83. Self-Employment 101: Financial Stability and Growth Tips

In this episode, Laura Sexton, a self-employed business owner, delves into the intricacies of managing finances for those who are self-employed. She shares personal experiences and practical advice on setting up a business for financial success, focusing on the principles of the "Profit First" methodology. Laura emphasizes the importance of maintaining profitability, managing taxes, planning for expenses, and fostering growth. She also offers resources and encourages listeners to reach out with their questions about self-employment and financial management.

In this episode we’ll discuss:

.     Profit First approach

.     Tax Management

.     Expenses and Growth planning

.     Bringing Home consistent income

.     Bifurcated Budgets

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Transcript

Laura: 0:37

Hello and welcome to the Accelerate Your Legacy podcast. I'm Laura Sexton, your trusted financial coach and money mindset specialist. Join me as we explore the world of money and money mindset while also paving the way for a lasting legacy that extends far beyond money. Together we'll eliminate stress, amplify freedom, and ensure you stop paying for your past so you can start saving for your future. If you're seeking peace in your finances, more margin in your budget, and a legacy that inspires generations to come, you're in the right place. Hey, accelerators, someone reached out and asked me if I had any podcast on self employed people and and how they could best handle their finances. And what I thought was very interesting is that I didn't. The reason that's interesting is because I'm self employed. I own my own business. I'm currently operating. You know, my own corporation, I'm officially an LLC. So why haven't I ever tackled this topic? And I guess it's because accelerators, when I think about the things that you might want to hear in the legacy pieces that you would be interested in, I often think about the personal finance side, but I want to let you know, if you have a question, if you have a question about legacy and we're talking, you know, self employed, you're talking about helping children understand money. If you're talking about you know, the legacy you leave with your habits and any of the things that have to do with the legacy and our reputations and the things that we, that we leave for future generations. If you have questions about any of those things, I would absolutely love to talk about them, but I may just not know that that's what you're interested in. Please feel free to reach out to me, Laura at accelerate your legacy, or you can reach out to me on Instagram at accelerate your legacy. So today we're going to talk about being self employed. And let me tell you, first off, being self employed is not for the faint of heart. This is not the easiest job I've ever had. There's a joke that some people that are self employed say, it's like, I left my nine to five so I can work 24 seven. That's kind of what this feels like. It's very difficult to separate the, the constant of the work because for me, my office is in my bedroom. My bassinet was in the background for a while because You have to make space work, and when my office and my bedroom are the same, it can be very difficult to not blur the lines of when I'm working and when I'm not. So I have to put some pretty firm boundaries in place, and that can be very difficult. So let's say that you are Are now running your own business. Your side hustle is making some money. It's not just an expensive hobby. You've got some money coming in. How do we set you up for success? How do we make it so that you are most profitable, but also so that you are Not stressed about the money in your business. I think that's a really important piece here. Whenever you set up your business finances, I want you to focus on profit 1st. Now, it is a great book profit 1st by my Calowitz. I think it's how you say his name. It goes into great detail about how you set up profit 1st, but basically it's this. You find out how much you need to make from your business and that is the 1st line item of your budget. How much you need to bring home is the 1st line item of your budget. The reason for this is simple. A lot of businesses set themselves up. So the profit is the last thing they bring home. And if you do that, you're not going to bring home as much money as you might prefer, as you might need. And then you have to work extra and you have to make more money. We want your business to operate cohesively, and we want it to be a calm, the duck on top of the water, not the duck underneath. Right. So, how much do you need to bring home from your business every month? Once you plan that, that is the top line item of your budget. After that, you are going to plan for the next big things. And that is taxes, growth and expenses. When you own your own business, you are responsible for both sides of payroll tax. Now, you may not know this if you work a 9 to 5, but Your job pays 7. 5 percent of your payroll taxes, and you pay the other 7. 5 percent of your payroll taxes. So, if you own your own business, you pay 15 percent of the payroll taxes. Even my friend, if you don't have an actual payroll, you're just paying yourself. You have an S corp, something like that. All of your revenue then is taxable. I don't know if you know that if it's in your bank account. And you haven't spent it at the end of the year, you get taxed on it. You're paying the 15 percent payroll tax. You also have to make sure that you are paying your quarterly taxes. So go ahead and set aside 25 percent of any income for your taxes. You want to make sure that that is squared away. Tide is a button. You don't want to be stressing out at tax time. Now, if you've been operating your business for more than two years, you're going to have to do something called quarterlies, which means that you make quarterly estimates on your business and you report that to the IRS and you have to pay based on what you project you're going to be making. I think that's a little crazy. I'm sitting here going, well, what if I don't actually make that? Well, guess what? They'll just hold it over until next time. So, yay. Thank you. I. R. S. you want to tax professional in your corner point blank period. You want to make sure that you are being taken care of there. You want to make sure that your profit is coming home and then you plan for your taxes. The next thing that you're going to want to plan for are your expenses. Now, you understand these expenses are other payroll that you may have to pay. It's supplies coming in if you have if you have, goods and services, if you need supplies to make the goods that you were selling, you want to make sure that you have enough money to buy more supplies and those type of expenses. Now, for me, I have a business that is done mostly online. I need to make sure that my podcasting subscription is up to date. I need to make sure that my email service provider is up to date. My course service provider is up to date. So those are the expenses that I have that I have to cover. The next thing that you want to have for your business is a plan for growth. I like to call this retained earnings. Your retained earnings are kind of an emergency fund. So we're there to be an emergency and you would have a month where you don't have the income coming in that you expect to have. You are able to then square that away and say, oh, well, I have this retained earnings here. I can just use that to cover where we didn't make enough revenue. But it is also there for the growth of the business. Say, you need to buy a new piece of machinery or a new software, a new course, continued education, whatever it is, you want to make sure that you have money inside the business to help you grow. Your growth is very important is and a very important piece of the puzzle. Once you have these things all in place. The profit 1st taxes expenses growth, then, you know what your necessary revenue is. If you sit down and you line those out and you're like, this is what I expect to need. Then, you know, what your revenue goal is and, you know, how I feel about goals. Like, I want you to have a goal. I want it to be a clear goal. I want you to be on top of it. And you want to say, this is what I need for my business to make the profit that I want and make sure the business runs smoothly. If you are in a month where you don't hit that necessary revenue goal 1, we're going to have that retain earnings can cover a little bit of it. The next month. We'll just. Fill that up, but if you were in a place where you don't quite hit your goal. You should always cut your expenses before you cut your profits. Here's what I mean by that. Is there a subscription you can get rid of? Is there a piece of machinery you can sell? I want you to get rid of the expenses. Before you don't pay yourself what you need to make a living. Now, this does not mean that the thing that we're losing is Johnny and accounting. Okay, this doesn't mean that we're going to lay off a person that is supporting our business unless it was not a good hire in the first place. If they are truly not benefiting your business in any way, shape, or form, because if you lose Johnny in accounting, you're going to have to hire somebody else in accounting later. Tech companies do this all the time and it's really gross. They'll hire a bunch of people because they're growing, but then when they look at what Their bottom line is going to be when they have to do their quarterlies, they're like, Oh, we should cut payroll because it's the most expensive part of the business. We should cut payroll so that we can look more profitable. That's disgusting. That is not the way to do anything. You don't just fire people so that you can feel better about your numbers. That's why I can't stand big business and I love working with small businesses and helping them thrive because small businesses care about the people they bring on love the people that are working with you. Cut your expenses before you cut your profit. I want you to bring home a stable profit and here's why when you bring your profits home, you make your budget. Now, some of us are working multiple different jobs. We have a study 9 to 5 and then we have a side hustle that we're bringing money home from. I still want you to have your profit 1st in that instance, but maybe the number can be a little bit more wiggly. When you bring your profits home, I like to create, you can create a budget, however you want, but I like to create a bifurcated budget and it's bifurcated this way. 1 side is the necessities. And the other side is the wants my profit, whatever I bring home covers all of my necessities. First and foremost, necessities are the four walls and the non negotiables. Your four walls are food, shelter, transportation, and utilities. Clothing if you need it, but most of us are adults and we have way too much clothing. We don't need more, right? Make sure that those things are covered and then you go to your non negotiable. So that's going to be things like health insurance, car insurance, homeowners insurance. It's going to be things like, for my family, having tuition for our private school is non negotiable based on where we live. So that would be things that need to be covered on the necessities side of my budget. Anything left over in my profits that goes to my wants the 1 side of my budget. I have a standing list of things that I want. That's going to be my subscriptions. That's going to be my coffee runs my fun money. Those are standing things that I expect to always be on the budget. I expect to always be paying them. It's a standard list of wants. Then I have an additional list of things that I would like to buy. So we have a standing list in our family of things that would be nice to have for the house. It doesn't necessarily need to come out of our regular budget. We don't necessarily need it right now. It'd be nice to have later. Last month, we bought a coat rack. Love the coat rack. It's great. It wasn't necessary. And so it didn't need to come out of a regular budget. But if we had extra money, my business brought in a little bit extra. We can buy a couple extra things. And the hat rack is a silly example. There may be things that are more meaningful to you. There may be experiences or things like that, that you want to be able to put into your budget. Now, my friends, if you are self employed, I would love for you to go to my website, accelerate your legacy dot com slash resources and grab my 5 massive money mistakes to avoid in business. Now, this is a quick read ebook. That you can download it will get sent to you right away and it really does distill down 5 big mistakes that are going to keep you from making profits in your business, their mistakes that I have made in my business or have seen many of the people that I work with make. 1 of them is don't have debt on the business. I've never had debt on my business because I started my business after my debt free journey began. That is 1 of the ones that is in there. And I Did not participate in that 1, but I've seen so many businesses fail because they have so many debts that they're not able to maneuver and grow the way that they could because they're so stuck in the past and making payments to other people. I don't want that for you in your personal life. And I certainly don't want that for you in your business. I do work with businesses on becoming more profitable on separating their bank accounts. If you have your bank accounts together, if your business and your personal, you don't know which one's coming out of which you need to separate them. I work with a lot of companies to get them separated so that you can feel more profitable. We do profit first. We make sure that you have more money coming in a steady amount of money coming in because then you're not stressed about, well, what if, what if, what if. There's a calm and there's a peace to knowing this is how much I have coming in. This is what my work budget looks like and this is what my home budget looks like. If I can help you in any way, you know I would absolutely love to do that. Accelerator, somebody reached out and asked me about creating a podcast for being self employed. I just want to let, you know, if you have questions that you want to hear me answer, please just send me an email. I'm here for you. Scroll down into the podcast description. You will see ways to connect with me. I'm here for you accelerators, but until next time, go out and make a difference. Thank you for investing your time with us today on the Accelerate Your Legacy podcast. Remember, your legacy isn't just measured in dollars and cents, but in the tools, habits, mindset, and reputation you leave behind. Don't just listen to the show, but take action on what you've learned. Share this wisdom with a friend who can benefit and help us spread the word by rating and reviewing the podcast. For questions or encouragement, reach out to me on Instagram at Accelerate Your Legacy or explore the resources listed in the show notes. I will be back with you next week. Until then, build your legacy with intention.