How to Manage Your Money Like The Wealthy for Self-Employed | Millionaire Mindset

Your processes for money management are imperative to successful wealth building. Below is an overview of how to start building your wealth.

Self-Employed vs. Employee

If you are a self-employed individual, small business owner, realtor, independent contractor, programmer, financial adviser, or work for yourself in any capacity. This article is for you.

I felt it was important to break it down into Employees and Self-Employed business owners separately because although there is much overlap, there are specifically different planning processes that must take place.

First: Set Your Goals

Whomever you are and whatever you do in life it is imperative to set goals and to internalize them. Without setting goals for your future you'll have much less probability for success.

For example, What if you were taking a vacation but didn't know where you were going? How would you pack? Is it going to be warm? cold? wet? dry? I think you see where I am going here.

If you don't have a plan for where you are going then you'll have much difficulty in making the right decisions today.

Likewise if you know exactly where you're going, what you want to do there, and what it will be like, then you'll have much higher chance of success and happiness!

Cash Management for Self-Employed

Planning your cash management for a self-employed individual is much different than an individuals budget. Some important concerns to understand and plan for are taxes and business expenses. You'll want to be sure you're taking every step possible to reduce your taxes due and utilize all business expenses efficiently.

I want to direct you to a video by Tom Ferry. How to Properly Manage Your Money Like the Rich | Tom Ferry.

To save you 19 minutes of your time I'll briefly describe what the video goes over. Tom is at a real estate conference explaining this concept to real estate professionals, but this will relate to anyone that is self-employed or an independent contractor status.

First off Tom explains that roughly 80% of realtors put there paychecks directly into there personal account. This results in an OVER PAYMENT of taxes in most cases. If I could save you on your tax bill would you be happier?

Get Incorporated

You need to work with your accountant on incorporation of your business. Make it so your paychecks go directly to your business, and you receive all the tax advantages!

Once your checks are flowing directly to your business account there are a few more important steps. Below are 3 accounts that need to be created.

Saving For Taxes: Tax Account - 33%

First, is saving for your tax bill. I personally save %35 into my tax account, and Tom recommends to save %33 into your tax account. Ask your CPA, with my current income (or projected income) how much should I save into my tax account?

Saving For Business Expenses: Business Account - 33%

This is not a difficult process, but by maintaining your expenses due in the future within your business account you can potentially avoid the income tax due on that amount. The potential tax savings on a $10,000 paycheck ($3,300*33% tax rate = $1,089! of potential savings) Please refer to your CPA when planning the percentage to fund your business account with, and to make sure you are receiving every deduction available! Ask your CPA, is there anything else I can be doing to reduce my tax bill?

Saving Your Living Expenses: Personal Account - 33%

Now you will need a personal budget. In my previous article I explain planning your individual (or household) budget. Please see How to Manage Your Money Like The Wealthy for Individuals and Households. This will is review the processes for managing your personal budget.

Get going now, and don't look back!

Stop wasting time and money! Contact your CPA and get started today! Having confidence in being able to pay your taxes, having liquidity for business opportunities, and committing to a personal budget will create a mentality for yourself that is unbeatable.

Imagine having an extra $25,000 in your business account at the end of the year, and all your taxes are paid. What opportunities would you take? How much more could you grow your business in the coming year with the extra marketing budget? How much more income would you make? Would you be happier then you are now?

“You must be willing to do what others won’t do, to have what others won’t have.” Les Brown

Thank you for your time

Also See: How The Wealthy Budget and Why You Should Too | The Millionaire Mindset