Hey there! Welcome to the Independent Money newsletter 👋 We’ll be exploring the latest financial news and discussing how it affects entrepreneurs like you. Plus, we'll share some awesome wealth creation insights from successful entrepreneurs that you won't find anywhere else.

Let’s dive in! 🏊‍♂️

In this week’s newsletter, we’ll discuss:

• Market Watch: Want to know what will happen to your bank if the US enters a recession? The Fed lets us in on a secret.

• Entrepreneur’s Corner: The key to accumulating generational wealth as an entrepreneur.

• Financial Tips & Tricks: Learn how high earners can contribute to a Roth IRA (even if you think you don’t qualify).

Market Watch ⏱

A Sigh of Relief: The Biggest U.S. Banks Pass The Latest Stress Tests

The Federal Reserve happily announced this week that the 23 largest banks in the United States passed the most recent stress test – mostly with flying colors.

These “stress tests” began in 2008 and are designed to simulate severe economic shock to assess how banks would handle the situation.

So think of a scenario of high inflation and a mild recession (rise in the unemployment rate, volatile equity and bond markets, drop in real estate prices, etc.). To pass the stress test, banks must maintain minimum capital levels required by the Fed despite this scenario.

What does this mean for entrepreneurs?

The results from this stress test suggest that your money and your business’s capital is probably still safe in a big bank, and it should give you confidence in the national banking system.

Despite the good news, the stress test still projected total losses of $540 billion – primarily from credit card losses and real estate mortgages.

As the commercial real estate market seems to be the most unstable, you might want to consider checking out your local WeWork before signing a lease on new office space.

Entrepreneur’s Corner 📚

The Wealth Ladder

Nathan Barry discusses the concept of the Wealth Ladder in this Twitter thread.

There are four stages in the Wealth Ladder, and at each step, you acquire additional skills and experiences that give you more leverage to generate more wealth.

A solo 401k is a great way to ensure you have a comfortable retirement, but investing in yourself and climbing the wealth ladder is the key to building generational wealth.

Financial Tips and Tricks 💰

The Backdoor Roth IRA – How High Earners Can Contribute to a Roth IRA

You cannot contribute to a Roth IRA if you make over $153,000 per year, but there is a legal workaround that allows high-earners to contribute after-tax dollars to a traditional IRA and then file a form to convert it to a Roth IRA.

This is called a Backdoor Roth IRA and can be tax free.

The tricky part is if you have any other money in other pre-tax IRAs.

In that case, you have to calculate the ratio of pre-tax money to after-tax money, and you pay taxes on the "pro rata" share of pre-tax dollars. This can be very expensive if you have lots of pre-tax dollars.

However, you're not subject to the pro rata rule when you move all your pre-tax IRA dollars to a Solo 401k.

This means high income earners can make a non-deductible $6,500 contribution to a traditional IRA and then convert it to a Roth IRA tax free.

What’s Happening at Carry This Week?

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If you want more resources on building wealth as an solopreneur/entrepreneur, check these out:

• What is a Solo 401k?

• How to Open a Solo 401k

• Common Solo 401k FAQs

• Solo 401k Contribution Calculator