0:03 hello and welcome to people making money one of the way to wow shows I'm your host Kevin bemel and we're here every Tuesday at 10: a.m. to talk about how to build our business and professional lives how to build wealth and all those subjects related to our financial success so um the you know the title of the show people making money is a little bit tongue and Chic um because it's not about people like you know Alon musk who have you know hundreds of billions of dollars or whatever most of us are never
0:38 going to see anything like that rather we focus on what we the sort of you know typical people um need to do in order to reach our financial goals so one of the central uh Concepts that that is necessary to meet financial goals is to live within our means and we can only live within our means if a we know what our means are and B we know how we're spending our money and so inevitably we
1:15 come to the issue of having a budget so when when I was uh a chaplain on active duty and uh we were deployed on the ship interestingly enough a lot of my time was spent helping Sailors and Marines with their personal finances so you know you would think wait a minute you're you're on an aircraft carrier in the middle of the I don't know Indian Ocean and you're a chaplain uh why are you talking about personal finances and and the re the reason is because for a lot
1:50 of young people as well as middle-aged and older people the idea of dealing with finances they had no training they're not you know they they don't really know what to do and the whole thing becomes a big huge mess and the next thing they know they're saddled with a you know a tremendous amount of debt that they cannot afford and their whole life seems to be crumbling and so while it's all nice to talk about uh you know praying to God and all that kind of stuff um when someone is worried about whether they're going to be able to pay rent and buy food um you know some of
2:25 those other more spiritual topics don't seem to have a whole lot of meaning so we would get down to you know the realities of life so what I'm going to do today is go over a a basic budget and something that's very simple and that we can all do and show you how to put it together and I want to couple of sort of prefatory remarks one is while once you get into budgeting it's very tempting to
3:00 get ever more complex the problem with greater complexity is that it takes more work to keep it up so what I advise you is keep your budget as simple as you can the more of it you can keep in your head the better okay because that way it'll be easier to stick to it okay and and and in the end that's the point of having a budget so to to draw a budget and then never look at it again
3:36 is useless really right because it's not helping us establish any Financial discipline and that is the reason for having a b a budget right it's to establish Financial discipline now if you are married then recommend you do this with your spouse now in some cases one or you know wife or husband may be the one who handles finances and so then you you know if if that's the case maybe you don't need to have your spouse in on it um but uh you know it's it's it's
4:11 probably a good idea to at least go over it with them so they can understand how you know you're planning to run finances and if you have uh children especially um Teenage children um I recommend that that you don't need to go over the entire budget with them but budget items that Rel relate to them whether it's you know cell phone costs or you know gas maintenance for the car those kind of things that they understand that these are budget items and what's what's budgeted for them we don't exceed those expenses each month and therefore you
4:48 know you're going to be um responsible for you know exercising the same discipline that uh you know your your parents are need to to exercise in order that the family lives within its means so I I prepared an outline um of of a simple budget and I put it into Google Sheets um which which is you know a nice uh uh convenient um you know program for um doing these kind of demonstrations and you'll see here there
5:25 are two budget columns one is for personal and one is for business so you may not have a business in which case the business column you know you obviously you you you wouldn't have to fill it in um and but but if you don't have a business then you'll see many of the expenses for your bus that are in the business column here are going to become expenses in the um uh personal column and um the the reason I have this divide it up is because indeed I do have
6:02 a business as you know and there are a lot of tax advantages to having a business because of the kind of expenses that can be paid by the income of the business that therefore reduce your personal tax burden so I'm gonna I'm GNA start out on the business side and this is not going to be reflective of of My Life um but I I you know I do want to um give you an example of of how this um you know would work and and you'll see certain numbers are going to be
6:38 calculated um automatically so the first thing we need to do is look at um what is the income from our business now depending on the type of business you have um whether it's a whether it's a service business or whether it's uh some kind of uh products business so that that will determine what your income stream is um but I'm going to go with a service business because that's simpler if you have a products business obviously then there's going to be some additional um expenses and in terms of calculating
7:14 your income you're going to start with your gross sales you're going to subtract from that the cost of goods sold which is the cost of creating your products and so then you'll get down to your net Sal so where it says total income here um it would say uh gross actually you know I'll put the I'll put these in here right now so you you would have gross gross sales oops I forgot that's let's check that out okay let's go over here so you'd have gross sales okay and from that you would
7:49 subtract cost of goods sold okay and what you're going to be left with is net sales oops oh gosh okay here we go third tries the charm okay and so let's let's say for example that you had gross sales of $250,000 okay and uh let's say your cost of goods sold is um let's let's say it's 125,000 so
8:25 you're you're keystoning on your gross sales so your net sales are going to be $125,000 okay and and so then you're you're that that would be in this you know the equivalent of your total income okay so that's the main difference between a product and a service business now if you're a service business you may charge by the hour you may charge by the job I've got a little formula in here that's designed um to calculate um in come from the business based on a a
9:01 weekly or a monthly basis but let's let's just start with something simple let's say that um oops let's let's just say that um oops I think I put it in the wrong one here hold on one sec yeah I okay so let's say that you're making $75 an hour and uh I wonder why that's not foot through H okay well we'll put it in here so you're making $75 an hour okay and you're working at your business uh let's
9:38 say you're working at your business 15 hours a week that's weird oh there we go okay so the gross income for or or the total income from your business is a little over $56,000 a year okay and that's you know 15 hours a week isn't that much that's 3 hours a day on average or you know maybe um you you know you work on weekends you work five hours on Saturday and five hours on Sunday and a couple of hours during the week okay so it's it's you
10:13 know it's it's not a lot of time this would be a a side business in this case okay all right so um then let's look at your expenses so let's say you have a car okay and um you know again I'm just going to be putting in some numbers to estimate it um but let's say you know in terms of gasoline you spend about uh let's say you know $400 a month on gasoline that may be a little bit low I don't drive a whole lot so mine is I think is even lower than that so that would be $4,800 a year okay and you by the way
10:51 where where a number is is in italics like this that means it's an estimate okay and then you have your your car insurance so insurance is very expensive these days let's put an insurance at $5,000 a year although that may be pretty low okay and then you've got uh parking okay and you know we'll allow let's say 3 uh $360 a year for parking that's $30 a month and then I realized um we don't have anything in there for maintenance so we'll put in another space uh for
11:28 maintenance search there we go okay and so here's uh maintenance maintenance and repairs okay and you know that would be things like car washes and repairs that sort of you know oil change that kind of stuff so you know I don't know let's let's put in uh two $2500 a year for that not 25,000 2500 okay so those are our automobile expenses okay next is is health care
12:04 expenses now it may be since this is a part-time business that you have an you know you have not maybe then then you have another job and maybe you have insurance through your job okay so in that case um health insurance cost would be you know in pre terms of premiums would be zero okay but maybe you have some other insurance that for example long-term care insurance okay so uh long-term care insurance um is if you um get get in in in a position where you
12:40 can't work and you need some um uh income to replace your lost income basically it helps pay for the care okay and you know it it depends on when you buy it and all those kind of things um but let's estimate it at $200 a month so 24 what happened I bumped something um so let's put it at uh $200 a month or $2,400 a year okay and then here's the thing even when you have employer paid
13:15 um health insurance these days typically we the you know you still pay a deductible and co-pays so you can still pay for your health care through your business okay and it becomes a deductible expense and and so let's say you've got a family deductible of I don't know $3,000 a year and you've got co-pays um that can equal up to $7,000 a year so your annual outof pocket for Health Care
13:50 is $110,000 okay all right next um internet service so depending on what your business is um you're probably going to be using internet service as part of your business either for for marketing or um for doing research whatever okay so you know internet these days is going to be around $100 a month maybe a little bit more so actually let's put it on $110 a month so that's $1,320 a year okay now maybe you have
14:26 life insurance so if you pay for life Insurance personally the premiums are not deductible but if you pay for life insurance through your business the premiums may be deductible okay this these you know on some of these expenses like the long-term care insurance life insurance these are things you would want to want to talk to your accountant about to make sure that um you know they're being handled correctly but you know it's it's entirely possible that um your life insurance can be a deductible expense for your business so let's put your premiums at 15 $50 a month which is
15:02 $1,800 a year okay and now Mark whoops marketing expense so um you're probably going to do some email marketing which might involve having a service like aweber MailChimp those are two of the best known maybe it's about $25 a month that you're spending there okay maybe you're doing some advertising um whether it's uh you know online advertising like Google ads or you know something like that so um you know maybe you're planning on spending let's say $200 a
15:38 month on that so that's $2,400 a year okay oops I don't know why it keeps doing that all right next are some operating expenses so if it's a part-time business probably don't have an office um so you're probably working out of your home now if you have a separate room that you dedicate solely for your business you may be able to deduct the cost of that room um from from your business income the way I've typically handled it so when I I end up
16:16 um actually paying so you let me take a step back if you have your own business even if it's a part-time business you should have a separate checking account for the business no matter what the entity is okay even if it's a sole proprietorship where the business is still just you and you're operating under a fictitious business name statement you should have a separate checking account for your business and by the way if you want more information on business entities I have done a show on that I'll put a link to that show in the show notes for this one so if you want to go look at that afterwards you can uh but so but in any event you're
16:52 going to have your own checking account so if you are planning let's let's say just to make it easy um that you you're you you know you're renting uh your residence and let's say you you're going to use one of the bedrooms as your office and that bedroom comprises uh 7% of the space in in your in your uh residence so then you could pay 7% of the rent uh from your business account and that makes it you know then and that'll deduct that expense uh from you
17:27 know from your from your business income you could do the same thing with your utilities electricity Etc um and um and you know you know so um you know probably not going to deduct uh you know water and trash unless there's you know a bathroom a separate bathroom that you're dedicating to your office um but um but at least you know rent electricity now if you own your house you could pay a portion of your mortgage um with um uh you know from directly from your business account now one of the things
18:03 you probably don't want to do is uh pay your from your business checkbook to your personal checkbook for rent because technically that makes it so that um you need to report that income a you need to report those funds as income okay so that's why it's better just to pay it directly to your landlord directly to the lender um and that way you you potentially avoid that problem again double check all of this with your accountant on how he recommends that you do these things okay so I'm just going to do you know operating expenses will
18:38 depend on the business um you're probably G to have some kind of cloud storage um whether it's something like a Dropbox whether it's uh uh um you know Apple iCloud something like that okay so um I I don't remember what dropboxes I think it's $190 a year okay so uh you know so there so there you've got that um oh restream so you can see I was adapted so I obviously I'm using restream right now um but maybe you have uh you know some kind of uh uh
19:16 file sharing service which is kind of what Dropbox is as well um maybe have some other what's another operating expense uh let's say you're in the real estate business and so um you have a membership in something like Loop net um so you know that that might be something we'll just we'll just put that in and I I don't remember what Loop net cost to be honest but let's put in $ thousand dollar a year just just to put so whatever your operating expenses are um and again you know you can see we're trying to keep the list of expenses fairly small um so it be so it's easier
19:54 to keep track of them okay and and by the way you could just have an operating expense category you wouldn't necessarily have to break it down you could do the same thing with marketing you could just have marketing you don't need to break it down that's that's up to you okay Professional Services this would be like legal in accounting you're probably going to have an account you know cost for an accountant because he's going to prepare your tax return let's say $500 to do that okay um Publications um I I get the Wall Street Journal every day um you may you know have an online publication or something
20:29 I think the Wall Street Journal is about $725 a year now oh research I'm going to I'm actually going to take this one out um here we'll do it this way okay um okay and then finally salary so there's a couple of ways to handle this um but you know the way that um the way that I typically handle it is uh on a small for a small business is
21:06 you you know maybe you're going to take you know draws on a monthly basis um based on your net income so you can see the net income is right now is about $23,000 it's obviously going to be lower than that so maybe you're going to have net income of about $18,000 so maybe you take a draw of $1,500 a month um and then when you close out your year which let's say just for sake of argument you're on a calendar year so you're going to have to pay uh payroll taxes and convert your draws to salary okay and um payroll
21:42 taxes so you're going to pay essentially what amounts to uh self-employment tax because you're going to be paying both the employees and the employers share of of income so let's let's just for the sake of argument let's just um estimate um your income uh at at $188,000 a year and um I'm going to look up the I I meant to look up the self-employment tax rate again uh yeah 15.3 okay that okay so so
22:17 we can calculate that here so we'll have $188,000 times 0.153 okay and you can see it's uh it's about 20 7 it's $2,700 there thereabouts okay next is telephone or telephone so you probably have a cell phone um I do recommend that you have a a separate cell phone for business um and and and that way you you don't have to worry about um being able to sort of Cordon yourself off from your business day um you know these days I mean cell phone
22:52 costs of course vary widely let's just U put cell phone costs of of $150 a month so that's $1800 okay and then um you know perhaps um you have some travel expenses um depending on what your business is so let's just put in $400 for travel and and that you know coincidentally that puts our you know our our payroll taxes um that we calculated based on $18,000 we're pretty close let's just see if we change this to 1801 okay so yeah so it's
23:27 it's you know it it it doesn't really it doesn't really change it so I'm I'm going to take that out but uh okay so um we have $118,000 um in net income from our business now you see over here under our personal budget then the business income is has already been inserted okay and you'll also note that um we're deducting our income tax from our
24:03 income um so that when we do our our personal expenses um we do so um on an after tax basis okay so we're we we don't have to worry about hey we we we haven't set aside for taxes okay so um I I calculated personal income taxes at 25% um you know it really depends if you're in a state like California okay and you're at the lowest Federal bracket of 15% still you could easily be in the 10% which is um close to the highest bracket here in California now
24:39 depending on what your overall income is that the 20 25% uh income tax rate may be too low now keep in mind that the way income taxes work is they're they what's called Progressive meaning as you earn more money a higher rate is appli but it's not applied to the total it's applied to the next increment of income so although you may be for example in a 28% tax bracket the tax rate on your overall income is going to be lower because
25:14 chunks of the initial chunks of income are taxed at a lower rate okay so um keeping that in mind now let's figure out the personal side of things so here's where you'll put your salary now this is your uh this is your um uh this is your salary um with um after deductions but not after income tax this makes it a little bit tricky okay because um if you put your let's say that you get paid $6,000 a month okay
25:49 which is $772,000 a year okay so um oh that's weird okay it took the wrong one there we go okay um oh I know I okay you know what that's right I set this up differently um so actually the number you plug in here is your take-home pay okay so I'm I'm GNA note this
26:25 um that's right okay so that way um all of your taxes are are accounted for okay by this is your after tax number okay so if your if your salary is $6,000 um a month so you know your take-home pay is going to be more like $4,000 a month okay so your after tax income is about $61,500 okay um so let me go over that again again um because I realized I did set
27:00 this up to make it as easy as possible so the personal income taxes here are taken just on your business income okay um because this is this is unless you have something like a C Corp okay where it's paying its own income taxes if you have a a sole proprietorship if you have um a partnership if you have an LLC or if you have an ESC Corp okay the net income your share of the net income from that business is going to be reported on your personal tax return there there
27:35 there what are called pass through entities okay so when this income is reported of $188,000 you're going to have to we have to account for the income taxes on it okay and but you can but for your salary you can just put your take-home pay and that way the taxes have already been um removed from it now there is of course an assumption here and that is that the amount being deducted from your salary for federal and state income taxes if you have a state income tax is the
28:10 amount that you owe at the end of the year okay in many cases people end up getting a refund okay so indeed your take-home pay is actually lower than what your actual net salary is if you were to calculate your taxes exactly so again this is something to talk over with your accountant to get an idea of what this number should be okay but if you use your take-home pay and you find that generally speaking you're getting um at you know at least a small refund on your taxes then you'll be okay for Budget purposes now if you end up owing
28:46 a lot of money at the end of the year despite the the deductions for income taxes um then you want to reduce this number otherwise if you know to to the extent that you budget your expenses um you know at a total of about $60,000 you're not going to have additional money uh to to um to pay those additional income taxes okay so um what what we're going to see here what we see here are a list of expenses yours may be different than mine um you know that
29:23 that really depends uh I'm going to take the blank space pieces out and put them here oops oh okay one more time okay oh does want do okay whatever all
29:58 right so um you'll see the top one I have here is allowance and you'll see that that is in purple that's because um this is a much more of a discretionary um uh expense and so um you know that one will we're going to leave for last otherwise you other you'll see they're an alphabetical order here um and that's as they are here and that's that's why allowance comes first okay cleaning service so if you have someone uh let's say you know coming in to clean your residence so that would go
30:35 there um let's say you're paying someone $200 um every two weeks so that's um that's 26 times a year times 200 is uh 5200 to have your place cleaned okay donations are charitable donations so you you see I put this as a mandatory expense because um that's that's part of my um my faith background um and so
31:10 let's put um let's put donations at $6,000 or or 10% essentially of our net income okay next DMV fees so this would be um by the way if if you if you have a business you can most likely pay the registration fee for your car through your business um so this would be for like renewing your driver's license um and these the reason I have you budget in these kind of fees is they keep getting higher and higher so you know there's you know if you have a
31:45 professional license I know profession my professional license fees all went up this year um in one case it doubled um to $1300 for my professional fiduciary fee which is an enormous fee frankly okay so DMV fees let's say it's a $100 to renew your driver's license dry cleaning so you know you may not have dry cleaning you know you see me I wear uh you know shirt and tie um every show so I've got dry cleaning let's put it at $200 a month which is $2,400 a year okay entertainment so this
32:22 is you know everything you do for entertainment whether it's movies whether it's uh um streaming services um it may be sporting events it may be concerts uh etc etc now you'll see I put it in as a you know as a mandatory expense um and the reason I do that is because um look life life is um uh stressful and so it's good to you know we we need to get some um you know some kind of relaxation so let's for now
32:57 let's just put into $2,000 um in entertainment expense um actually uh yeah 2,000 that's fine okay now you see food and suares is in purple as well and that's because what we spend on food and suares can vary a lot depending on for example how often we eat out and uh you know and or how often we you know cook our own meals uh you know how elaborate we get um you know again know me I I I you know wine and and Spirits is my big thing um which you
33:33 know raises the cost of food and suy so I that's another one that I leave um until I've budgeted the other expenses so I can I can understand you know really what how you know how you know lavishly if you will um can I um you know e eat and drink you know and be merry right okay gifts so um look there's there's uh holiday gifts um you may be helping out a relative um and and so you know again I categorize that as a gift um and
34:08 or you know and and you know you go to a party you your somebody invites you for dinner you may want to bring a bottle of wine or something like that so you know put in an allowance for gifts more or less uh so let's put in $600 okay next is insurance so if you're renting your your residence um you're going to have renters insurance um if you own your residence so then you're going to have homeowners insurance of course um and again this can vary a lot depending on where you live um how big a
34:43 place you have what kind of personal property you have um but you know recognizing that insurance costs have gone up tremendously in the last few years so you know it's probably going to be a pretty significant expense venders Insurance used to be pretty inexpensive but it's really not anymore um you know but it really depends you know if you live in a state like California you may need earthquake insurance um even if you're a renter okay because um you know if you're renting your the the the owner of the property you're renting will not cover your contents your you know your
35:20 personal property if there's an earthquake and and some of it is damaged okay so you're going to want to get vendor insurance and perhaps broader this is something to talk to your insurance agent about so let's put in uh $2400 uh for renters insurance okay next is credit cards now presumably interest on your credit cards is zero okay that's what you want to get to you don't want to be running credit card balances okay um and and it's fine to
35:58 use credit cards just pay them off each month and when you do that you don't have a credit card expense because what you're buying on that credit card should fit into these other categories okay so I know for me I pay all my utilities through but you know by credit card I pay for food cleaning dry cleaning everything basically I put on a credit card and then I just pay the bill off at the end of the month okay now let's say you've had an emergency expense maybe an emergency medical expense or something else okay and you
36:33 are running uh you have a balance on your credit card that you're paying off okay again the expenses from the credit card still get reflected in your budget items but there needs to be a place for the interest you're paying on the credit card and also by the way if you have a credit card fee like an annual fee although technically that's not interest it's an expense of having the credit card so you know you may have a $50 a year fee or you may have some interest as well okay now there's lots of no fee credit cards and of course those are the
37:08 best um but but in any event um you know this is something you would have to fill in depending on your personal circumstances okay next Landscape Maintenance so if you rent a house and or you own a house you you may be paying for Landscape Maintenance okay maybe that's a $150 a month okay now maybe the owner of the property pays for it and so you know you don't have to you don't you don't have that expense um does doesn't you know doesn't really matter um as
37:43 long as you account for the expense that you're paying okay next is utilities so you know this is going to vary somewhat which which categories you have now by the way you could just have a utilities category in which you them all together okay um here in in Southern California so we have the Southern California Gas Company in Los Angel we have the DWP Department of Water and Power so it's one bill every other month for all of this and then you have your gas bill um I know my gas bill is is not very expensive because I only use it for
38:18 heating and cooking um but electricity and water and trash here in La is exorbitantly expensive it's you know on the neighborhood of a least $2,000 a month okay so um there you go so um in this okay so now we've got to go back and we've got you know not quite $117,000 uh a year left and we have to plug in for food and sundies and maybe an allowance now by the way you don't see you know shoes clothes Drew with that because that all comes through your
38:54 allowance okay this is this is the money you can spend on whatever you want but that includes things like clothing unless of course there's some kind of clothing you need for your business in which case it would be over on this side okay so um you know even if you were to spend $1,500 a month on food and suies you'll see you have a you you end up with a negative number here right so you you can't spend that much now this budget appears to be for a single person so you
39:29 know maybe $1,500 is too much but let's say it's you spend $1,200 a month on food and sundies which is about $300 a week so that's going to be $14,400 okay and you're left with about $2,360 so if you give yourself an allowance of $1,800 a month well there you go you you know you're you're in positive territory now you may notice that there's one more thing that hasn't been budgeted for and that is any kind of saving or
40:06 investing okay and and and that's problematic okay unless you have some kind of um pension plan at work where maybe you're building up a 401k so you're you're saving um at least saving for retirement there um you know while you're living in your current means you're not planning for the future so the question then becomes well where can you cut back okay and this is why you know this is where um you know you need
40:41 to start looking and the first two places to look are allowance and food and sundies okay so you may decide you know what um I'm going to get my enjoyment out of life from what I currently have um plus my you know having a a nice meal once in a while maybe you know going out to dinner once a week and so I'm going to reduce my allowance to just $50 a month okay which uh ends up being uh $600 okay and now I've got about
41:17 $1,700 um uh a year uh to to invest okay maybe further instead of spending uh $400 I'm sorry $300 a week on food uh I'm G to spend $250 so that'll reduce this to 12,000 okay and now you've got $4,000 net income that you can save and invest each each year okay and the idea is the you know and I've I've talked about this in another show um you you
41:54 first want to create you know a rainy day fund of at least a month or two of income so that you know if you have an emergency you don't have to use your credit cards and carry a balance in order to cover that emergency okay so in this case um your um monthly after tax income is a little over $60,000 so you want to have between five and $10,000 in savings for your rainy day fund okay so you can see that it may take you it's going to take you a couple
42:30 of years to get you know to to to um accumulate that but that's okay um the other thing that you may do is you may say well I you know I I want to save more um I'm gonna be you know kind of frugal here but I still want to save more what if I work in my business 20 hours a week okay so that Al even though you see your your income taxes you know almost double the income taxes on your business almost doubles because your net income
43:06 um uh uh uh doubled right because your expenses really don't change a whole lot with income maybe you have a little bit more automobile expense or something like that maybe you have a little bit more marketing expense so let's say let's say you double your advertising to get more business um and you know you you you're you're driving more so um now you're you're you're spending you know $500 a month even so you know you're making more money and now you're you have over $15,000 a year available to invest okay
43:45 now you may say well I'm I'm working a lot more hours outside of my salary job so in that case um I I'm going to I'm going to make my allowance $100 a month that's you know that seems fine and I'm going to take this back up to $300 a week okay still you've got over $112,000 or over ,000 dollar a month that you can save and invest and that's that's pretty good that's 20% of your take-home pay okay that's that's a nice amount to uh save and invest each year okay and and
44:23 and this is but this is what's nice about having a budget in a spreadsheet like this is you can um easily adjust and do some wh ifs now there's here's another wh if okay you know are you going to be able to get 20 hours of work a week um at $75 an hour okay for 50 weeks out of the Year notice I only do 50 I'm assuming you're going to take a couple weeks off from your business okay now by the way maybe at $75 an hour after several months you find that you
44:58 could easily be you know working 25 30 even 40 hours a week at your business so now you've got a decision to make do you want to um start uh do you want to make your business your full-time um occupation that's one option okay so so let's let's look what what would happen there so let's say you now you start working 40 hours a week in your business okay and you quit your job how does that okay well that looks
45:34 like a good decision because now you're earning you know 20 you've got $221,000 a year to invest okay so that's that's one possibility that you can do the other next one is maybe you you you know you really like your job you see a lot of long-term potential there so you don't want to give up your job to work in your business full-time but you've got a lot of business still you're content to work at your business 20 hours a week so what can you do well maybe try raising your hourly
46:09 fee okay and what typically when we raise our hourly fee okay what that does is I'm gonna okay what that does is um some people are going to drop out some clients are going to drop out because um you're too expensive now but that's fine um you know whereas you may have been working 30 hours a week maybe you lose a client
46:46 or two if you increase your fee to $100 per hour and now you're back down to 20 hours per week but still you're making you know you're you're making a lot more money and um and that's good of course you're paying a lot more taxes fine no problem but look now you're you know you've got an income of $30,000 a year to save or invest that's over $2,500 a month so this is the kind of what if planning that you can do with a budget as well and this is why again I encourage you to do your budget in a
47:22 spreadsheet like this now um You may not be you know particularly good at um you know building this kind of spreadsheet and if so feel free to send me an email I will email to you a um an Excel document that had this basic outline the way it looked um before before um you know we filled in all the numbers and you know you can certainly fill in the numbers and um and uh you know start playing around with this the way I've
47:57 just been showing you okay and you know again o if there's any particular item um that doesn't apply to you so you can just you could just delete it like you know loopnet maybe you don't have loopnet um but you know maybe you have some other um you know some other uh you know operating expense okay it doesn't you can put that in there or again you can just lump together all of your operating expenses um uh yeah you could just lump all your operating expenses together the way I've set this up um so you'll see one90 if we
48:34 put that in there and take these other two out um it gives you the same result because it's just it's just adding up all the expenses that are that are here okay um so this is what I recommend you do and then if you're using a tool like like quickin or whatever so set up your quickin um chart of accounts the same way they're set up in your budget okay and that way each month you can do a quick and report and you can and you can
49:09 see um how you're tracking okay so this budget is done on an annual basis um and I think what I'll do in the spreadsheet that I give you is I'll put in a you well I we've done this on an annual basis with the spreadsheet sheet I give you you can make a second copy and you can do it on a monthly basis so you can track your expenses month by month um however you want to do that okay but the main thing is is is that you have a basic budget so you track your income you track your expenses um because the
49:45 key thing is here this is what you want to um uh you know you want this to be green okay that's that's too dark to see let's let's let's put it a let's see if we can get a lighter green here uh how about that there you go so you want this you want to be in the green right now by the way the reason loss is in parentheses is um I'm just going to change this let's let's say as gifts you're giving you know $40,000 see that what that's what this
50:21 is a negative number when it's in parentheses that's an a that's an accounting thing okay by the way don't I don't recommend you give you know $40,000 in gift when your after tax income is $91,000 obviously um but in any event um this this this is the key number that you want to look at okay so now by the way um this number is also important um you don't want to you don't necessar well you know you You' got to be careful about running a business at a loss especially if it's a sole proprietorship
50:58 because if you run a sole proprietorship a a so-called Schedule C Business consistently at at a loss so the IRS might decide to um to redesignate that business as a hobby and so all of the deductions you took from that business now become taxable okay so in general if you have a side business the the goal is to make sure you know it's fine to have uh a big profit of course but to have at least a small profit each year okay so that you
51:36 know you you can legitimately be writing off your expenses okay and that's one of the reasons why by the way people start side businesses is it helps them reduce um their taxes so notice that you have um almost $42,000 in expenses here now you may not have all of these same expenses with out the business for example you wouldn't necessarily have payroll taxes um you might not have the marketing expense but notice that a lot of these expenses are expenses you're going to have regardless of of of having a business or not so if
52:12 you need to pay $40,000 in additional expenses keep in mind that if if that were coming out of your salary then you would have to pay on top of that all of well you're going to pay um double this taxes plus you're going to pay I mean I'm sorry you're G to sorry you're not going to pay double these taxes you're going to be paying income taxes on this number so if you're in a you know if you're paying overall 25% taxes basically you need another roughly 121 13,000 in income if this if these
52:50 expenses were being paid personally so you can see it's it's a big tax savings to have a business and be able to legitimately and this is what you want to talk to your accountant about legitimately write off these expenses okay so that is uh your basic budget and we're going to stop sharing come back over here so I thank you very much for joining me if you have questions comments please feel free to post them in social media all the links will be in the show notes after the show posts
53:26 and if you've got a personal question or you want a copy of the spreadsheet unfortunately I can't put a download link in um uh uh the um YouTube uh you know uh notes um but you can but my email address will be there just shoot me an email and I will be happy to email you um the uh the spreadsheet back and um and you can start working on this yourself and again if you have if you have personal questions I'm happy to answer them as long as they're as I always I always give this caveat you
54:01 know as long as they're in my area of expertise so if it's legal or accounting advice you're looking for I'll be happy to refer you to a lawyer or an accountant I'm neither and so I don't give uh legal or accounting advice all right so that is the show for today now normally Wednesday is my last show for the week but tomorrow is independence day here in the United States and I'm going to be doing a special show uh for Independence Day so it has been my practice for a for quite a
54:38 number of years now that on Independence Day the Fourth of July which is the uh essentially the birth day of the United States of America to read the Declaration of Independence so the Declaration of Independence was originally improve approved by the Continental Congress on July 2nd of 1776 and it was essentially published on July 4th okay now if you watch like the the the show
55:13 1776 it it makes it look like everybody signed it um on July 4th that's historically not exactly accurate some of the signers actually signed it afterwards but July 4th was the day it was published to the country and and and the day that the United States was established as a country and I think it's important for us to remember why our our founding fathers decided to break away from the mother country England and
55:49 establish our own country and that's essentially what the Declaration of Independence does so it talks about the the the fundamental ideals of the United States and it talks about the Grievances that the founding fathers had with really King George it wasn't it really wasn't England per se because um they didn't want to alienate their uh you know the English people okay and and and then and then it it established the country so I think it's important to uh at at least
56:26 once a year read this document and understand what our country is all about so I invite you to join me tomorrow Thursday July 4th at 10:00 am all the way to W show or at 10: am. Pacific time and and I'm G to be reading the Declaration of Independence and join me in this tradition okay so and then tomorrow will be the last show for the week this time and then starting next week on Monday is my show um uh trust in Estates weekly on
57:04 Tuesday is business lessons from the military and then a week from today will be the next edition of people making money so I thank you very very much for joining me and wishing you a wonderful rest of the day and looking forward to seeing you tomorrow for a special wa to wow show the best folks oh I got it I didn't do my regular sign off and I should especially on this show Marie