For business owners who make good money but can't keep it, set up separate accounts for owner's pay, profit, and taxes. Pay yourself a fixed amount monthly, like $5,000, and automatically invest any surplus into index funds or retirement accounts. Dollar-cost averaging, investing the same amount regularly regardless of market price, builds wealth without thinking about it.
I'm good at making money, but I'm not as good at keeping it. What are some tips I can do to save some money? So it's not uncommon. You're not alone. Let me give you a basic— some basic tips and some advanced strategies. How about that? So one of the best ways to make sure we keep some of the money that we make, or a lot of it, is setting up multiple bank accounts. like the Profit First system suggests. So with that, some of those accounts are going to be ones for owner's pay, ones for profit, ones for tax. All those accounts, those 3 accounts, are going to benefit you as the owner. Um, and now you can use that owner's pay account the way you like, as long as of course you're paying yourself consistently, because the last thing we need in our economy is for you as a business owner to not be in business. The world is better if you're in business, and the way to ensure that is you pay yourself so you don't get burnt out and you have a profit so that you can actually stay in business. So let's say my owner's pay percentage— now, if you're not familiar with what I'm talking about, go to our website, our webpage, insighttax.com/wealth, or go to our website or our blog and check out Profit First. We have tons of videos. You can check them out on YouTube as well. I've gone over this multiple times. I just want to focus specifically on the question that was asked this time. I'm good at making money, how do I keep it? So let's just say out of the owner's pay scenario that, you know, it's roughly $15,000 to $20,000 a month that you're getting hit with. Or let's use, let's use a smaller example. Let's say it's $7,000 to $10,000 is your monthly owner's pay amount. Okay. Let's say, though, that you, from a family standpoint, you, your spouse, your family, whatever that looks like, you've agreed that you only need $5,000 a month to live off of. So in that scenario, you would transfer the $5,000 a month. But that means this owner's pay balance gets accumulated over the years. One thing you can do if that's the strategy that you use, which I'm suggesting is one of the solutions if you're good at making money, But not good at keeping it. Set a flat amount you're committed to live off of and ignore the excess, meaning you're ignoring the excess and not increasing your cost of living. Then at certain times, whether that's once a quarter or once a year, you take the excess amount and you put it towards some sort of saving vehicle. Whatever that looks like for you, whatever your preferences are. That could be stocks, that could be retirement accounts, could be investments. Look, some, you know, if you're buying real estate property, that's one way to save money because your money is in an asset. It doesn't always have to be cash that saves. Like, you can buy an investment. That's a form of saving. Um, so that's one thing that you can do. I personally do that. I do it once a year. I take the excess out and use the difference. You also have the profit distribution that you are giving yourself once a quarter. Use some of that to save in something, whatever fits your retirement plan. Hopefully you're trying to grow your wealth, but again, that's where some excess cash goes. So From a basic standpoint, using the Profit First system is a really great way to ensure that you're saving for your future so that when you want to retire, you could retire. Because if you're not putting money aside now, then the time comes to retire, really all you can hope on is that your business is going to sell for enough money that allows you to retire. So today, if you haven't started yet, today is a great day to start saving for retirement in case you ever want to do that. Even if you don't ever see yourself retiring, it's good to start planning for it. So that's kind of some basic stuff, Profit First. If I then were to go further, let's say you're taking home a lot more than you need. And let's say your take-home is $10,000, but you're only really spending $5,000 or $6,000 a month. Well, then out of your owner's pay amount, the amount that you're taking home each month, you set up something. Um, the strategy is often credited to Warren Buffett— dollar cost average or dollar cost averaging. Um, it's interesting, I don't even know why it's called that. The premise is you're putting in the same dollar amount into an investment that— so that you believe will grow in the long run, regardless of what that asset is worth at the time. But it's the same amount. So let's say it's $100. I commit to paying $100 into my stock account. Maybe it's the index, the S&P 500, which is pretty smart. I like that idea, to be honest with you. Um, so you're putting $100 a month into the S&P 500, some sort of index fund, and regardless of the value of the S&P, you just— $100, $100. That's a strategy you could use. Again, it, it's up to you on what you're putting the money into. It's your wealth that you're trying to grow. But hopefully you are trying to grow it and acknowledging that, hey, you know what, I'm not good at saving it. That's the first step. But ultimately, you need to build in something like that that makes it automatic that you're putting money into something else. I have a client who fits this description exactly. This particular client makes a lot of money, and when I mean a lot of money, 7 figures or above. And what we did is we set up a cash-defined benefit plan, which is different. I mean, slightly different than a 401 or some of these other things. The client has a lot more control over it, and they can also contribute a lot more into it. And so that is now how he's saving for the future. And because of the money he makes, he's putting, you know, $100,000 to $200,000 away every year into other things. Buying gold is a strategy that some people like. Again, I'm not here to tell you right now the strategies that I like or don't like. Choose the one that works best for you, but pick something that you can create a habit around so you're automatically putting money into that. There are lots of things nowadays because again, you're normal. There are lots of people in your boat where the investment institute, whatever that is, can pull the money out automatically from your personal bank account or wherever so that you don't even see that the money's going into it. That's also a strategy that you could use. So that's Hopefully that helped. And in this case, I mean, you have to be intentional about it because if you're not, you're gonna keep spending the money that you make and you're not setting aside anything. It just, that is what it is. So remember, profit is a choice. Have the courage and wisdom to choose it.
