Let’s talk about personal finance, something we don’t always talk about as creators and entrepreneurs, but something incredibly important as you grow, scale, and look to earn even more.
So first, let me talk a little bit about the basics, things that you’re going to roll your eyes at and basically say, “Girl, I know.”
But you’re not likely not applying those things to your personal finances, which can be harmful to your overall wealth perspective. So I don’t often talk about this, and it’s really because it’s something that’s so individual and so specific that I have these conversations one-on-one with my clients frequently, but not with a general audience or someone that I don’t know maybe their business life or their personal life very well.
So that being said, I’m going to make some assumptions about you. Okay? You’re a creator, owner, or entrepreneur, someone who’s earning with a business of any sort, and that you have money left over after you do that.
Oh, boy. Yeah. So that’s incredibly important and that’s a cute little word I love to call profit, and it’s something I’m extremely passionate about. I think profit should be the goal in any business. I don’t even care if it’s a hobby. It should be your goal. Let that money be your trust fund for your doggie for all I care (Karamel Frappe approves!), but it should be something that you strive towards instead of just flushing money down the drain with something that you’re passionate about.
Burdens, needs and opportunities…
So being said, if you own an entity of any sort, digital or physical, and you’re making money, oftentimes you’re not realizing that with that comes a tax burden, it comes with a strategic need, and that’s what I want to talk to you about today.
So, let’s talk about profit. It is such an important aspect of your business, and profit, if you kind of thinking this through, the basic aspect of profit that I want you to consider is revenue minus expenses equals heaven. Okay. Equals profit. And so with profit, there’s a good issue there, right? Profit means that you have taxable earnings. Profit means that you have likely different revenue sources, meaning multiple clients. Very few businesses these days are built on a single client, one contract type of entity, and so that’s great, because it allows you to be strategic about how you earn.
Let’s talk about PRO-FIT!
Now, let’s think about what you do with what you earn. So all your expenses are paid, and there’s money left or over. Well, the first thing you do is you go back looking at the expenses, right? Any good, sound, personal finance advice would tell you that you never want to overpay for anything. Now, I’m a big believer in value. So I’ll be the first to say something that costs more is not necessarily worse. In fact, oftentimes I’m a big advocate of investing in things that may cost more maybe upfront or strategically, because it actually saves you so much more in other areas and for the long term.
But that being said, it is incredibly important that you keep your expenses in line. I can’t tell you how many times I start working with a new client and the very first thing we do is just wipe out all the unnecessary junk that’s sitting on that profit and lost sheet, right? It’s always some basic software they never really used. They’re overpaying at the level that they’re paying for for some of the tools that they use, stuff that they aren’t even using. I mean, honestly, I see it all, and it’s a really easy area for you to squeak out a little more cash flow and profit for your business, and there’s no shame or blame in that.
I think the second part of it is even more important, which is what do you do with the money you have left over? Now, I need to make an assumption here. I need to assume that you’re strategic enough to know that when you earn more than you spend that you also paid yourself, right? This is really big in some of the industries that I support where it’s a labor of love, but it’s not strategic. So, I’m going to make the assumption that you also pay yourself a usual and customary salary. I think that’s what they say. And so that it’s applicable for you, it makes sense, you’re paying yourself enough and not just a little bit. And so then the profit after that is the one that we’re talking about.
And this is where investing is huge. Now, oftentimes when we talk about investing, we talk about it personally, right? Robinhood, stocks, bonds, but I’m a really big believer that your business can also invest in things, and that you can invest in things that are supportive and complimentary to your business.
Know when to invest, hold and do more
So what does that look like? Well, I think every few years, having some capital improvements to your business can be really important. So maybe you’ve put off improving your website, maybe you’re at a stuck point or you have new competition coming into the market, and so it’s time for you to invest more into marketing. Those are the things I do day in and day out. Something that’s not as familiar to most people is improving the structure in which that your business is based. So if you’re a digital business, improving your digital assets is just as important as if you are a physical business improving your physical assets. If you’re going to put paint on the wall in a brick and mortar business, you better put paint on your digital asset too, right? Whether that’s graphics, anything related to content, copy. I think one of my client’s favorite thing that they would have never thought they invested in that was actually related to ROI, return on investment, and better outcomes for their business was investing in the ability to have copywriting be part of their marketing budget.
This sounds crazy, but copywriting is the thing that you don’t even realize is essential to your marketing, and it’s actually what helps people to make a connection sooner, convert faster, and just have an overall need and desire to be in, with, or around your business. I think it’s one of those things that is an absolute investment into the business, because it does not have a dollar amount impact in the first day or month, but month after month, year after year, you’ll find your business’ imagery is just much stronger, which leads to a stronger conversion because the client that you’re looking for can resonate more. Your business creative and content is better branded, helps you to stand out in the market, and more importantly, you differentiate a lot more clearly when you have great copywriting. So, that’s one area that’s related to the business.
Stocks, bonds, crypto- oh my!
Let’s talk about personal for a second. I have to be honest. I’m not a huge fan of how the stock market has been going for the last couple of years. It’s too topsy-turvy and too difficult for me to tell you how to be successful on there, although I do believe there’s a place for it. I personally invest in the stock market with my husband and I firmly believe in a diversified strategy for investment, which means stocks, real estate, bonds, unique assets. I think anything that you can invest into and get a return safely is a great idea. So if you’re not currently invested in the stock market, or in bonds, treasuries, I think it’s incredibly important that you start thinking, how can I be strategic with the money I have left over?
And some of that is to earn on that money, right? So there’s the simplest form of this, which is making that little, tiny quarter of a percent, if you’re lucky, on something like a money market account in your bank. It’s so tiny, and I hesitate to recommend it, but it’s a great place to start. It’s a really simple place to start. And then you need to find someone who can advise you in the stocks area and the bonds area. I really don’t believe it’s one of those areas you can do alone. There’s so many things that you can DIY, but I don’t believe that your investments, I don’t believe that your marketing or your strategy can be one of them, because those things actually really take a thoughtfulness from an expert. And as an expert myself, I invest in other experts to make sure that I own, and operate, and provide the best of what I know, but for everything I don’t know well, I got an expert for that. It reminds me of that old Apple commercial. It was like, “There’s an app for that. There’s an app for all of that.” There’s a expert for all of those things that you don’t want to learn yourself, you do not want to DIY, and investing is one of them. But I recommend that you invest.
So this is the ‘too long, didn’t read’ version. Take the money, put it in something that grows and earns, and easy place to start would be the stock market.
Let’s get real (estate)
Let’s talk about real estate, because I find it really shocking how many business owners and creators, they own their business and they’re savvy with regards to how they want to grow, but they don’t own even their own home. This is a touchy subject, and I understand that it’s not always something that’s as easy to do as what I’m sharing, but I do believe that there’s a benefit to owning your assets, and especially the most important asset that you’ll probably ever own in your life, being your home, and the safety, security, and the benefits that come with that from a earnings perspective and a tax perspective. I really recommend that if you’re at the point where your business is stable enough to be turning a profit, and paying yourself, that if you’re not already owning physical property, it’s time to consider doing so.
Now, depending on the market or how you feel about your local area and your ability to plant roots, all of that is equally as important. So there’s another expert that you may want to consider conferring with, someone who can actually guide you on whether or not it’s appropriate for you personally, and then also appropriate for you financially. And spoiler alert. It’s probably not a real estate professional, to be honest. No disrespect to my realtor friends, but it’s always a good time to buy when you talk to a realtor, and so I actually think of this as like long term wealth planning. So if you have someone who manages that for you, or tax, a CPA, or even someone like myself as a business strategist. I’m not a professional in those areas, but what I do is I help my clients to kind of guide them to a professional that they can speak to, and know the questions they need to ask, and the stuck points that they have, and actually give them some real world perspective. For instance, “As a business owner myself, here’s what I do.” So that sometimes can be really helpful just for you to feel like you understand the opportunity and also the risks. So physical assets are incredibly important in this digitally centered world that we’re living in, and I hope that you’ll consider real estate, even if it’s just your primary property. For sure.
Planning as a business #boss
I want to talk to you about other aspects of things that you can buy that are physical, including businesses and investment property. So, I’ve owned investment property in the past. It’s not for me, personally. I always believe, and there’s some really great experts that I’ve listened to and met over the years, that basically share that there’s an algorithm to success for investment property and it has to be that you’re willing to have multiple of them. It’s kind of like that joke that people tell like one kid is a lot of trouble, but three’s not so bad, because one takes care of the other and the other one takes care of the other one. Okay. It’s kind of like that with business and also with real estate property. And so I think the people who are usually touting the success of investment property are usually folks who, one, have interest in real estate. So maybe they’re realtors, or they’re looking to do that as a side hustle, or two, they have multiple assets so it makes it an economy of scale for them to cluster five homes or a fourplex apartment complex in an area that they’re already living in and manage that successfully by themselves or with a small team. It’s something I want you to consider if you’ve not kind of delved into real estate before, because it’s actually an amazing wealth creator even beyond your business.
So imagine I’m only talking to you about this if your business is already successful enough to turn a profit, you’re paying yourself, and you have money left over. The real benefit of investment property is definitely the tax treatment. It is by far the most exciting place in the tax code. There’s still so many opportunities to grow and earn, but there are also a lot of things that are only applicable to certain types of investors, and so it’s really important that you do your homework before you start diving into that.
So let me clarify. There are some things that are only beneficial if you are part of a large investment property business, or a type of entity, like a C Corp, where there are just benefits upon benefits upon benefits. Whereas if you’re an average, everyday mom and pop independent entrepreneur, and you want to own like one other home or maybe two other homes, some of that tax treatment, even some of those benefits, may not be there for you. So I’m speaking about these things kind of in rapid succession to open your mind, and help you to think, and help you avoid unnecessary financial burden, but I am also recommending that you do your work and you understand where you’re at personally, professionally, and financially to determine if that’s a great fit for you.
Okay. So the last one is my personal favorite. Not shocking, because I’m a business coach and consultant, but I’m also a business owner, and I have been five times over. And I really believe that owning a small business is the real American dream. It’s not the home. I love the home, but it’s not the home. I love the ability to own multiple businesses, see the economies of scale, very similar to owning multiple homes, but also have so many different avenues open up for you when you are diversified in owning multiple entities. So when I talk about business entities, that’s where you can get very strategic and own comparable businesses, right? You can also be strategic and be kind of an owner of the same type of business in multiple places. You can take your current business and let’s say it’s a physical brick and mortar local business, you can scale it to be national, international, regional. You can invest in something completely different, but maybe you also have a skillset in, and then those things are diversified in a way that let’s say the market is not good for this company, but the market is great for this company. So this company will have better earnings some years, this company will have better earnings in some years, and it really just keeps you in a much better risk profile as an entrepreneur.
You can see me light up. When I talk about this. For me, I grew up poor, very humbly, and this was the wealth creator for me, well even before real estate was the real opportunity, it was buying businesses, starting businesses, growing businesses, and not just because of what I do for a living.
When I think about where I would recommend you start, it’s so specific to your situation that I almost was discouraged to film this for you, but I also believe that when you hear about these different things that we’ve talked about today, I think it will open your mind, which is the very first, most important thing I wanted to do. And secondly, it’s going to help you to think and strategize, which is my favorite thing to ask you to do. And I think it’ll give you some perspective what your next step is, how can you plan.
And by the way, I don’t think any of these things we’ve talked about are get rich quick, overnight success, you can do it in a month type strategies, but that’s what I love about them. They’re tried and true. They’re successful when you make the effort and you invest. It’s just such a great place to put your extra profit. A lot than material things or the things that don’t earn you anything additional on the money that you’ve made. I’m just such a believer in mitigating your tax situation, helping you to grow in a way that’s diversified enough to feel risk proof, or at least somewhat mitigated with risk, and most importantly, to help you to find more opportunities to earn, feed your family, and feel great about where you are in your business and in your life. That’s been true for me. And I really wish that for you.
So I’d love to hear maybe some questions that you have. I can think of one off the bat that I’m not touching in this video, which is a little digital asset that is its own currency, and I’m really not a believer enough to speak on it in a way that I would tell you to invest your profit in that. It’s just way too volatile and way too difficult to predict, especially right now, as the market is constantly like a ping pong ball. It’s up, it’s down, it’s up, it’s down, and investing in currencies, which is what I’m talking about, can be really challenging to do without another expert. So I’ll be honest. If you were to take the advice I gave you and create a succession of it, it would be utilizing your profit for investing first. Where can you reinvest in the business and capital expenses? Then it would be your personal property, right, like your home. Then it would be business and other assets that you can grow and earn with. And then it would be cryptocurrency and other digital forms of earnings and currency that you could invest in. It’s so speculative right now, and I want to give you things that are time tested and proven, and it’s just not one of them.
Doesn’t mean I don’t find it incredibly exciting and sensational, and I follow the market as best I can myself. It just means that if I’m going to tell you to take your hard earned money and not stick it in a sock drawer or just let it sit in the bank and do nothing, I’m going to talk to you about things that are going to give you a return, and some consistency, and some safety, and right now it’s just not that. Let’s talk in like five years.
So again, I’d love to hear your questions, stuck-points and successes. I’d even love to hear you completely make fun of me for not recommending cryptocurrency today, and I’m going to look forward to having more conversations about this very, very soon. Let’s talk about your personal (and business) finances, together!
With knowledge, discipline, it’s time to tell your money what to do… and make it GROW! – KK FIT TIP #1081