more than fully valued. For me, I am circumspect and cautious of the consequences of investing in today’s markets. I’m invested, but I’m also cautious. The Role of Stock Price in Company Growth Companies benefit from higher stock prices, allowing access to additional capital, attracting, and retaining talent, and pursuing mergers and acquisitions with stock vs cash. Effective management teams strive to maintain high stock prices, not just for personal gain, but to fuel company growth. And public market investors hold managers accountable for poor performance, while good managers are often rewarded with longevity, shareholder value creation and shareholder loyalty. Final Thoughts When comparing compounding of interest vs a stock price, you can see there are far more features involved in forecasting the expected price a seller is willing to sell their ownership, and a buyer is willing to pay for that ownership. It is far more complex than straight interest but there is also a great potential opportunity if you can find an impressive set of companies to own or if you wish to invest in the Total U.S. Stock Market. I say the U.S. as we have been home to rule of law, innovation, and our tax structure is one that supports investment and innovation. Your Equity Investment Compounding (Bonus – Not in the Podcast) Your investment and retirement accounts are impacted based on the price you paid when you purchased your equity investments, your time in the market (Months, Years, Decades) and whether you are an investor or a trader. Traders time the market and as we discussed previously timing is not your friend (https://embraceanyfuture.substack.com/p/time-is-your-friend-timing-is-not). The best I have found for myself is to be an “investor” and to consider my investment as illiquid —which is VERY hard to do consistently, especially if you like public markets because they are so liquid. It’s a tough relationship to manage. Experience will help you figure out what works best for you and how you naturally operate as an investor. Hopefully, this provides a deeper understanding of the compounding of equity investments over a long-time horizon allowing you to create flexibility and freedom to embrace any future. Check out the Podcast to hear a fuller description in more personal terms my thoughts on compounding of equity investments. Disclaimer This newsletter and podcast are not financial or investment advice. Rather, this is educational information as you build your financial skills to be a better sovereign of your own finances. My comments and thoughts are based on my observations over the last 30+ years. At present, the financial markets look highly valued as measured by the Shiller PE Ratio. Share With Others If you are a mentor working with your mentees to improve their career possibilities, having financial strength is key. Understanding how company value is created and how investors view that creation is one way your mentees can set themselves up for success. Feel free to share this so others can know and grow. Note: Thanks to AI for helping scribe and edit my dictation on this subject, which is based on my research, observations, experience, and perspectives. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit embraceanyfuture.substack.com (https://embraceanyfuture.substack.com?utm_medium=podcast&utm_campaign=CTA_1)

6. 

   18 Oct 2024

   Podcast: S1 E5: Be Prepared When You Show Up to Investors:

   In this episode, we dive into the critical steps for raising capital, whether for real estate or any other capital-intensive business. I recently received a question from a former client about raising capital for their real estate venture, which inspired me to share the essential tools and strategies that apply to any entrepreneur looking to take on investors instead of securing a loan. We’ll cover: The key legal documents required to raise capital, including the Operating Agreement, Subscription Agreement, and Private Placement Memorandum (PPM). How to build a strong business plan that highlights market opportunities and your competitive advantage. Why having the right team, such as a fractional CFO and a certified bookkeeper, is critical for gaining investor confidence. Tips on managing investor relations and exit strategies, so you can ensure long-term success for your business. Takeaways: Understanding the fundamental legal documents you need to raise capital. How to craft a business plan that sets you apart in a competitive market. The importance of financial infrastructure and team selection when bringing on investors. Whether you're looking to raise capital for real estate or another capital-intensive business, this episode will give you the roadmap to do it successfully. Resources Mentioned: Blog Post: https://open.substack.com/pub/embraceanyfuture/p/be-prepared-when-you-show-up-to-investors (https://open.substack.com/pub/embraceanyfuture/p/be-prepared-when-you-show-up-to-investors) Legal Documents Overview: Operating Agreement, Subscription Agreement, and PPM. Listen Now: Tune in to learn how to prepare when you show up to investors and set your business up for success! This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit embraceanyfuture.substack.com (https://embraceanyfuture.substack.com?utm_medium=podcast&utm_campaign=CTA_1)

7. 

   30 Sept 2024

   S1 E 4: Personal Finance Education Q&A

   Hi, welcome! As part of Hispanic Heritage Month, we’ve put together a Q&A based on questions submitted by our community. Our hope, aligned with our mission, is to help advance financial education and knowledge so that you feel not only more empowered but also financially savvy in making decisions that best suit you and your family. Thank you to everyone who submitted their questions. They are quite in-depth! I’ve got eight pages of notes, so we’ll try to go through them as quickly as possible. Let’s jump in and get started! Questions from the Community Q: At what age do you start allocating for long term care? What options are available for this? A: Navigating Long-Term Care Insurance: Strategic Planning for Future Needs Long-term care insurance is a crucial consideration for anyone planning for their future healthcare needs. Statistics show that more than half of individuals over the age of 65 will require long-term care. It's vital to understand all available options for funding such care to ensure peace of mind and financial stability. Optimal Timing for Purchasing Long-Term Care Insurance While the mid-50s is generally recommended as the optimal time to secure long-term care insurance, certain circumstances might necessitate earlier consideration: * Health Considerations: Your current health and any medications you take play significant roles in your eligibility for long-term care insurance. Certain medications, especially those affecting cognitive functions or diseases like multiple sclerosis, a history of strokes, or diabetes requiring insulin shots, can preclude you from obtaining coverage. It's crucial to apply before such issues arise. * Early Planning Benefits: Purchasing insurance earlier can lead to lower premiums and a higher likelihood of acceptance, safeguarding your future while also protecting your loved ones. * Considering Others: Let's talk about others—this includes your spouse, partner, adult children, and grandchildren. Planning early can protect them from potential financial burdens or the responsibility of caring for you themselves, which could delay their ability to work or attend school. In some cases, they might not be physically capable of providing the necessary care, such as lifting another human being or relocating from another part of the country to assist. If you find yourself suddenly single and subsequently have a stroke or other health issue requiring long-term care, you would want to be self-sufficient through the assistance of long-term care providers. In all these cases, think of others. Understanding Funding Options for Long-Term Care There are several strategies to fund long-term care, each with its own set of benefits and considerations: * Government Assistance: Programs like Medicare typically cover limited, short-term long-term care needs, mostly after hospitalization. Medicaid may cover long-term care but only if you meet stringent financial eligibility requirements. Research your state's Medicaid program, particularly for long-term care. Your financial situation will have to be quite dire, and there should be no attempts at "gaming the system" (which we know our readers would not do), among some of the basics. * Hybrid Policies: These policies combine life insurance with long-term care insurance, offering a death benefit if the long-term care benefit is not used. This option provides flexibility and ensures that the premiums paid will not be lost. * Traditional Long-Term Care Insurance: This offers the most comprehensive coverage for long-term care services, from in-home care to full-time nursing home care. These policies can often include benefits like spousal sharing, inflation protection, and return-of-premium features. Benefits usually have a set term of 2 to 6 years once a physician certifies you can’t perform 2 to 3 activities of daily living (ADLs), such as bathing, dressing, eating, and personal hygiene among others. * Self-Funding: For those with sufficient resources, paying out of pocket may be an option. This requires substantial financial planning to ensure that personal assets can cover potential care costs without compromising other financial goals. Estimated Funding Aging is a fact of life, and in the United States, our healthcare system places a large financial burden on individuals. There are two pieces to consider when funding for your future age-related needs: * Healthcare Expenses in Retirement: Plan to have approximately $157,000 saved (after-tax)/ per person to cover healthcare-related expenses in retirement. You may need more if you have larger incomes and are subject to Income-Related Monthly Adjustment Amount (IRMAA) Medicare surcharges for those whose incomes are over certain thresholds. * Long-Term Care Needs: Separate from regular healthcare-related expenses noted above, Fidelity estimates that 7 out of 10 people will need long-term care in their lifetime. This includes services in your home, a day program in your community, or a residential facility like a nursing home or assisted living facility. To determine what amount you would need today and estimate in the future, check out the Genworth financial calculator (https://www.genworth.com/aging-and-you/finances/cost-of-care). Fidelity estimates a blended cost of $116K/year and they estimate you will need three years of long-term care costs. Their Retirement Tool includes a feature to include Long Term Care costs to help you figure out any gaps in your retirement plan. You can adjust the total cost you will need to self fund by reducing the estimated cost by the amount of Long Term Care Insurance you already hold. Choosing the Right Insurance Carrier Selecting a reliable insurance carrier is paramount: 1.      Financial Stability and Ratings: Look for carriers with high ratings from independent agencies like A.M. Best, which reflect strong underwriting and actuarial practices. There used to be over 100 different policy providers in 2000; today, there are fewer than a dozen. Why, you may ask? Many providers underestimated the costs of these plans, had richer coverage features, and large total benefits. More of the financial burden is now on individuals. In 2018, long-term care carriers covered only about $10 billion in long-term care costs, while individuals covered $55 billion in out-of-pocket expenditures. So you can see that the carriers that remain have been disciplined in designing the plans, managing the coverages offered, increasing premiums to cover the risks, and strictly underwriting clients. According to the American Association for Long-Term Care Insurance, over 45% of people over 70 are denied coverage, almost a third of folks between 60 to 65 are denied coverage, and even around 21% of people in their fifties are denied coverage. 2.      Coverage Options and Benefits: Ensure that the carrier offers flexible coverage options, including inflation protection, spousal discounts, and potentially a return of premium if the insurance goes unused. 3.      Customer Care/Claims Processing: Review each carrier’s ratings on customer care and claims processing. If the process to receive your benefits is difficult, remove them from your list of carrier choices to consider. Spousal Considerations and Discounts For couples, purchasing a joint policy can be beneficial: * Spousal Discounts: Many insurers offer discounts when both spouses apply for coverage together. Even if only one qualifies, premiums may be reduced for both. * Care Sharing Options: Some policies allow spouses to share their benefit pool, providing additional flexibility and potentially extending the duration of coverage available under one policy. Your Living Status Your living status is part of the underwriting process. If you are married or have a partner you live with, carriers look at that to help determine if you could, in fact, help should the other partner need it. Consider the following situations that may arise and when long-term care would be a need. Fidelity has a great chart to help you determine when Long Term Care would be appropriate or when it would kick in: Source: Fidelity LLC Conclusion Planning for long-term care is a complex but necessary part of preparing for the future. By understanding the various funding options, features to look for, and the importance of selecting a suitable insurance provider, you can ensure that your long-term care needs will be met in a financially smart manner. In short, what you are buying is insurance for those unexpected or large burdens that may come your way. You are buying peace of mind and mitigating stress for what will be a stressful time for those who love you best. Q: What is the best way to invest $5,000, $7,000, $10,000 for short and long-term growth? A: First off, understand the job of each dollar you are putting to work. What is its purpose? Here are some questions to ask to help you figure out the purpose: * Debt Management: Do you have any debt with interest rates above 7%? * Emergency Readiness: Do you have at least $2,500 in an easily accessible savings account for emergencies? * Job Security: Do you have a 3 to 6-month emergency fund (in cash or accessible equity) to cover living expenses in case you lose your job and struggle to find a new one? * Upcoming Expenses: Are there large purchases (like appliances, significant car repairs, or college payments) coming up in the next two years that you’ll need this money for instead of relying on a high-interest rate credit card? * Skill Enhancement: As an employee or entrepreneur, are your skills modern, future-focused, and marketable? Is there a course that could immediately enhance your earning power? Investing in your skills can translate into salary increases over time, enhancing your knowledge and skills stack, which in turn boosts your earnings potential. * Retirement Planning: Where do you stand with your retirement savings? Are you on track, ahead, or behind? Can you afford to invest these extra funds and not access them until age 59½? Depending on your answers, you can determine the best way to allocate your funds—whether that's paying off high-interest debt, establishing an emergency fund, improving your skills, saving for large purchases, or investing in the future and retirement. Keep in mind, every dollar needs to have a job and every account should have a purpose. You don't need to obsess over it. Think of yourself as the leader and your dollars as soldiers ready to do the good work of helping to build financial well-being for you and your family. To create an accord in your life, it’s best to clearly define the role you want your money to play. This approach will help you achieve peace, joy, and harmony. Investment Options Based on Time Horizon * Immediate Needs: For needs that are very immediate, consider very liquid options such as a High Yield Savings Account or Money Market Account. * Short-Term Goals (2-4 years): For needs that are not immediate but are expected within the next two to four years, consider treasuries or bonds. Treasuries have interest and par as their components. Bonds could have some potential appreciation. * Long-Term Goals: For long-term horizons, consider equities through a broad-based, low-fee ETF, as they are more tax-efficient if in a taxable account. If you have a long-time horizon, place those funds in a Roth IRA if you have earned income. Consider that a Roth account has income limits, and future you will probably be making more money than you do today. If so, you may make too much money to participate in a Roth IRA in the future. Q: When investing for long-term growth, what about purchasing property and starting a small business? How do you start a small business, and what is the best way to research a business you can grow into? A: This person is looking for long-term investment growth prospects. In an earlier post, I provided a 9-box chart of investment options to consider, starting with investing in yourself to increase your earning power, followed by equities and bonds, real estate, small business ownership, and royalties. Take a look at the chart below for a high level of investment choices to consider: Key Questions to Consider for Investments When deciding on a long-term investment like property or a small business, ask yourself the following questions: * Monthly Cash Flow: Do I need this investment to generate monthly income? * Capital Access: How will I finance this investment? Where will I access capital for the purchase? * Liquidity: How liquid will this investment be for me? How can I access my equity before I sell? * Risk Factors: What risks are involved in this asset? Consider inflation risk, economic slowdowns, employee retention, the earning power of the business’ products or services, and the complexity of operations. Also, do you have a marketing and sales strategy to build awareness and then convert that awareness into sales? This is key! * Time Commitment: How much time are you willing to commit daily to this business or property? These are active investments that require significant time and effort. * Retirement Plan: Is this an investment you plan to take on in retirement, or will you remain active in your current employment? If you're planning this for retirement, how do you plan to manage the large time commitment for a business and your personal dreams to have more flexibility and freedom in retirement? Starting a New Business vs. Buying an Existing One When considering starting a new business, think about whether you’d prefer to start from scratch or buy an existing business. Both require a significant capital outlay, but starting from scratch comes with additional challenges. You’ll need to establish your product or service, set prices, figure out costs, marketing, and find customers—all while building the processes to secure sales, support functions like legal and accounting, and hire operational and sales teams. The startup phase can be intense, with many business owners experiencing a J-curve—low points where pressures, lack of capital, tight margins, unfavorable business terms with strategic partners, and operational challenges can cause the business to falter or fail. It’s essential to anticipate this and prepare. Buying an Existing Small Business On the other hand, buying an existing small business might be a more manageable path. Here are some important facts of what is going on in the SMB marketplace: * 40% of small business owners are Baby Boomers, and millions reach retirement each year. * By 2030, the Baby Boomer generation will be at or beyond retirement age. * Less than a third of small business owners have an exit plan. * Many small business owners want to transfer ownership to employees or business partners, yet in many cases there is not a ready buyer. With an existing small business, you’ll need less upfront capital. You can explore securing an SBA loan with a minimum of 10% down, assuming the seller will finance another 10% and the SBA loan will cover the remaining 80%. SBA-approved lenders will carefully underwrite the business to determine the loan amount. There are some excellent SBA loan officers who can thoroughly review the tax returns of the business you’re considering, helping you avoid potential pitfalls. Some of those pitfalls include market-based salary to replace that of the owner/operator, market rate building rent for an owner-occupied building, etc. The SBA loan officers job is to ensure the business can pay back the loan while also expecting the owner to run the business and be paid market compensation for the job/work performance. This will help you determine the maximum price you should consider paying for the business. Key Considerations When Buying a Business When looking at profit margins, anything north of 10% is a base starting point. Given that you can make around 10% in the stock market with liquidity, you want to find a business that offers much higher returns (15%+), given the risks and the fact that a small business is an illiquid investment. * What Are You Buying?: You’re buying processes, operations, and existing products and services that already have a market presence. Ideally, the business has a solid sales and marketing team. However, many small business owners are also the face of the company and the primary sales team. If you lack sales and marketing skills, be prepared to secure proper replacements or skill up quickly. * Solid Financials: You’ll want a company with clean, accurate financial records. If the books are messy or incomplete, walk away. Poor accounting can hide serious problems that may surface after it’s too late. It is also a sign of poor leadership and how unseriously they took the business. Purchasing a Long-Term Asset (Real Estate or Small Business) Here are the typical considerations when buying a long-term asset like real estate or a small business: * Market Conditions: What are the current market conditions in the industry? Are there risks on the horizon? For example, autonomous long-haul freight could disrupt the freight industry. How close are we to seeing self-driving 18 wheelers (https://apnews.com/article/trucks-selfdriving-highways-automation-driver-083409631158f54d806d75309c4764e2) on the road? * Investment Quality: What is the quality of the investment and the cash flow, and how does that compare to the price you’ll pay (especially if you’re using an SBA loan)? * Expectations: What are your expectations for this investment? Are you looking for cash flow to cover 100% of your living expenses? What happens if business slows down and that is not an option every year? How much work is involved? Am you willing to do whatever it takes, no matter what the personal costs in terms of time and relationships? * Opportunity Cost: What is the opportunity cost of making this investment versus another? This is a HUGE question. Before you commit to any large capital-intensive investment, look at all your options. Especially with small businesses and real estate, you can be waiting a long time to sell or unwind the deal to secure a better return with less management hassle. This is usually the main driver of why I don’t pursue other investments. Compare. Compare. Compare. And most importantly: * Exit Plan: What is your exit plan? Is this a business others will want to buy? What will you do to make it so attractive and magnetic that, when you’re ready to sell, buyers will compete for it? If you don’t know the exit, figure that out before you build or buy. Real Estate Considerations Real estate investments require similar consideration, but remember that they are capital-intensive even after you make your purchase. You’ll need to save enough to build reserves for maintenance (appliances, HVAC, roof replacements) and keeping the property refreshed for new tenants and refreshed to compete with newer properties with better living options. With private equity investing so much in apartment buildings and offering resort-like amenities (community events, pools, lounges), this is a lot of capital to compete with. If you decide to invest in single-family homes instead of apartments, keep in mind the need for scale. Determine your cash flow needs, reserve requirements, and how you’ll manage the property. And, of course, ensure your returns exceed what you could get with more liquid investment options over similar time horizons. Q: I’m moving my previous 401(k) money from my old financial advisor to either self-manage or into my current employer’s 401(k) plan. What should I consider to determine if I should keep it in an IRA or add it to my current employer’s 401(k) plan? A: Great question! We recently covered this topic, and I’ll reference some of that in my notes. Here are a few high-level considerations to keep in mind: * Fees at a DIY Provider * Consider the fees you’d pay at a self-managed provider. Providers like Fidelity, Vanguard, and Schwab are all solid, low-cost options worth reviewing. * Personally, I’m a fan of Fidelity due to its user-friendly technology interface, comprehensive retirement planning tools, and excellent customer service. For DIY investors, they offer features like risk assessments and even volatility calculations (standard deviation), which is great if you want to understand your risk volatility better. * While they’re not perfect (I wish they had more ETF options comparable to Vanguard), Fidelity still offers plenty of low-cost solutions themselves as well as many other providers like Vanguard, and other top Morningstar Rated Funds. * Note: This is not an ad for Fidelity and we are definitely not paid by them. I’m just a fan of their technology platform. * Can Your Current 401(k) Plan Accept a Rollover? * Does your current 401(k) plan allow you to roll in funds from your old 401(k)? This is the first question to ask. If not, that’s a non-starter. Let’s not assume all plans offer this feature so it is best to find out before you go further. * Fund Options and Associated Fees * What are the fund options and fees with your current employer’s 401(k) provider? * If your company is large and publicly traded, you may benefit from more investment choices and lower fees, thanks to their scale and negotiating power. It’s worth checking to ensure you’re getting these benefits. * If your company is smaller, look very closely at the fund options and fees. They may not be great options and could cost you hundreds of thousands of dollars in the long run due to fees and lack of compounding. * Brokerage Link Feature * Does your 401(k) plan offer a brokerage link feature? This can give you the ability to invest in a broader range of funds or even individual stocks and bonds, which could be advantageous if you prefer more control over your investment options. * Flexibility in Early Retirement * What flexibility am I referring to? If you decide to retire early, you can access your funds from your 401(k) before age 59½ if you retire in the year you turn 55 or later. This rule, known as the Rule of 55, can give you more flexibility if early retirement is part of your plan. * If you have an IRA with both after-tax and pre-tax contributions and are considering converting some to a Roth IRA, rolling a pre-tax IRA into your 401(k) plan can help manage the taxes on your Roth conversion for the remaining IRA. Keep in mind, Roth conversions are proportional, meaning you cannot choose which part of the IRA to convert. So, if you've moved your pre-tax IRA into your 401(k), your Roth conversion will only apply to the remaining IRA on a proportional basis. For example, if your remaining Traditional IRA has a large amount of after-tax contributions, a proportional amount of any conversion will be after-tax vs. pre-tax. By transferring your pre-tax IRA into your 401(k), which is typically 100% pre-tax, you can better control the tax impact of your Roth conversion. Since this can be complex, it’s best to consult a tax professional who specializes in this area to explore your options. That’s a Wrap! Alright, that covers a lot of topics! Thanks to everyone who submitted questions. If you found this valuable, feel free to share it with others who are interested in growing their personal financial knowledge and economic prosperity. Disclaimer: This newsletter and podcast are not financial advice. Rather this is educational information as you build your financials skills to be a better sovereign of your own finances. Until next time, keep building so you can embrace any future that comes your way! If you are a mentor working with your mentees to improve their career possibilities, having financial strength is key. People are more apt to take on greater career prospects if they currently have financial security. Feel free to share so others can know and grow. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit embraceanyfuture.substack.com (https://embraceanyfuture.substack.com?utm_medium=podcast&utm_campaign=CTA_1)

8. 

   20 Sept 2024

   S1 E3 An Agreement With Yourself

   Listen to Rachel as she reads an article she originally wrote in March 2024 about creating your own investment policy statement. In this recording, she expands on the original content to encourage her audience to develop their investing skills. Whether you're opening a savings account at 17 or evaluating your assets as a new retiree, it's never too early or too late to cultivate an investor mindset. Please note that this is not investment advice. It is educational material designed to help listeners grow their understanding of key considerations as they embark on their investment journey. You can find the original article here, along with key highlights of what will be covered: An Agreement With Yourself (https://embraceanyfuture.substack.com/p/an-agreement-with-yourself). This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit embraceanyfuture.substack.com (https://embraceanyfuture.substack.com?utm_medium=podcast&utm_campaign=CTA_1)

9. 

   30 Mar 2024

   Your Financial Well-being

   In this podcast episode, we delve into personal finance reflections and address questions from the community, emphasizing the uniqueness of personal finance journeys and advocating for informed, value-driven decisions. The episode covers several key themes: * Investment Discipline During Economic Stress: Hear some of my experiences with market downturns and the importance of sticking to core values and investment principles. The discussion underscores the significance of balance, support systems, and aligning financial decisions with personal values over purely economic gains. * Learning from Financial Crises: Reflecting on past financial crises, you will hear lessons learned about global debt, economic resilience, and the societal need for overall prosperity. An "investment policy statement" is introduced as a guide for investment decisions, with advocacy for periodic reviews to ensure alignment with long-term goals. If you are interested in learning more about an investment policy statement, start by reading this article (https://embraceanyfuture.substack.com/p/an-agreement-with-yourself). * Relationship with Money and Investment Strategy: Listeners are encouraged to understand their relationship with money and how it influences their investment strategy; highlighting the importance of core values, goal setting, and understanding the time horizon in shaping investment choices. * Paying Off Mortgages Early vs. Investing: Here we address a question about paying off a mortgage early, a balanced view is presented, suggesting there are more solutions than just two options to include a hybrid that might offer both security and financial growth. The discussion advises listeners to consider their core values and financial goals in making such decisions. * Debt Management and Monthly Budgeting: In response to a question from the community, we discuss strategies to manage significant debt. It starts with understanding one’s relationship with money and adopting a kind and understanding approach to yourself is suggested. Practical strategies like prioritizing expenditures, seeking additional income, and embracing creativity to navigate financial recovery are recommended. Throughout the episode, we emphasize personal reflection, the alignment of financial decisions with your personal core values, and the proactive management of finances through education and disciplined strategy. If you are interested in learning more about Your Relationship with Money, Determining Your Core Values, and Your Personal Power, you can now purchase the workbooks and get started on the self-study program (https://payhip.com/EmbraceAnyFuture). These upcoming materials, including affordable workbooks on financial wellness, will aid you as you start to develop your own personal finance plan and journey with an emphasis on the holistic nature of financial well-being beyond mere numbers. Thank you again for those who submitted in questions. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit embraceanyfuture.substack.com (https://embraceanyfuture.substack.com?utm_medium=podcast&utm_campaign=CTA_1)

10. 

    19 Oct 2022

    Investor Mindset Session - Q&A

    This is a Q&A from the October 4, 2022 AT&T HACEMOS Webcast. How do you build an investor mindset. Here are few questions asked after the session:1) Is it too late to start in your thirties, forties, or fifties, in terms of creating an investor mindset and ultimately creating wealth? (0:10) 2) What is your advice for creating an investor mindset in teenagers or youth? Any recommendations on books or articles to read? (2:11)3) What financial advice would you tell someone who's starting investing? Is there a particular investment strategy type that you'd recommend? And what advice would you tell your younger self? (4:45)4) Many economists say that the global recession is going to be happening within the next year. What are your thoughts and how will impact people's investment strategies? (7:54) 5) Have you ever invested in a minority owned business? Any advice or tips when investing in a minority owned business? And why is investing in minority owned businesses important? (9:41) 6) Where can one go to get a better understanding of one's 401k fund? (11:22) Are you interested in having a wealth coach from someone who has achieved similar financial success? If so, feel free to reach out: info@embraceanyfuture.com or call 210-810-2459. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit embraceanyfuture.substack.com (https://embraceanyfuture.substack.com?utm_medium=podcast&utm_campaign=CTA_1)

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