Ep. 88 My Best Money Advice for 2021

Jan 14, 2021

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Hey everyone, this is Julie, happy 2021, sort of. It seems like 2020 has bled into 2021. But nonetheless, we are still here, we are still standing. Today I want to talk about my best money advice for 2021.



I did a kind of state of the union recap, and a lot of people wanted to thank me for that, because I shared more realistically my numbers, what it looks like in the backend, so to follow up, I wanted to give you some really practical advice about how to think about your revenue in profits now.

So this is going to work for anyone who makes $60,000 a year or more, and that’s actually exactly when I started this habit. I remember it really clearly, I was starting to exceed about $5000 a month regularly, now the habit is like second nature.

So step one, get a bookkeeper. This will be a lot easier if you do that. And if you really, really don’t want to pay a bookkeeper and do your own bookkeeping, my bookkeeper who is now my CFO, Emily Volz, she has a course called Automatic Bookkeeping. It’s like $27 or $37, it’s totally worth it. She’ll help you get set up with Quickbooks. So whether you hire or you do it yourself, you really need to be able to see your monthly profit and loss, which really is necessary for the rest of this work.

So step two is to start paying yourself a salary. This is sort of based on the Profit First Model, if you’ve read that book. If you’re an LLC, this is going to be kind of pretend because in an LLC you don’t really have a salary, you don’t put yourself on payroll, but we’re still going to earmark it and act as if you are. Now if you’re an LLC electing to file as an S Corporation, you will literally put yourself on salary. So it can be done pretend wise if you’re an LLC or a Sole Proprietor, or you can just do it on payroll if you are an S Corporation.

So everyone asks, “How much should I pay myself?” and really only you can answer that question. But pick a number that you can start at. So for example, if you’re making $5000 a month gross, maybe your salary will be $1500 a month to start. If you’re making $10,000 a month, maybe the salary will be $4K. This exercise is very important because as you grow, and I think this happens with a lot of business owners, when they first start out they think, “Oh, I make $5000 a month, I keep $5000 a month.” And what we need to do is train our brain to see the gap, because the gap will only grow as you grow. So you’ll be stuck with a lot of disillusionment if you don’t get that under your belt. $5000 a month business is about a $1500 a month salary. $10,000 a month business is about a $4000 a month salary. So that’s kind of how you work it.

Now step three is to make a plan with any of that extra profit. So depending on how much you’re making, after you figure out your personal salary and your expenses, there might not be anything left. That’s okay, but the goal will be to have additional profit at the end of the month. So that’s the goal that we’re working towards.

But with whatever you have left, I recommend you do the following. You’re going to set aside 30% of your remaining profit and put it in a tax savings account. Now, I know that’s painful to do, but please trust me on this. And once you start making more money, over $300, $400,000 a year, you’re going to get to put more in, like 40%, and I won’t tell you that I put in 50%, but I do. And I don’t usually need to use all of it, but it is my cushion, because I am in a high tax state, I also have employees in other states, which forces me to pay state taxes in other states as well. So when you add that all up, its pretty bad.

Okay, so then with the remaining 70%, you’re going to want to divide that again. And this is what I do. I take 70% of that remaining amount, and I put it into my personal investment, banking accounts to use for whatever Alex and I wish. The remaining 30% will go into a business savings account. And that money can be earmarked for a Mastermind, an event, a new project, a new hire, etc.

So if you look at someone up in the 6 figure a month range, so let’s say an average monthly revenue of $150,000, I am going to say, $150,000 a month is you know, it’s over a million dollars a year for sure. It’s close to two million dollars a year. So a salary for that kind, let’s put it around $250,000. So that’s going to leave you with an average monthly net profit of about $70,000 left if you have good profit margins. So I would split the $70,000 in half and I would put $35 into the tax account, and the other $35 is going to be divided again. That $35 is going to be divided into 70/30.

So that means out of $150,000 in revenue I’m getting a salary of about $10,000 a month, and I’m also getting a distribution of about $24,500. Then I have $10,000 saved in business and my taxes put aside. Now this is all creating a system whereby I am not struggling with cash flow. I have my tax money growing, and if you want to put that in some interest yielding account or invest it so that at the end of the year, or quarterly, (you should be paying your taxes quarterly so you don’t get a fine), then you have all that money set aside, you’re not worried about it. You also have a salary and a distribution that you’re taking, which is what you live on or invest with, and then you have business savings which allows you to make decisions not out of scarcity, because you have a savings.

So I understand that for some people that kind of walk through this exercise with me, they’re kind of like, “Wow. So you really only see about $30-40,000 a month when you’re making $150,000? That’s awful.” Now, that will feel awful if you’ve been operating in the world view, the false world view, which is the number that everyone tells you they make per month is the number that you actually keep. So what I’m trying to do through my email list, through my podcast, through my posts, is change that paradigm. So that people stop thinking that a six figure month means a six figure monthly salary.

Once you get used to it, and it’s way easier to get used to it when you’re making less, you won’t see numbers the same anymore. So now when I see a hundred thousand dollar launch, I’m proud, and I’m happy, but I have real expectations of what that money does. And for those of you guys that are just kind of like, taking the pill and waking up to this, it’s going to feel hard. But trust me, if you start when you’re making less, it won’t hurt as much when you’re making more.

You know, when I see at the end of the year, okay, my gross revenue was 2.2 million, that’s amazing, I’m super excited. I already know what 2.2 million kind of funnels down to in my pocket, so I’m not living for the high that I think a lot people live for when they’re looking at attaining those big numbers.
So I had a former Digital Insider who’s now making multi-million dollars a year reach out to me and say, “Thank you for teaching me this lesson about money, because it kept my business running smoothly during Covid because I had this foundation.”

So you can do this no matter what your numbers are, trust me, you will thank me eventually. And really the person you should thank is my accountant, who helped teach me this habit 5 years ago, and it is now allowed me to create wealth in ways that many influencers who grew quickly cannot. I appreciate you all, talk soon.

Julie Chenell initials

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Get in touch! I teach strategic business growth tacticss for everyday people.

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