In today’s episode, we have a fabulous question from Catherine. Her question is about how much money she should put away for tax and investments. (Beware: I will answer this question but with A LOT of caveats).
I’m not a financial advisor, not a financial planner, not a tax accountant, and not a bookkeeper, but I can share my own personal experiences and what I wish I had done differently if I was starting over again. That is the lens through which I’m going to share.
If you feel like you need some support in this space, dive on into this episode. I’ve got some great resources at the end where I can point you to other people as well.
Let’s dive in!
Before we begin, I will just reiterate that I’m not a financial advisor and not an accountant.
I do NOT recommend that you just take my word for this – I highly recommend you invest time and money in becoming knowledgeable in this space and getting personalised advice.
The advice that I’m going to be sharing today is very general in nature. It doesn’t take into consideration your personal circumstances, it is simply me sharing from my perspective, what I did and what I wish I had done when I started my business.
As long as we’re on the same page about that, let’s dive in.
Thank you so much to Catherine Ellwood for submitting this question.
If you would like to ask me a question, you can do so at any time at tashcorbin.com/question.
If you pop a question in there, just like Catherine did, I might just answer it on the podcast.
The reason why I wanted to come and do this episode is not that I want to suddenly be seen as a financial advisor (I definitely don’t), but I do wish that more of the people that I had followed when I first started my business were open about the finances and behind the scenes in the business.
There were a couple of people that I followed who were very open about it and I’m so grateful for them, so I figure I want to contribute to that conversation.
I’ve got four things that I want to cover off with you today.
1. Having separate accounts for your business
I feel like that might come as a surprise that I would share that, and it seems like a really basic piece of advice that I would be sharing. But it blows me away every time we run Conference and we have this conversation, or every time I’m on a call and we have this conversation, how many people say that they still don’t have a business bank account.
It’s non-negotiable! Have separate accounts for your business.
In most cases, you can find a bank or building society that will do it for free. In some cases, it’s a legal requirement.
It’s also such an important energetic boundary.
Set up a separate bank account for your business.
I feel like it’s such a basic thing. It’s such a basic, energetic sign to the universe, that this is a business. Think of the magnetism and the power that would send out to the universe for you, and the ripples it would create.
Yet so many people still haven’t done it yet, so I’m just going to say it – separate accounts for your business.
Something that I did after a year of being in business was I also set up a second business bank account that was for my tax.
When money started coming in, I put my tax aside.
The reason why I did that after a year of being in business was that after a year of being in business, I did my taxes for the first time, and I had a $19,000 tax bill. My business was really successful in its first year, and I didn’t realise how much tax that was going to cost me.
I am really grateful for the person who kicked my butt into gear and made me open up that separate business bank account for my tax and start putting a good chunk of my income away into that tax account, because I honestly underestimated how much of my income would need to then go into my taxes.
That’s the first one – set up those separate accounts, and, for bonus points, set up a tax account as well. That’s really powerful.
I’m going to recommend some resources at the end of this episode that talk about multiple, multiple, MULTIPLE bank accounts.
I would recommend trying it and seeing if it works for you.
For me, those two have been in my business forever since I’ve done that.
Even now when I’ve moved to a Pty Ltd company, and I’ve had to go back into just having one business bank account, I still at any moment in time know exactly how much in that account is for my tax.
When I get back to Australia and can open a second account, I will. I can’t do that from New Zealand because my business is based in Australia, so I need to actually go to Australia to do that, and so I will do that as a priority.
It is really important to me because I’m just one of those people who sees the money there and it puts me in a space where it is a big energetic thing for me. And so putting it into the tax account for me is really powerful energetically.
I’m definitely going to be going back to that when I get back to Australia.
A separate account for your business and bonus separate account for your tax, and if you want to do even more, you can actually separate it even further. But we want to get the basics done here.
If I was to go back and start again, I would just do a business account and tax account – especially just as I’m getting started.
2. Micro-investing and superannuation
I didn’t actually invest outside of my business until 2018. I started my business in 2013, and even when I first started my business, I was really fascinated by investing and the stock market and shares and all of those sorts of things.
It wasn’t until I discovered micro-investing apps in 2018 that I actually took the leap and started investing outside of my superannuation (which for those in the States is your retirement investments).
I did not put any money into superannuation between 2013 and 2018.
I put money into superannuation now, but at that point in time, my cash flow was really unsteady and I also felt like the best space I could invest into was into my business because I was in that growth stage of my business, I needed to hire team members, I need to invest into ads, I needed to get to scalability, and so I made a conscious decision not to put money into my super between 2013 and 2018.
All of that being said, I think there’s huge power in just putting something aside and putting something away, and I wish that I’d put money into my superannuation a little sooner and I definitely wish I’d discovered micro-investing sooner. I don’t even know if it existed before then, but micro-investing is definitely a thing now and if it’s available in your country, I highly recommend that you do some.
When it comes to superannuation, I was very, very fortunate when I first started my business to already have multiple six figures in superannuation because I was very well paid in my corporate job before I started my business.
I also knew that even if I didn’t contribute another cent to my superannuation, from the day that I started my business until the day I retired, I would still retire in all likelihood with more than a couple of million dollars in my investments because of the long term growth of stocks and shares.
This is why I’m saying this episode does not take into consideration your personal circumstances.
I would say if you are over 40, you really want to prioritise your superannuation.
If you are very young, you might want to prioritise things like micro-investing and just putting small amounts into your superannuation.
There are huge tax benefits to putting money into superannuation versus putting it into other investments.
- There are so many different questions that would determine what’s best for you, such as:
- Do you own your own home?
- Are you in the property market?
- What’s your risk profile?
I am not here to give any advice around that investment.
But I can tell you, I did not invest outside of my business until 2018.
I wish I had started micro-investing when I first started my business, just to be able to see that little tiny amount of money going in each day or each week, and seeing that balance go up.
It taught me so much about my money mindset and my energetic limits on how much excess money I can have laying around as well, which is really powerful. And also I wish I had invested in my superannuation sooner.
That being said, some of the investments that I made into my business instead of making them into superannuation paid off by returning tenfold that ROI immediately, and then that credits so much more money for me to be able to then invest into my business and into my superannuation.
I can’t predict the future, I can’t know what would have happened, but I do think that the sooner you can put some money aside into investments and into retirement accounts, the better.
3. Play with your percentages
This is something I did not do.
When I first started putting money away for tax, I started by putting 20% aside and then I didn’t adjust it at all.
I never paid attention to how much extra I had or how much less I had or any of those sorts of things.
When I did my tax disbursements, I would go and get my taxes done (whether it was my quarterly business activity statement, which was my GST, or whether it was the end of financial year tax).
I would literally have my bookkeeper send me how much I was going to need for BAS, what my quarter’s PAYG tax will be, and I would pay those, keep the PAYG aside, and then I would put anything that was left into my business bank account and spend it.
Silly, silly, silly, silly mistake, because as my income grew, so did the percentage I should have been putting aside.
A couple of times I was short, and there was money in my business bank accounts so I just filled the gap with the money that was in my business bank account, but I didn’t adjust my percentage that I was putting away.
I really need to be at the 22% to 25% that I’m putting away now. I’m much better at that, and I actually have the exact amounts month by month from my bookkeeper and financial coach that I work with.
That makes it much more precise for me at the moment, which is really sexy and I love that.
But do play with those percentages.
In Profit First (which is one of the resources I’m going to recommend at the end), they recommend to start with 20% or maybe 25% and adjust from there.
Maybe play around with that, but do pay attention and don’t steal money out of your tax account (I also made that mistake).
(Goodness – this is like financial confessions with Tash Corbin.)
4. Pay attention to your money and build a system for managing your money
This is the most important advice I can give you around tax and investments.
One of the big questions that people ask and one of the big goals that people have when they are starting a business and they’re trying to grow their income is: How do I never worry about money again?
There is a big difference between worrying about money, and managing your money.
A lot of people conflate those two things, and they think that by never having to worry about their money, they never have to manage their money.
That is absolute BS.
Multi-billionaires still manage their money. You still need to manage your money.
You still need to know what’s going where, and you still need to know what’s going in – YOU are the responsible party.
If you don’t sit down and have a money date with yourself or something similar at least weekly, put that in your calendar. Make it a non-negotiable and do it.
You need to pay attention to these things.
Putting your head in the sand and ostriching when it comes to your money is the way that you create money worries because then you don’t know.
You don’t know if you’re:
- Going to have a big tax bill – you just worry about having a tax bill
- Going to end up with the right amount in your investments – you just worry about your investments,
- Setting yourself up for retirement – you just worry about retirement
It’s so important to notice and identify that behaviour.
You don’t want to worry about money, so you don’t look at money.
But looking at money takes away money worries, because the best thing you can do for your money is to have a plan.
When you look at your money, it might not be the money situation that you want to see, but the most important thing is that you look and you make decisions and you make a plan about how you are going to move it towards that money situation that you do want.
You don’t just decide that you need to get a lot more sales and hope that somehow it works out.
I didn’t get to that point of feeling like my money stuff was really amazing and I was making enough sales until I did the money management stuff.
That is what created the release of money worries.
It wasn’t that I magically made more money, it was that I started managing my money more actively and I paid attention.
That is my number one piece of advice.
Pay attention to your money, get your head out of the sand, build a money management system of some sort, have regular money dates with yourself and make a plan.
If you’re ignoring your money and your finances, you will have money worries because you won’t know.
It is better to know.
If you’ve got overdue taxes, get them caught up. It is better to know.
If you’re in Australia, you can normally negotiate a payment plan. It is better to have a plan and it is better to know.
If you haven’t been putting tax aside, put money aside. Just start.
If you haven’t got a separate business bank account, do it. If you don’t regularly look at your money and manage your money, put it in your calendar and start doing it.
I know that I’m getting very lecture-y here, but this is something where I see women really hold themselves back and keep themselves small, because of some kind of subconscious or conscious belief that managing their money somehow will make the situation worse – that looking at their money somehow will make them feel really depressed.
You get to choose when you look at your money how you feel, and the only way you can fix it is by knowing what’s there, making a plan and managing that money.
Pay attention to it.
As I said, I’m not the expert here, I just wanted to share my own experiences and my advice that I would give to myself.
That little lecture-y bit that I just gave to you is what I would say to 2013 Tash if I could go back and whisper in her ear. I wouldn’t be whispering, I would be yelling, and I would be drilling it into her because I’ve put myself in some really tricky situations by not managing my money.
When things got tricky, I would put my head in the sand and ignore it, and that just made it ten times worse.
I wish I could go back and give her a little lecture on those.
Anyway, I’ve got some great resources that are for you from experts in this space:
1. Profit First by Mike Michalowicz (book)
This is not an affiliate link or anything, just go and get Profit First and have a read of it.
It’s a really powerful book.
It’s got some great systems in there. You don’t have to go full in with the system that Mike talks about, but understanding the concepts and principles and just getting started is really important.
Go and read Profit First by Mike Michalowicz.
I wouldn’t necessarily recommend listening to it as an audiobook.
Yes, it’s a good audiobook to listen to, but there are also lots of written bits.
I actually did both – I had the audiobook and I had the physical book so maybe get both of those.
2. Get Rich, Lucky Bitch by Denise Duffield-Thomas (book)
This isn’t a money management book, this is about growing your income and releasing all those limiting beliefs around money.
I listened to Get Rich, Lucky Bitch on audiobook about 200 times between 2013 and 2016. I still love that book.
My version of that book is so dog-eared.
I got a second copy and got it signed by Denise at one of my Conferences, and even that one’s got post-its all through it.
Honest Dave (my partner) would be able to recite passages from Get Rich, Lucky Bitch off by heart to you.
It completely changed the way that we looked at how we spoke about money, how we behaved around money, how we viewed money, conversations with others about money, conversations with each other about money, and our thoughts around money.
Life-changing. Go and grab that book as well – Get Rich, Lucky Bitch.
That’s an awesome audiobook, Denise reads it herself.
3. She’s on the Money by Victoria Devine (podcast – soon to be book!)
This is especially relevant if you’re in Australia or New Zealand.
There would be other ones that are more relevant for those in other countries (I’ve got a USA one to share next as well).
The podcast She’s on the Money is about that investments piece and looking after your future self.
It’s mostly focused on millennials who are in a job, but there are some really juicy little tidbits in there.
It’s really great for understanding the basics of investment and finances.
She’s on the Money is the name of the podcast, and it’s a podcast by Victoria Devine.
Victoria is also releasing a book called She’s on the Money this year, so keep an eye out for that one as well.
4. Hello Seven with Rachel Rodgers (podcast)
This is another podcast that I would recommend that’s more relevant for those in the States.
Rachel also has a book coming out that’s available for pre-order now (in April 2021).
That book is called We Should All Be Millionaires by Rachael Rodgers, and her podcast is called Hello seven (as in hello seven-figures!).
That’s a really good one as well.
Very intersectional, amazing perspectives from different backgrounds and different cultures as well as understanding the impact of our ancestors and our money mindset and all sorts of things as well.
Those are the resources that I recommend in this episode.
This has been a particularly juicy episode, so I would love for us to continue the conversation over in the Heart-Centred, Soul-Driven Entrepreneurs Facebook group.
The reason being also is that we do have financial advisors, financial planners, accountants and bookkeepers in the group who will be able to give you more detailed advice as well.
You’ll be able to connect with them through this conversation.
If you would like to come over to the group and continue the conversation and ask questions, just use #podcastaha, let me know you’ve been reading episode number 272, and you can ask questions, share any lightbulb moments that you’ve had or make a commitment to take some action in this space.
It’s a really important one to take care of, which is why I wanted to answer Catherine’s question.
Thank you so much, Catherine, for asking.
Until next time, I cannot WAIT to see you SHINE.