"Fun Money" Fridays
Ep. 7 LET'S GET DOWN TO BUSINESS SHALL WE?
What if you could choose what [ TAX BRACKET ] you're in....$$$
“EENY, MEENY, MINY, MOE, Catch a tiger by the toe…
My mother told me to pick the very best one and you are IT!”
( Good ole Nursery Rhyme humor ;)
Okay, there’s a bit more to it than that, but it is that simple.
With a great strategy, a dedicated plan, and a solid financial education on how money works, you can pick, choose, and refuse the tax bracket you end up in.
A decision on the matter before it becomes a matter of fact can go a very long way in making it so. This, my Bad Ass sisters, is the long game, which requires intention and effort but once the plan is in place, you set it and you cultivate it by pouring into it like nobody’s business.
Yes, Business, that’s the main topic of our conversation.
How can being a Business Owner help accelerate your possibilities and maximize your time spent, making that gain easier to attain?
1st we need to assess where you are in order to get you there.
Remember the Cash Flow Quadrant?
Let’s refresh our memory from last week so you get the visual as we talk it out.
DID YOU IDENTIFY WHICH QUADRANT YOU ARE IN?
I went from a brief stint as an Employee, to a very long time period as Self Employed, to becoming an Investor while becoming a Business Owner simultaneously. The last two work nicely hand in hand. I think ultimately that’s where most people want to end up. Why?
On the “Right” side resides:
5% of the people with 95% of the wealth
You own a system and people work for you
You own investments and money works for you
What is the alternative?
When I was on the “Left” side, I was left trading Time for Money all the time and I realized that someone else got to dictate what I was worth but they could never truly ever pay me what I was really worth because…
a) there was always a cap that I could not exceed
b) someone controlled my time, when I took time off, and for how long I could be gone
c) I only had the benefit of my own efforts, 1x1 = 1 ( I want to 10x myself, I knew this could not happen on the left hand side of Cash Flow.)
How does Business Ownership maximize your tax benefits?
Well, let’s talk it out. Keep in mind, ideally the best type of business owner is the owner of a true business ~
Having employees, passive/residual income (the kind of money that occurs whether you show up to work or not) and the ability to step away from your business and it continues to make money.
As a Business Owner, part of the bells and whistles = the #1 TAX BENEFIT:
You get 100% of all your money up front, you expense your purchases related to running your business, and when it’s time to file your taxes, you get to deduct all those expenses and
only pay taxes on what’s left over.
Are you tracking with me?
Owning a business gives you more control,, not only do you have your money in your hot little hands to do with as you please for the year( hopefully investing in some things that will grow, Grow, GROW ), you also get to spend what you need to make your business a thriving and profitable entity and at the end of the day, you only pay taxes on the money that you have left!!
Deductions ~ Expenses ~ Advantages: ( a sample of what’s available to use )
* Office Rent
* Books and Educational materials
* Mileage deduction when driving your car
* Prospective client and employee outings and events
* Business trips
When the timing is right becoming Incorporated ( this is where I ended up on the Cash Flow Quadrant )
~ An “S Corporation” is the most commonly used for small businesses. This has the biggest bang for you buck as it helps you reduce taxes even further, as corporations don’t pay self-employment taxes, which is about a 13% savings!!
A SEP IRA can be funded to reduce your taxes and save for retirement
NOTE: utilizing this tool is “saving money on the seed to pay taxes on the harvest”
(a topic I covered in a little more detail under Tax Later when we started the Tax Talk)
I am impressing upon you the need to empower yourself with a bit of “know how” and eduction on the subject of taxes, not because of where we are currently but because of, who knows, where we may end up.
Ask yourself this ~
”What’s the possibility, that in the future, the government will tax your income at 50-75%?”
If you said, “None”, then let’s take a peak at the 1940’s post Great Depression, the highest Federal Tax Rate for those high income earners was… 94%
NOPE NOT A TYPO! 94% Tax Rate
That is precisely why prominent actor-turned politician, then became, President Ronald Reagan significantly reduced the maximum tax rate to 28% shortly into his role in the oval office.
To pick and choose and refuse your tax bracket would mean utilizing Tax Now, Tax Later, Tax Free and Owning a Business…
I hope the wheels are turning as to the plethora of ways in which you can structure a game plan to create a Win-Win as the book “7 Habits of Highly Effective People” by Stephen Covey talks about.
The timeless principles contained in “7 Habits” apply very easily to having a holistic handle on your habits when it comes to money:
Habit 1: Be Proactive ~
Taking responsibility, literally being “response-able”, taking ownership and personal initiative to becoming financially literate is a great place to start
Habit 2: Begin with the End in Mind ~
You have to know where you are going in order to get there, otherwise how do you know when you’ve arrived or worse yet, you may never arrive anywhere desirable if your ladder is leaning against the wrong wall. This involves developing an outcome-oriented mindset
Habit 3: Put 1st Things 1st ~
If you do not have a goal there may be a lot of time spent spinning your wheels to no avail. Not doing everything that comes along is okay because you have formulated your highest priorities and that will help you filter things out and filter things in.
Habit 4: Think Win - Win ~
There’s plenty for everyone and finding that coexistence of collaboration toward a common goal creates a wonderful environment for everyone to win in.
Habit 5: Seek 1st to Understand, Then to be Understood ~
Take the time to fully understand by giving it your full attention and presence. The best way to know if you truly comprehend a thing is the ability to simply explain it
Habit 6: Synergize ~
Innovative problem-solving skills that incorporate ( pun intended ) new and better alternatives to what you have been doing financially
Habit 7: Sharpen the Saw ~
Tap into the highest and best contribution of everyone on a team by unlocking the total strength, passion, capability, and spirit of each individual you enlist. Coming to the realization that life is better with a team, you will go so much further faster. A team of trusted advisors can propel you precisely where you want to be and they in turn get the benefit of exceeding their own personal goals. Seek continuous improvement and renewal professionally and personally
To sum it all up:
Your business will help reduce taxes when you earn money
Your business will help reduce taxes when you spend money
“Remember two simple rules as you travel down the path toward financial independence:
RULE #1. You must keep your money from the banks
RULE #2. You must (legally) keep your money from the government”
~ by Mark J. Quann, “Rich Man, Poor Bank”
The biggest take away for today ~
It’s not about how much money you make, it’s about how much money you get to keep!
Keep up the great work ladies! Until next time,