Today’s Smart Money Question:
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Here Are Just A Handful Of Things You’ll Learn:
On today’s episode we’re answering questions from listeners and clients about starting a business and whether to take Dave Ramsey’s advice.
Angie wants to start a business making cakes. Should she put an addition on her house so she has the space to do this, and where should the money come from – her IRAs or a business loan?
We don’t recommend taking it out of your IRA, because taxes are due and payable as soon as you take the money out. We also don’t know how old you are and whether there will be an additional penalty.
Some people have their business inside their IRA, and we don’t recommend that either. You will lose the tax advantage of when the profits come out, because everything that comes out of an IRA is taxed as ordinary income.
You need to create a business plan and costs. For the first six to 12 months, you should put that money back into the growth of the business. You could also consider a home equity loan or business loan.
A client recently read an article from financial guru Dave Ramsey. Dave’s advice was to pay off all non-mortgage debt and have an emergency fund before investing, even if there’s a company match.
Not all information financial gurus give you is bad, but you really have to dive into it and research. We would recommend having an emergency fund before investing. Whatever your comfort level is, make sure that you have that emergency fund.
Some low-interest debt is OK to have while you invest, such as a credit card with 0% interest. If your company offers a 3% to 5% match, that’s free money and you should take it.
Listen to the full episode or use the timestamps below to jump to a specific section.
3:12 – Starting a business
9:18 – Dave Ramsey advice
“Understanding and developing a business plan is going to be essential to you being profitable.“
-Matt Hausman
Additional Podcast Episodes:
- Should You Take Advice From Financial Gurus?
- Why Business Owners Need an Exit Strategy
- Tough Questions About Family Finances
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The host: Matt Hausman – Contact – Resources – Call: 610-719-3003
