Ten Percent (10%) Is All I Get
PAY YOURSELF FIRST
I think we have talked about this in a number of blogs. (I know we have!) So many people start their own online business and pour everything into it, never seeing a return. Most people do not build a business but instead, they “gamble” on building a business. They throw mud against the wall to see what will stick!
In the blog post: Financial Regrets in Business the author wrote the following:
In the words of Robert Kiyosaki: “PAY YOURSELF FIRST!”
He realized this as he was rebuilding and paying off a huge debt that his business partners left him with “when they ate the seed money of their business!” (I could spend some time on this but you can pick up one or more of Robert Kiyosaki’s books.)
My biggest financial regrets in business is eating the seed and not paying myself first. When everything goes back into your business (including the seeds for future crops), you are doing no more than gambling against the big houses in Vegas. The odds are stacked against you!
Now, we all have a chance to correct our past mistakes. We are entering a new venture withCompumatrix. With this new venture, I will pay myself 10% and 25% will be used to purchase more “SEEDS” for future crops.
Keep the above information in mind as we move forward. (We will refer to this.)
TEN PERCENT (10%) IS ALL I GET
Let me take you back to a previous post: Taking on the Tax Bite, I wrote the following:
That 10% is a part of the taxable income while the 25% is a part of the business expenses and are deductible from the gross income. These are just 2 aspects of this business we have discussed. All other business expense will be added to this 25% and deducted from the gross income. Then charitable donations will be taken into account (per IRS rules up to 50% of your taxable income can be deducted).
Ten percent here, 50% there, where do you turn for the right information. This is when I tell you to : to consult a tax professional.
Beyond this, let’s discuss the figures that we have presented. If you pay yourself first (10%), then you have something to show from your online business. If you return 25% back to your business (this could be a lot more depending on your business), then this is a business cost and deducted from your taxable income. After deducting the business expenses, everything else (including the 10%) is a part of your taxable income.
You can donate to charitable causes up to 50% of your taxable income. (This is our goal but we are not there yet!) After you deduct what is your charitable giving (for most people 10%), then the rest is what your taxes will be based on. This is where we will take 50% of this figure and place it in a special account. This account will be drawn on to pay taxes and what is left is a built in savings.
We will have to address this built in savings in an upcoming blog post. For us, this is a critical part of our Financial Education and planning.