256 - My Finance Hot Takes

On today's episode of the podcast I'm serving up some finance hot takes.

I start off the episode talking about some wisdom tooth pain I'm having which, unrelated to the podcast topic, led me to my first hot take - The US insurance system is messed up and we should not need to pay separately for dental and eye insurance. 

 

Hot Take #1 - Credit is sometimes worth it and debt is not a moral shortcoming.  

Not all of us have the luxury of having parents pay for our college so we have college loan debt. A lot of us need a vehicle and may need to take on a car payment. Also not a moral shortcoming if you have personal credit card debt, it happens. We live, we learn and we move on. 

When it comes to debt in business, it comes down to investing and the ROI. I shared on my October Profit Report that I racked up credit card debt last year to get ready to launch Profit Rx, which I was okay with because I knew there was a high likelihood that I would make it all back. I ended up making about $20,000 in the first two months of launching the program so it had a good ROI. 

I did the same thing again this year with branding and Drag Tax launch. I'm launching Profit Rx again next month and hoping to pay off those credit cards and fingers crossed also build my business savings account and slush fund so I won't need credit card debt in the future. 

 

Hot Take #2 - You don't need a bookkeeper right away in your business

A lot of bookkeepers might disagree. They might suggest you need a bookkeeper and an accountant right away. I disagree, especially if you're a sole prop or a single member LLC, it doesn't have to be complicated, you don't have to create your own balance sheet, really all you need to do is track your income and expenses to know how much money you're spending and making which for a lot of new business owners you can do on a spreadsheet

Exceptions to this are if you're investing a lot of money into your business, especially if you have a business partner and you're both putting a lot of money in and hoping to make this happen pretty quickly. Examples of this would be a wedding venue or a physical retail location, then it might make sense to have a physical bookkeeper right away because you're dealing with a lot of product as soon as it starts. 

 

Hot Take #3 - Paying $0 in taxes isn't it

If you're someone who believes that taxation is theft or unconstitutional you can log off and find someone else, that's not my vibe and not what I'm teaching. If your goal is to pay $0 in taxes, if you are running a normal service-based or product-based business, you're only going to pay $0 in taxes if you are not making profit, and who wants to run an unprofitable business? If you spend 100% of the money you have coming in on deductible expenses, you aren't making money from your business and the profit is what helps your personal finances and savings. Are you going to short change yourself thousands to stick it the IRS? 

 

Hot Take #4 - Credit card fees are a cost of doing business

I get it, they aren't fun, but it's a cost of doing business and we have to stop bitching about it in this modern era of doing business by the books. Unless you're taking cash under the table or doing big contracts over Venmo is not professional. 

Same thing with contracts - if you're someone who is regularly sending contracts you should be doing it electronically by now. Stop sending the PDFs. 

If you use a platform that has ACH capability you can tell your clients that you prefer ACH because you don't lose processing fees. If the credit card fees are really eating into your profit that much, it's time to raise your rates. DO NOT pass the credit card processing fees onto your clients. No one wants to be nickel and dimed and it's not legal in some states. 

 

Hot Take #5 - Stop being mad at people if they want to 1099 you

I got a DM recently from someone who was frustrated that a client was giving them a 1099 and could they go back and charge them more since they hadn't factored paying taxes into the price. I told them no, you already had a contract and in the future if you want to buy a house or show proof of income from something, you'll need tax returns. 

On the flipside, please stop sending 1099s when you don't need to. The rules are a little complicated but I have a thorough blog post on them here. You don't need to send 1099s if you pay people via PayPal, credit card, debit card, or if you are paying someone who has an S Corp or a C Corp. I get 1099s every year and then I need to print them out and send them to the IRS with a letter explaining why the 1099 is not reflected on my taxes. It's important to understand proper 1099 rules. 

 

Hot Take #6 - You need to pay yourself from the beginning

 

Focus on profit from the beginning, at least a little bit. This is part of the philosophy of the Profit First system. Otherwise we get in this habit of allowing our business to not be profitable. Then we start kicking the can and don't get in the habit of paying ourselves. Before S Corps and salaries I encourage people to pay themselves every Friday or every other Friday as part of a finance Friday routine. 

Profit First is a system that encourages you to have five different bank accounts and separate your money across them. On the surface I like the system but in practice I've found many people use three bank accounts. What I teach in my book, is that I like to have people automate their tax savings into a savings account linked to the bank account. Having five bank accounts complicates your bookkeeping especially if you use something Quickbooks and have to link them all. I've also found a lot of people have trouble sticking to the five bank account system so if you're going to half ass it, it's not a good system for you. 

Stay tuned because I'll be having bonus episodes for the next three weeks AND the doors to Profit Rx will be reopening (with bonuses) in December. 

 

 

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