Episode Transcript
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Speaker 1 (00:01):
Welcome back to ADHD
Money Talk, the show that helps
dynamic but distracted ADHDbrains take back control over
their money and their future.
Welcome to the show.
Okay, today we are going to doa listener question because a
listener has kindly andgenerously given me a question
(00:22):
to answer, and so I'm going todo that as a reminder.
If you remember, way back inthe day, when I was doing this
podcast like every week and Iwas trying to just be a boss
about it I always asked theyalmost pleaded for listener
questions.
I would love to have more ofthem, because when you give me a
(00:45):
question, I get a littledopamine shot and I'm like, ooh,
someone's asking me a question,I'm going to answer it on the
podcast.
What a great idea.
I'm going to make this personhappy because they're going to
get a question answered andtheir name will be mentioned
just their first name, becausethat's important and they're
going to get a thorough answerand, over explanation, a 30
(01:06):
minute long rampage on theirquestion, and that's fun for me
and probably for you too.
I mean, if I asked a questionto be on a podcast, that it
would get on the podcast, likeliterally within like two or
three weeks.
I would ask questions, and thisis your opportunity to do that,
because I don't get a lot.
I mean, my podcast is small,it's not tiny, it's not huge,
(01:30):
it's niche.
This is niche, this is ADHD,which is niche in and of itself
a big niche.
But then we go into a smallerniche, subsection of that niche,
into the one area where almosteveryone avoids talking about
and I'm talking about it.
No other ADHD podcast wants totalk about this, because there
(01:53):
are episodes that even do talkabout it are probably the worst
performing episodes, because noone wants to even think about it
.
No one even want.
Everyone is in avoidance.
Don't think about it, ignore it.
It doesn't exist, my futuredoesn't exist, nothing exists,
money doesn't exist.
I'm good, oh my gosh, I'mscrewed, just kidding, whatever.
(02:14):
So that's why my podcast issmall, not huge, so I don't get
a lot of questions.
I want them and you want them,so ask them, I mean, and we will
answer them.
I will answer them.
One other thing to know is thata few episodes ago I talked
about an app called Monarch andin that episode I gave you a
(02:37):
discount code to use to get adiscount on Monarch for a year.
That discount code no longerexists.
It got turned off pretty quickbecause the public sharing of
that created some issues withpeople not being great people.
I don't know, maybe we werethings with discount codes that
people don't like, so Monarchhad to turn that one off.
(02:59):
But I have a new one that I'mnot going to share out loud, but
if you were to Instagrammessage me or email me or ask me
for it through the podcast,website, answer or question form
, whatever, then I will be gladto share it with you, and that
code is going to be good untilthe end of the year.
So if you want to give Monarcha shot, I highly recommend it.
(03:19):
It is a game changer for me andfor my clients.
So let me know.
All right.
So the question we have today isfrom a lovely I can only
presume a lovely woman, youngwoman, I presume the most my
listeners are young.
Her name is Elle.
She gave me a question, so Iadmire her for that.
(03:40):
Her question is I am aself-employed bracket therapist,
because I'm assuming she's atherapist because the way that
this reads.
So I am a self-employedtherapist and also a 1099 at a
group practice.
How much and how do I save andinvest based on the ongoing
(04:01):
fluid income flow.
What a great question, and Ihave decided to answer this
within a lens of therapists,just because I have a lot of
clients who are therapists andthis reads like that.
So I hope that this does answeryour question.
First thing that I would wantyou to be doing is to make sure
that you have your businessexpenses separated from your
(04:25):
personal expenses, and you cando this simply by opening up a
business bank account and abusiness savings account, if you
wish as well, because this wayyou can have a very clean sort
of understanding of what is itcost to run your business.
And in my mind, your businessis your self-employment, but
(04:47):
also your 1099 as a contractorto me is all within your
business.
That is, your business is beinga therapist.
You have your own clients.
You also work with clients thatare technically the clients of,
I guess, another company, butthe whole thing is your business
, because all that revenue wouldcome to your business bank
(05:08):
account.
That is your business.
That's important.
So the first thing for sure isopen a business bank account if
you don't already.
Make sure you keep yourbusiness expenses separate from
that, and that will also justhelp simply with simplifying
your tax reporting, simplifyingyour profitability, simplifying
(05:30):
your ability to understand yourprofitability.
It can make you appear moreprofessional.
If you're a sole proprietorship,you don't have a ton of
personal liability protection,but it still will help you with
legal protection.
Having it separated It'll justhelp.
Our ADHD brains want clear,clean lines and structure, so
(05:51):
that'll definitely help.
Using accounting software wouldhelp and a system for just
tracking receipts and invoices,and all of that will be very
useful for you.
That is the first thing, andregarding the structure, sole
proprietorship is fine.
There's also the option ofgoing with an LLC, which you
(06:14):
could set that up.
That provides some legalprotection between you and your
personal assets and businesssort of assets and debts.
So LLC can be a very good wayjust to have that protection for
you.
Then, of course, there are somestates where you can't have an
LLC, where you might have to bea professional corporation or
(06:37):
there's some nuance there.
But thinking about your businessstructure is important.
And so now that you've got yourbusiness account, you've got
your personal accounts, you cannow track your expenses and you
can start setting budgets foryour expenses on both the
personal side and the businessside.
You could simply use a Monarch,which I've talked about before,
(06:58):
to track both, or you could useaccounting software as well.
Some of my clients will useMonarch to offer the day-to-day
tracking of the businessexpenses, but then they'll just
sort of give that over to theiraccountant later who will sort
of do the bookkeeping or therecordkeeping for their
accounting software.
So there's lots of differentways to skin the cat.
But yeah, it's important to bebudgeting and understanding your
(07:23):
expenses, because then, onceyou've got an idea of this is my
fixed expenses for my business,these are my fixed expenses for
personal you can then at leastknow that this is what I need to
cover me to keep operating.
And then you can also throw inbudgets for food, all the
(07:43):
variable expenses, and then youcan draw a line there and say,
ok, above that, this is moneythat could be invested or saved.
Also, taxes so as 1099 workerand being self-employed, you
will need to be payingself-employment taxes.
So you'll want to be settingaside anywhere between 25% 35%
(08:06):
of your income for taxes, and ofcourse this percentage will
vary depending on your specificsituation.
But you need to make sure thatyou are taking care of that,
because we do not want a big taxbill come tax time, you should
also definitely be consideringpaying quarterly taxes, so
setting it aside but then payingquarterly taxes just to help
you avoid any potentialpenalties.
(08:27):
And going back to the expensesagain, you know tracking and
taking advantage of industryspecific tax deductions like
office supplies, equipment,professional development
expenses.
You want to be tracking all ofthat separate too, so that way
you can just know how muchyou're able to deduct to lower
your tax bill.
And then again, going back I'mjust thinking now about the
(08:48):
expenses and income you reallywant to think through sort of
what are the levers?
That kind of create your levelof income any given month, like
what's it based on?
It's based on the number ofclients.
You see, you know yourinsurance reimbursements, the
structure of the group practice,you know what is your
compensation percentage, andunderstanding these variables
(09:09):
and potentially mapping it outon a spreadsheet or something
just gives you that ability tosort of forecast.
So then as the month goes on,you can kind of say, okay, this
is how much I'm expecting, andthat way you can stay more on
top of things.
Going back to the business sortof account side of things,
having a business savingsaccount could be good, because
then you could also you know,before you really just invest
(09:30):
into investments you could firsthave like a business emergency
fund in case times get lean, ormaybe it's for future
investments into your business.
That's really important.
Maybe you want to just go fullsolo and not do the 1099 work,
and maybe you're going to take alittle temporary hit on the
income side, but you want tohave some emergencies there.
So it's really important tohave that as well.
(09:50):
So then, big picture, just likeI recommend with personal
savings and stuff, having a wayto sort of have income once your
income fills up your fixed andvariable expense needs, you then
should have an understanding ofokay, the rest of the money
that comes in gets directed intomaybe another account, or maybe
(10:12):
just straight into aninvestment account, whatever
makes sense for you at the time.
You know, given your place,having that money just get
directed to the goal, which isit sounds like to you it's
investing, saving and investing.
So once your fixed and variableexpenses are taken care of, you
can have the rest of the moneyflow into a different account or
wherever it needs to go.
(10:32):
You can set rules for this inaccounts, whether it be like
mental rules or written rules,or you just have like an
understanding of this month.
When my account hits this andyou know the rest of it I can
just send to here.
Or you can use a program that'sreally cool and that's out,
called sequenceio, which helpskind of automate smart automate
(10:52):
kind of the movement of money.
So there's ways to get it, butbasically knowing over what
threshold is money kind of likefree money to put towards goals
In terms of investing and howand you know where you should
invest.
On the personal side, you've gotoptions you can do depending on
your level of income.
(11:13):
You could either straight upcontribute to a Roth IRA or you
could do a back to a Roth IRAcontribution every single year,
or you could potentially do justa regular taxable brokerage
account.
And then on the business side,you have the option of setting
up a SEP IRA, which is selfemployment pension IRA.
(11:35):
So that's basically a selfemployment IRA where you can
contribute a lot more than youcould in a traditional IRA on
the personal side.
So for the SEP IRA you cancontribute 25% of your income or
66,000, whichever is lesser.
So if you get so, if 25% ofyour income is 70,000, then you
(11:56):
can put in 66,000.
If 25% of your income is 10,000, then you can put in 10,000 to
SEP IRA and those contributionswill reduce your taxable income
dollar for dollar, because it'sa pre tax savings vehicle.
So the money that you put inwill not be taxed until you take
it out.
You may even be able to do,depending on the provider, a
(12:16):
Roth set by RA, in which caseyou will not reduce your taxable
income, but you'll be puttingmoney in.
After tax, that money will growtax-free and you'll take it out
tax-free.
Ultimately, that can make a lotof sense if you're in a lower
tax bracket than you expect tobe in the future.
That can make sense becausethat way you're paying the tax
(12:39):
now but you're in a lower taxrate, so you're paying overall
less tax than later on, whenyou're in a really high tax rate
because you're making so muchmoney.
You can switch to a regular setand reduce your taxes Today by
not paying at the high tax rateand then, when you're in a lower
tax rate maybe in a few years,while you start to retire you
can take out money and pay fromthe regular set by RA at a lower
(13:01):
tax rate.
So, tax planning as an aside,the goal is to minimize your tax
rate, your lifetime tax rate.
What is your average tax rateover your life?
Let's minimize that.
Sometimes that means you'redeciding to pay taxes today to
pay less taxes tomorrow.
I would say the easiest way,honestly, the easiest way to get
all this going is to work withsomeone.
(13:22):
I'm not trying to pitch mybusiness or anything, but this
is a lot you can do as aself-employed person and a 1099
worker, and I would as someonewho's a financial planner who
has clients, like you.
The point is that I want youfocused on getting clients and
(13:43):
growing your business and savingfor your business and
reinvesting in your business andhelping you grow that, helping
you have more money so that Ican help you manage it.
Because you having to deal withall of this with ADHD
especially if you have ADHD,because this is my show it gets
to be a lot and overwhelming and, as we all know, information
(14:06):
overload will just stop, we'lljust procrastinate, we just will
never do it and when we do doit, it'll be out of a position
of complete weakness, meaningwe've waited so long that now
it's urgent because we'rescrewed if we don't.
So the earlier that you workwith someone, the better, or
just get on it and just figureout a way to do it and then just
open these accounts and startall of this stuff.
(14:28):
It's a lot, it's a lot of lot.
But to recap, basically, whatI'm trying to tell you is you
have to be tracking yourexpenses.
You need to know your fixedexpenses, you need to understand
your variable expenses, youneed to know how much you're
making over that which can gotowards various goals, whether
(14:48):
it's whether you set up a set byarray, whether you you know,
and ideally, what I would wantyou to probably do and this is
not like advice, like this isthis is just general information
, because I know basicallynothing about your situation
besides what you've told me,which is a sentence question,
which is great and I love it.
But I just just want you knowthis is just ideas for you to
think about, but before you doanything, I would really want
(15:09):
you to be consulting with aprofessional and making sure you
do all of your due diligenceand make sure you really
understand this stuff.
So, to recap, you want to youknow, understand your expenses,
your fixed, your variable,what's beyond that you can send
to goals every single month.
You could, and I would considerpotentially setting up like a
automatic amount.
(15:30):
That, like you know, is gravy.
Like you know, you're making atleast this much over.
So it's set up an automatictransfer to your goal accounts,
whatever you choose to be yourgoals.
Then you know also what's leftover at the end of that.
Any money that you weren'texpecting or any extra income
just because you had a goodmonth can go towards that as
well.
Make sure you have yourbusiness expenses and income
(15:52):
coming into separate accountsfrom your personal.
That's really important so youcan understand exactly your
fixed business expenses, exactlyyour fixed personal expenses.
You can look at your personalsort of profitability.
You can look at your businessprofitability.
It's all related.
Obviously you could have abusiness savings account, keep
money in the business so thatway you're not having to draw it
out from your business and haveto pay taxes on it.
(16:14):
You can keep it in the businessso you can reinvest in the
business.
And then I would definitely beconsidering saving, making sure
you have a business emergencyfund and making sure as well
that you invest in your business, invest in yourself.
I mean, I think someone in yourposition constantly be thinking
about how can I improve, how canI get more skills?
(16:36):
How can?
What can I do to raise my fees?
You know what can give me anedge?
Because ultimately, more incomeis going to help you in a very
dramatic way to make all of thispossible and to offer all of
this to work flawlessly.
There's nothing quite likehaving income that goes well
beyond your fixed and variableneeds, because that way you
(16:58):
could set stuff up and it runsautomatically.
If you're in a poverty mindset,if you're always spending what
you have, then any rules andautomation you set up just
breaks, because you break it,because you're not, you're
constantly leaving everythingshort.
Oh, also, beyond the step IRA isalso a solo 401k.
Now, I think a set IRA isprobably sufficient, but the
(17:18):
solo 401k, once you get bigger,might be a good way to switch,
or to start with a solo 401k,because as a solo 401k, which is
for self-employed people aswell, the only thing with solo
401k is you can only have a solo401k if you have no employee.
So if you ever get so big andyou have your own practice and
you're hiring a full-timeemployee, you can't, you can't
all or contribute to your solo401k.
You can still have it and itcan still grow, but you just
(17:40):
can't contribute to it if youhave employee.
But I know this is so muchinformation and I'm going into
the weeds now and so it's fine.
But just quickly, as a solo401k, you can contribute both as
the employer and as theemployee, just like with a
regular 401k at work.
You contribute your employeecontribution and then your
employer can match as theemployer contribution.
You can do both, since you areboth employee and employer with
(18:04):
solo.
Also, that 66,000 I mentionedearlier for the set is a 2023
number, so that's going tochange in 2024.
It's changing every year, sokeep that in mind if you're
listening to this.
Well, into the future.
So one last time, because I knowreputation is good and I know
saying it in different ways isgood.
(18:24):
If I were to give you achecklist, I would say open up
business accounts, move allbusiness expenses to business
accounts, start accepting incomeinto business accounts, and
then I would start trackingexpenses.
And number two would betracking expenses and
understanding exactly how muchyou're fixed and variable
(18:46):
expenses are for.
Variable just understand whatyour patterns are and get an
average, understand the line ofwhat your fixed expenses are,
the line of what your fixed plusvariable typically are, and
then that helps you understandwhat's extra From there.
Number three would be toevaluate if you have enough
emergency fund savings for yourbusiness.
(19:07):
If you do not, I would havethat be your first goal.
If you do have enough, then Iwould be looking to opening up
the solo or the SEP IRA andcontributing to that.
Number four would be dope sonumber so that would be I don't
even know a number, I was onthree, four, whatever.
So the next step, five, I think, maybe, or four.
This is this is why being ADHDand talking to people ADHD can
(19:29):
get a little bit complicatedsometimes, because it's a little
bit of chaos.
But anyways, the next stepwould be to determine what is
the gravy amount that you canset and forget as a dollar
amount each month to set account, whether it is the emergency
fund or the investment fund, andthen I think that would be a
(19:52):
great start.
Thank you so much for thequestion, elle, and for
everybody else.
I hope you got some value outof this.
If you're an entrepreneur, ifyou're a business owner, if
you're thinking about it.
I hope this gave you some ideas, some inspiration, hopefully,
and with that said, I am goingto just end this podcast right
now.
See you later.
I'm out of here.
Until next time, take care.