Financial advisor Winnie Sun discusses paying yourself as a business owner.
Paying yourself is so important—I want you to pay yourself as much as you can!
From the beginning, if you already have a viable business—it’s running well, it’s established, you’ve got your slate of clients—then you know how important it is to invoice on time and get yourself paid. Once you’re getting paid, it’s important to treat it like you would a regular paycheck: for every dollar make sure a good portion—20%, 30%, as close to 50% as you can—is going to pay yourself.
Of course you’re also going to have to allocate for taxes—you should have a minimum of 20% set aside so you’re ready with those estimated taxes.
Also make sure you have a buffer: fund your emergency fund as soon as you can, which is generally 3-6 months of living expenses (bare bones: housing, food, and medication costs; for most households you need a little more, so put aside what you can).
If you’re just starting off, focus on bringing in income as your number one goal. All the other bells and whistles—social reach, etc.—are nice, but focus on bringing in income, especially recurring income.
Until you have that, there’s no disadvantage to also maintaining a traditional job that will give you benefits like a 401K and medical benefits until you’re able to duplicate the same level of financial comfort on your own.
Winnie Sun @winniesun
#WinnieSun 25 billion impressions shared | Forbes Ranked Award-Winning Financial Advisor | #CNBCFACouncil Personal Finance Educator Media Brand Spokesperson | Managing Partner of Sun Group