For contractors and business owners, especially those in the storm restoration industry, navigating financial stability can feel like a “feast or famine” cycle. On The Roofer’s Helper Podcast, Richie Rossouw from Thunder Media recently sat down with wealth manager Jason Solomon, owner of Tactical Investment Advisors, to discuss crucial strategies for managing money, minimizing taxes, and building long-term wealth. Jason, a father of five and a husband, brings extensive experience, having started in the insurance industry in 2001 and obtaining his securities license in 2005.
Here are key takeaways and actionable insights from their conversation:
The Critical Need for a Financial Plan
One of the most significant challenges Jason observes is that business owners, particularly those who come into a lot of money, often lack a clear financial plan. Instead, they might funnel large sums into “new hot exciting things” without professional guidance, leading to potential pitfalls.
Beware of Common Pitfalls and High-Risk Ventures
- Over-investing in Speculative Assets: Jason cautions against putting a high concentration of wealth into highly volatile and unsecured investments like cryptocurrency. While some professionals might suggest a small percentage (e.g., 2%) for high-risk assets, Jason has heard stories of people losing substantial amounts due to being locked out of accounts or hacks, even if the investment itself wasn’t “bad”.
- Trading Yourself: Unless you possess a deep understanding of financial concepts like PE ratios, Sharpe ratios, technical analysis, or fundamental analysis, self-trading on platforms like Fidelity Investments can be risky. Many stories involve people making quick gains on options trading only to lose everything the next day due to a “get rich quick” mentality rather than a big-picture strategy.
- Guaranteed High Returns from Private Funds: Be wary of private funds that promise exceptionally high annual returns (e.g., 11% or 9%). Jason notes that the S&P 500 has historically averaged around 8.5% per year over 90 years, making such guarantees a red flag and often ending poorly for investors. Our natural inclination to believe what we like can make us vulnerable to these promises.
Smart Tax Strategies for Business Owners
Many business owners, focused on “working on their business,” neglect crucial tax strategies. Jason, though not a CPA, is well-versed in these areas:
- Business Structure Matters: Your business’s legal structure (e.g., LLC, S Corp, C Corp) significantly impacts your current tax situation and future considerations, such as when you eventually sell the business.
- Leverage Retirement Plans for Tax Savings: Implementing specific retirement plans can allow you to save on taxes now while building substantial retirement wealth. These include:
- SEP IRA
- Solo 401(k)
- Defined Benefit Plan: This strategy allows you to contribute a large amount of money (potentially more than a traditional 401k) that doesn’t show up on your tax return but builds in your account. For example, a business with $500,000 in net profits could put a significant portion into a defined benefit plan. It’s important to remember this is a retirement plan, and funds generally cannot be accessed until much later.
When to Engage a Wealth Advisor and What to Expect
You might wonder if you need “wealth” to be advised about it. While putting away even a little money each year can lead to significant growth over time, a wealth advisor can have a “big impact” when you have a financial problem or a substantial amount of money.
- Mindset Shift: Often, a life event (like a parent or friend passing away) or realizing a large sum of money is sitting idle (e.g., $700,000 in a checking account) prompts people to seek help.
- A Coach, Not a Salesperson: Jason likens his role to that of a fitness coach. Just as elite athletes have coaches, a wealth advisor increases the chances you’ll “do it right and then sticking with it”. Jason emphasizes that he’s “not actually selling” you things you don’t know, but rather guiding you to take action.
- Typical Client: Jason primarily works with individuals who already have a net worth exceeding $1 million. These clients have amassed money but don’t know what to do with it, or they’ve been “burned” by previous bad investments and seek professional discipline.
- Active Management with Protection: Jason actively manages his clients’ money, making investment decisions himself. His general strategy is a hedged growth strategy, primarily utilizing the S&P 500 but implementing put options for protection. This means accepting slightly less growth during booming markets in exchange for significant pain mitigation during downturns. His goal is for clients to “sleep at night,” prioritizing safety over high-risk, high-reward approaches.
Core Principles for Long-Term Success
- Play the Long Game: Focus on consistent, long-term investing rather than trying to “hit home runs”.
- Embrace S&P 500 Index Funds: Jason echoes Warren Buffett’s advice: for those who aren’t investment experts, put your money in an S&P 500 index fund and “forget about it.” This fund represents 500 of the most well-established U.S. companies and negates the need for constant research.
- Power of Compounding: Consistent investments, even $20,000-$30,000 a year, can grow into an “unbelievable” amount over 10, 20, or 30 years due to compounding interest.
- Diversify: Ensure your portfolio is diversified, a strategy often overlooked by business owners.
- Stay Disciplined Through Market Cycles: The market experiences emotional “roller coasters”. It’s crucial to stick to your plan even when the market is not going your way, as many people pull their money out at the bottom due to fear. While it’s been a long bull market since 2009, periods of meaningful pain can happen rapidly (e.g., 2020).
- Monitor Your Financials Religiously: Dedicate at least one hour a month to review both your company’s and personal financials. Many business owners are operating with “bad data” or avoid looking at their numbers. Regular financial review is essential for long-term goals like exiting your business in the next decade.
The “Wins” and First Steps
Jason shares a success story of a woman who, despite earning a modest salary ($100,000-$160,000 annually), maxed out her 401(k) consistently and ignored market fluctuations. She retired with $2.6 million, generating substantial interest income without needing to work.
For 1099 salespeople and self-employed individuals (like a chiropractor making $400,000-$500,000 a year), there’s even more opportunity to save than for employees, potentially putting $100,000 a year into a retirement plan and seeing significant returns in 10 years. Jason’s happiest clients often utilize simple, safe fixed-income solutions that consistently yield 4-6% with no fees, prioritizing reliability over speculative gains.
If you’re ready to take control of your finances, here are the crucial first steps:
- Build an Emergency Fund: Accumulate 6 months to a year’s worth of savings, ideally $50,000 to $100,000, in a savings account or emergency fund.
- Work with a Professional: Once your emergency fund is established, the next critical step is to work with a professional wealth advisor to put a comprehensive plan together and commit to sticking with it.
For more information, you can find Jason Solomon at tacticalinvestmentadvisors.com or call him at 980-280-1502.
