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17 min read

How to Prepare For The Unexpected And Master Your Finances

How to Prepare For The Unexpected And Master Your Finances

Gabe NelsonWith 25 years in the financial services industry and more than a decade as a business owner, Gabe Nelson understands the importance of independent, objective, trusted advice, especially when it comes to running a company of one.

He took his passion for providing a personal touch with hands-on problem-solving and solution-oriented comprehensive planning and decided to focus on serving solopreneurs.

Co-host, Carly Ries, predicted this would be one of her favorite episodes to date before the episode started, and she was right.

Looking for a way to be more productive in your business? The LifeStarr App is launching July '22 and is designed for solopreneurs like you. Click here to be the first to know when it gets released.

What You'll Learn In This Episode

  • How to take the leap from employee to solopreneur with confidence
  • Whether or not you should start a side-hustle before becoming a full-time solopreneur
  • How solopreneurs can best prepare for the unexpected
  • How solopreneurs can plan for major purchases since their income isn’t always predictable
  • Where solopreneurs should start when it comes to self-funding their retirement
  • How new solopreneurs can price their services
  • How solopreneurs can make their business profitable

And so much more!

Resources Mentioned In The Show

Favorite quote about success:

"Just Keep Swimming!" - Dory, Finding Nemo

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Episode Transcription

Gabe Nelson (00:00):

As a solo entrepreneur, it's a lonely game and it's a lonely time. And if you just keep swimming and you just keep moving forward and you just keep doing the work and helping the people and making the calls or doing the things that you need to do, the success continues to build and it builds upon itself.

Speaker 2 (00:20):

Bigger. Doesn't always mean better. Welcome to the One-Person Business podcast, where people who are flying solo in business, come for specific tips and advice to find success. As a company of one, here are your hosts, Joe Rando and Carly Ries.

Carly Ries (00:39):

Welcome to the One-Person Business podcasts. I'm one of your hosts, Carly Ries,

Joe Rando (00:43):

And I'm Joe Rando.

Carly Ries (00:45):

I'm just gonna kick off this podcast with a prediction. This will be a must listen episode. Today, we are interviewing the host of Solopreneur Money podcast and author of the Solopreneur's Money Manifesto, Gabe Nelson. No pressure, Gabe, just doing that prediction, that it'll be one of my favorites. With 25 years in the financial services industry and more than a decade as a business owner, Gabe understands the importance of independent, objective, trusted advice, especially when it comes to running a company of one. So Gabe, we are so excited to have you and welcome to the show.

Gabe Nelson (01:16):

Carly and Joe, I am excited to be here. This is gonna be fun.

Carly Ries (01:19):

Well, let's dive right into it because I have questions. Having been a solopreneur myself in the past, I'm so interested in some of these answers. So taking a leap from employee to solopreneur can be terrifying. Do you have any tips how to transition with confidence?

Gabe Nelson (01:36):

First one, don't do it. No, I'm joking. I'm sorry.

Carly Ries (01:39):

I just said it'll be one of the better podcasts. So watch out!

Joe Rando (01:42):

Run away! <laugh>

Gabe Nelson (01:44):

<laugh> I'm just having a little fun. Short, sweet and simple, the best way to make that transition is to build up some cash reserves so that you have the replacement of your income, whether it's three months, whether it's six months, whether it's 12 months. Whatever your comfort level is, you've got to build up some cash reserves so when you go make that change over, you aren't looking at every single client like they are your ticket to groceries. You don't want to be desperate. So if you have some cash reserves, you're ready. Then the second thing I always tell people is, make sure you have clients. Do you have somebody who's already willing to pay you for what you want to go do? Because you've done it as a side hustle, or you've done it in some other way or form, usually as a side hustle, before we go on our own. And do you have a repeatable client gathering process, like a sales process that says, if I keep doing this, I'm gonna keep getting clients. Because as a solopreneur, if you don't have revenues, you don't have a business. You don't have anything

Joe Rando (02:45):

Expensive hobby.

Gabe Nelson (02:46):

Yeah. A very expensive hobby that is stressful and can cause major problems at home if you don't have your stuff together.

Joe Rando (02:53):

Quick question, Gabe, what about the idea of starting with a side hustle? You keep your job, but you do this in your spare time to kind of establish that you have a business. Is that something you recommend or is it better to just kind of burn the bridges, burn the boats?

Gabe Nelson (03:09):

It depends. I was a burn the bridges type of person, but then again, I started in this industry right out of college. So I didn't have any bridges or boats to burn. I basically had nothing and started and built up. But when you've got kids in college and family to support, usually that side hustle is a really good way to start. You can start to get your proof of concept and understand really what you're doing so that when you go out on your own, you've got the confidence to go build that business quickly and replace your income even faster.

Joe Rando (03:44):

That makes sense.

Carly Ries (03:45):

That's a great point. Actually I had another question that ties into the first one. Fear of the unknown is very real for solopreneurs and that's why someone might do a side hustle. This happens, especially with money. How can people best prepare for the unexpected?

Gabe Nelson (04:00):

The simple is kind of to go back to that answer I already gave. Set aside six months of your revenues, or your income that you had before, so that you have got the runway of your income to support yourself. If you are doing proper financial planning, which most people don't, and I'm thankful for that because that's why I have a business, is you should have three to six months of emergency savings set aside. And so if you now can replace a little bit more of that with another three to six months of your income that you need to replace, as you make that transition, then that fear goes away. You could really focus on running your business and working with the right clients to build the business that you dreamed of when you decided to go start that side hustle so that you could make the transition.

Joe Rando (04:49):

That's such a great point because if you're taking customers because they're breathing as opposed to, because they're the right customer for you, you're going down a bad path. If you treat a customer like their your lifeline to groceries, as you pointed out, you're probably not gonna serve them the way that they really want to be served because you're gonna be so focused on collecting revenues. So it's really good advice to do it the way you're saying. It really is.

Gabe Nelson (05:13):

Oh yeah. I built my practice on the fog a mirror. <Laugh> If you could fog a mirror, I took you on as a client. I've spent the last four years cleaning that mess up and that's not fun. It's not fun cleaning that mess up. So try to try to build your business cleanly in the beginning.

Carly Ries (05:32):

I think that is such great advice. I do have a quick question. So you are kind of talking about the three to six months of an emergency fund. But let's say you want to do this, but you also have a big purchase. You wanna buy a house, you, you wanna start saving for your kids college or something. How can solopreneurs plan for that big stuff when their income is unpredictable. Even past that three to six months, let's say they're a solopreneur and have been for a while, how can they plan for the big things even when their income is unsettled?

Gabe Nelson (06:01):

My advice is to follow that whole profit first mindset, which is you pay yourself first. You start taking that idea that, all right, I want to start setting aside money for a house. Let's use that big purchase example or the down payment. Every single month you've started to build a track record if you've made it past six months as a solopreneur to a year. You're starting to achieve success or you're doing really, really well and your lifestyle has caught up to your income, which happens all the time. Start to pay yourself first and go, "All right. Well, I know that if I set aside a thousand dollars every single month, I'm just using that as an arbitrary number, I know that over the course of a year, I can put away 12 grand. In two years, I'll have, you know, $24,000.

Gabe Nelson (06:47):

Is that a lot? To some, Yes. But will it help get somebody closer? So then, reverse engineer, the math that if you need to come up with a hundred grand over the next few years, well, what do you gotta do to set aside to get that done. Pay yourself first and start putting that money into what I would call, a separate account that you can use towards that goal. Then, the other thing it starts to do is it starts to snowball. You start to see that account get bigger and you get more motivated to keep funneling money into that account.

Carly Ries (07:19):

Yeah, absolutely. So I'm even gonna take this question one step further because savings is great and everything, but I know when I jumped ship from being an employee with a company to being out on my own, a big thing that I lost was the retirement planning side of being a part of a business or a part of another person's business. Often people also lose the employer matching with that. So in addition to saving for those big purchases, where should solopreneurs start when they are self-funding their retirement?

Gabe Nelson (07:45):

The first thing they gotta do is they should take their retirement plan from their prior employer and move it into at the very least an IRA or a Roth IRA so that they are able to still maintain control of those funds that they built up before. The next thing is to then, and my advice to almost every single one of my clients, unless they hit the ground running and they're making a great living immediately when they make that transition, is start small. Start with a SEP IRA, start with a regular IRA. And I'll go down that road a little bit, cuz this is where I get really excited. It's kind of like the funnest part to financial planning for solopreneurs for me.

Carly Ries (08:24):

Yeah. Go all the way you want to

Gabe Nelson (08:26):

<laugh> All right. Good. Well, thank you, I appreciate that permission. I was gonna take it anyways, but I appreciate the permission. So...The IRA, as a solopreneur, if you're under 50 years of age, you can put $6,000 a year away into an IRA. If you do it as a traditional IRA, you get a tax deduction for doing it. So let's just use simple 20% math. If you had put $6,000 away in an IRA, you're gonna get a $1,200 tax deduction for doing that. That IRA's gonna grow tax deferred. It's gonna then build up so that you can go to use it in retirement. The other way you could go if taxes aren't really an issue in the beginning, is you go to a Roth IRA. A Roth IRA, if you're under 50 years of age allows you to put 6,000 away.

Gabe Nelson (09:12):

And if you're over 50 years of age on a Roth IRA and a traditional IRA, you can do $7,000. Now there are income limitations that come into those, but that would allow you to start to put money away. It doesn't take a lot to get started. You can start a Roth IRA or a regular IRA with 50 bucks a month, $25 a month in some places. But what I try to start getting my solopreneur clients to start really thinking about is, "What's the next step". If you can put more than six or $7,000 a year away, where can we go next? That's where you jump into the SEP IRA. The SEP IRA is gonna allow you to put up to 25% of your bottom line in. So if you're a straight sole proprietor and you made a hundred thousand dollars bottom line, you could put $25,000 a year away for your retirement.

Gabe Nelson (10:04):

If you could afford it, you could do it. And, that $25,000 is all pre-tax so you get a tax deduction on that $25,000. Simple 20% tax bracket math, $5,000 tax deduction for doing that. But then that money gives you the opportunity to grow tax deferred and comes out at retirement. You'll pay taxes then at whatever your rate is. But then there's another level, there's a simple IRA. Simple IRA takes the idea of that old 401k that you had, but simplifies it, hence the word simple. There's a really long name as to why it's called a simple IRA, which is boring to everybody. So I'll just call it a simple IRA. You can put up to $14,000 this year into it if you're under 50 and another $3,000, if you're over 50. Then you can use your company checkbook to do a 3% match. This is what you can do with a simple IRA.

Gabe Nelson (11:00):

And so, you're talking a little more than a thousand dollars a month that you could put away if you were able to do that. Then the next level is a solo 401k. And this is the part that really gets me excited because that takes really that old retirement plan that you had at the prior job and all the benefits and all the options you could actually put into your solo entrepreneur business. Whether you're a sole proprietor, whether you're an S Corp, whether you're an LLC filing as an S Corp, there's all kinds of ways that you can design a solo 401k into your retirement program that allows you, if you're under 50 years of age to do $19,500, plus you can then do a 25% of your bottom line profit sharing contribution. If you're over 50, the numbers are better.

Gabe Nelson (11:46):

I'm sorry, I actually misspoke. The number is $20,500 that you can put in. Plus another $6,500 of catch up if you're over 50, for $27,000 that you can actually put away. And the neat thing is with a solo 401k is, if you wanted to, you could design a Roth 401k into it so that you can play both sides of the tax game. That's where I normally tell my people to start. Like, we're gonna go down these roads. I tell everybody is just start small, start with a hundred bucks a month, and then let's build. As your business continues to grow, we'll go to 200, then we'll go to 300, then we'll go to 400 and we'll just keep growing and getting bigger until you're at a point where, my clients will, say "Alright, Gabe, Where else can I put money? I want to reduce my taxes or I'm trying to play catch up on retirement.

Gabe Nelson (12:35):

Where else can I go then?" And that's generally how that solo 401k comes about. Then there's one more up above that. It's called a defined benefit plan where someone, it doesn't matter, you could be 30 years of age, or you could be 70 years of age and put a defined benefit plan. You're really just designing your own pension. So a 50 year old person right now could put somewhere in the neighborhood of 100,000 to 150,000, maybe $200,000 a year away, depending upon your income and your bottom line, all pre-tax. What you're doing is you're just building your own pension plan that they used to have in the old days that our grandparents have. My dad has a pension. He's one of the last of people that I know that has a pension. Those are the areas I go.

Gabe Nelson (13:22):

So yes, you will not get the match. Yes, you have to sign this form to get out of the 401k, cuz there's a lot of plans that have a reverse enrollment that basically says we're putting you in the plan and if you choose not to, you have to sign a form to get out of it. That's sometimes how people start retirement plans. So there's all kinds of ways to get it started. You will not have the company match that you had from your employer, but you have all the control in the world to design it the way you want to. And as you can tell, as I just went on for like 87 minutes, I get excited about that. That's so much fun and creativity that you can bring into something that seems really, really boring.

Joe Rando (14:05):

I'm so blown away because I didn't know about any of this stuff. And I thought that I knew at least a little bit. This is amazing. I I'm gonna add something. It's a shameless plug, but not for us. If you're a solopreneur, you need to find yourself a financial advisor that understands what it is to be a solopreneur.

Carly Ries (14:25):

Like this guy, Gabe Nelson

Joe Rando (14:27):

<laugh> yeah. I mean, we're talking about stuff that I've never heard. I've had some pretty good tax advisors in my life and though I'm not a solopreneur right now, this is stuff beyond anything I've ever heard. So, Really, really cool.

Gabe Nelson (14:41):

Thanks. I appreciate that cuz this is the area that I have so much fun in and you can hear it. I actually have done all of these types of planning for myself as well. I know how they work because I do them. I've done them all either for myself or I have implemented them as my business has continued to grow.

Carly Ries (15:02):

Gabe, all this is just so fascinating. And one thing that you were saying to grow it as your business grows. One of the things people might have trouble with is actually growing that business. That's often because when people become solopreneurs, it's difficult to price their services. So do you have any advice for that?

Gabe Nelson (15:19):

Yes I do. First of all, think about who your ideal client is. Now this is a little before pricing, but think about who your ideal client is and then the value you're providing and then you really need to start to price your services properly. And that's really just a repeat of your question, the thing that I like to use is, think in terms of, a third, a third, a third. A third of overhead in your pricing, a third of expenses now overhead and expenses kind of sound like the same, but overhead let's just say is your pay and expenses, let's use your software, if you have office rent, or your cell phones or your computer programs or your insurance, et cetera. Then add a third add in a profit. Literally build profit into your pricing so that you are able, when you go to price something, you're actually realizing that, okay, I've got my pay in here and I've got my profit in here so that I can use that profit to grow my business and do the things I'm doing.

Gabe Nelson (16:28):

A lot of times what people do is they go, "all right, well I'm gonna go out and start my company. I know that I can start to do the same work for clients that my company was paying me to do so I'm taking my skill set, my relationships and I'm gonna go hang my own shingle and I'm gonna go do my own thing." And they say well, my business before was billing me out at a hundred bucks an hour. I'm just gonna go bill out at a hundred bucks an hour. Well, we forget that a hundred dollars an hour was paying you, but it was paying benefits. It was paying taxes, it was paying things. And what people have a tendency to forget is they forget they're gonna have to pay taxes and solopreneurs, if you haven't figured this out already, you've got to pay self-employment taxes.

Gabe Nelson (17:11):

So not only do you have that 7.65, you have to double it. Now you've got 15.3, plus your marginal tax bracket, you got taxes to pay. You gotta replace your benefits, somehow, some way. We just talked about retirement. You need to build in the ability to put money away for retirement. So what I urge solopreneurs not to do is don't go back to those clients that you're gonna go steal, or do business for those clients and say, well, they were billing you out at a hundred bucks an hour so I'm gonna come in at 75. Well, you just cut out your profit and then you're not pricing your products and your services properly, which is gonna put you in a spot where you're gonna wake up one day and go, holy crap. I'm not charging enough. No wonder I don't have any money left over at the end of each month.

Joe Rando (17:59):

I have a question on that. So, matching, it makes a lot of sense. One of the things though is that sometimes when you're at a bigger company, yes, they have various overhead, but they also have economies of scale, right? So you're renting an office for one person, they're renting an office for a hundred people or whatever, and the cost per person, so to speak, might actually be lower on a lot of these things. The benefits can be a lot cheaper in groups. So the hundred dollars an hour might not even be sufficient to do what they want to do in terms of that third/third/third. Have you come across that? Has that been the case for anybody you've seen?

Gabe Nelson (18:38):

Yeah, definitely once a solopreneur sits down and says, all right, well, my third/third/third is gonna be $150 an hour. You might have to go out and charge $150 an hour. Then that comes back to how good of a salesperson are you? Are you really understanding their needs? Can you deliver the value of $150 an hour that someone was paying a hundred an hour before? Now that's a whole other conversation.

Joe Rando (19:08):

I go on and on about that, <laugh>

Gabe Nelson (19:14):

Yeah, that's a whole other podcast, but it's true. I'm glad you go on about it because it's really important on running your business properly.

Joe Rando (19:21):

It's all about market positioning and defining what you do and what you don't do in such a way that you have more value to the targets than your competitor.

Carly Ries (19:29):

Gabe, I could just listen to you talk all day every day. So luckily you do have a podcast which we'll plug in a second. But I can't believe we're getting to the end of this episode. You have been so successful with helping solopreneurs find financial success so I have to ask you, what is your favorite quote about success?

Gabe Nelson (19:46):

I've been thinking about this ever since I got your informational sheet, I'm looking at it. I'm going, what is my favorite quote about success? And I keep coming back to the phrase, "Just keep swimming." I keep thinking about Dory in the net that gets the whole group of fish to just keep swimming. I keep coming back to Finding Nemo and it's such a really great business quote because as a solopreneur, it's a lonely game and it's a lonely time. If you just keep swimming and you just keep moving forward and you just keep doing the work and helping the people and making the calls or doing the things that you need to do, the success continues to build and it builds upon itself. So I keep coming back to finding Nemo and just keep swimming.

Carly Ries (20:37):

Gabe, can I just tell you are the second guest in the past two weeks that has said that, which is so true, it's so relevant. Good job Pixar because that quote, I mean that movie's been out now 20 years, which is crazy and it frequently comes into my mind. Whether it's with business life or whatever. So I love that that's your quote <laugh>

Joe Rando (20:58):

Every business I've ever been in has just felt, at one point earlier on, like it was probably a good idea to quit. That it wasn't gonna work. I don't have that in me, probably to a fault and I stuck with it and was glad I did. Even when it didn't work out, I did it again, same thing, a little different, and it worked out. So I think it's a great quote and a great piece of advice. Just keep plugging, but adjust

Carly Ries (21:27):

Gabe is just full of advice. So Gabe, right now, I wanna wrap up the show with sharing where others can find you, the podcast online, wherever,

Gabe Nelson (21:36):

Podcast is called Solopreneur Money. I have a website for the podcast called And if you go there, that'll take you everywhere. You need to go. It'll allow you to get to my Gabe Nelson financial Inc website. So it's is my business that I operate. I serve solopreneurs to help them master their finances and create the life they want. You also can get a link to go buy my book on Amazon, The Solopreneurs Money Manifesto. If you start at solopreneur money, you'll be able to find me anywhere.

Carly Ries (22:09):

Fantastic. Well, I think my prediction became true because this was a very helpful episode. Gabe, we cannot thank you enough for coming on this show.

Joe Rando (22:18):

It was great.

Gabe Nelson (22:18):

Thank you guys. I really appreciate it. This was a lot of fun.

Carly Ries (22:21):

Definitely, we'll have you back anytime. That wraps up another episode of the One-Person Business podcast. To listen to past episodes and subscribe, visit or you can find us anywhere you subscribe to your shows or listen to your shows. We'll see you next time.

Closing (22:40):

You may be going solo in business, but that doesn't mean you're alone. In fact, millions of people are in your shoes, running a One-Person Business and figuring it out as they go. So why not connect with them and learn from each other's successes and failures. At Lifestarr, we're creating a One-Person Business community where you can go to meet and get advice from other solopreneurs. Be sure to join in on the conversations at