Three simple ways to approach your finances like a billionaire
[Written April 11, 2024]
Hi friends —
Today we're talking about money. Moolah. The invisible resource that makes our late stage capitalist world go round.
In this Energy Recipe, Kelly will be teaching you how to make your money go farther – and in doing so will be sharing her actual financial figures. At the end of this newsletter, you should feel like you're capable of earning more, while also working less. Kelly will be covering:
How learning tax laws (& loopholes) has allowed her to stop comparing her income levels to others levels
How she minimizes her tax rate (and how she aims to be under 5% as an effective tax rate)
How she systematizes her finances (& in doing so, frees up her energy)
We're especially excited about this recipe, because money is something very few are willing to share the nitty gritty details on.
working smarter, not harder
Ladies. It's tax season. I hope you – and your wallet – survived. In honor of this season being (nearly) over, I'm going be superrr transparent with my finances and how I manage them. Because who doesn't love seeing the actual numbers behind someone's business!
So – last year I earned … drumroll please… £13,924.
Yes, that number is a combined figured for all 12 months 😅 Not my finest year, but running a 1:1 coaching business without much childcare meant… no income. (Let's normalize seasons of earning less!)
Now, on the flip side this month alone (April), I'll be earning close to £15,000. More than I earned all of last year. I'm dying, and you're dying with me.
In fewer words…she's back, baby! My breadwinning, business woman self.
I love this for me.
But what I love even more, is that while yes a £15k month is sexy and abundant… I'm not aiming to bring in £15k each month.
I'm aiming to optimize what I take home after taxes each year. And you should be, too.
I believe most of you reading this are entrepreneurial in spirit. Either you are working for yourself, own a business… or are curious to do so in the future. As such, I'm going to focus on my tips for what allows me to take home more – while working less – as an entrepreneur.
tax calculator badassery
Ok, this one might seem straightforward. And many of you likely have accountants. But do you really, actually know all of the tax laws inside and out? My guess is… not really. Because yes, tax is mind-bending. And tax is boring. And tax is tedious.
And yet, if we think about it, tax is the single biggest cost your business has. Just like you've likely obsessed about the number of potential clients you have in the pipeline… or how impressive customer journey is… or how marketable your skills and experience are – why haven't you done the same for your taxes?
I know, it's daunting. When I moved to the UK six years ago, I found myself with absolutely zero knowledge of how the tax system worked here.
And yet slowly but surely I have investing my time & energy into learning the UK tax laws intimately. Doing so has allowed me to put together an Effective Tax Rate calculator that allowed me to navigate the financial side of entrepreneurship stress free.
And ultimately, it is what allows me to feel happy with a target of earning £50-60k/year. Yes, you heard me right! £50-60k.
Before I dive into details, I should share that I personally need £4-5k/month hitting my bank account each month to pay the bills comfortably (or £50-60k annually). In creating this tax calculator that shows my Effective Tax Rate – the higher the income I strive for, the less actually gets placed in my pocket.
I've also found that in entrepreneurship, the first 50% of my income takes a lot less time to earn (the natural network effect vs having to do a lot of strategic networking). So in striving for a £60k revenue goal (with a maximum 10% tax rate) I was actually able to pay all of my bills.
Did my ego like this? No. Definitely not. Earning £60k isn't something to brag about. Compared to others salaries… I didn't feel successful.
HOWEVER – for the last 3 years, I've worked ~20 hours of work a week. I haven't been burned out. I've only done work that truly energizes me. And yes, that feels like a massive success!
Because to me, tending to my energy is more important than tending to my ego. And I'm guessing the same is true for you, too.
Now… I brushed over the Effective Tax Rate calculator I mentioned. And there is a big lever inside of that calculator that we need to go deeper on.
Let's get into expensing like a billionaire.
expensing like a billionaire
Many people I know feel “bad” about writing off business expenses to some degree. Or at least… find each expense has to be very justifiable.
This smells like a female problem, ladies!! Bring some bro-energy to your expensing strategy and starting writing off anything & everything and everything as a business expense (of course staying within the bounds of the law). You are taking a massive risk in choosing to work for yourself. This is a perk you get in choosing to follow a more innovative path.
And because again I am in the mood to give you some numbers – to go alongside that £13k I earned all of last year, I had £10k of expenses.
The year prior – I earned £30k and had £13k of expenses.
The year before that – I earned £40k and had £22k of expenses.
As you can see, I have the mindset #alwaysbeexpensing. I consistently purchase courses, experiences & gadgets that expand my world view and my network. Courses that enhance my intuition are valuable to my business. Travel that informs my newsletter writing is valuable to my business. Tooling, books & assistants to more effectively run my personal life are also valuable to my business.
Each year I've been self-employed I've had an effective tax rate of 2-3%. Yes, you read that correctly… two percent. It's my goal to never pay more than a 5% effective tax rate.
Love me or hate me in my hyper-masculine energy in this arena… it's a card I have to play. And you bet I play it. Every billionaire out there plays this card expertly… so put on your billionaire alter ego's shoes and grow those business expenses, ladies!
This year, however, I'll be earning more so I will need to be expensing more. A lot more.
And you can bet your beautiful booty that I am already thinking about ways to expense upwards of £40k! This is no small feat… but if I don't start now I won't be able to do it. This money is going to leave my bank account one way or another, and I'd rather use it in a way that I view is supportive for the world (rather than leave that up to a questionably motivated politician).
Some ideas I have are…
An excursion to Costa Rica to explore scenes in the book I am writing
Run a Womanhood retreat – without pressure of having a high margin
Hire a specialist to create an app or website that makes a lot of the energy maintenance tools I use for myself easily accessible to my networks
The possibilities are endless!
PS if you have any great past biz expenses, I'd love to hear them!
PPS – don't get me started about how childcare is very explicitly not a business expense according to the law… when it's required to be able to work 😤
PPPS – and in case you were wondering, here is the annual expense total you need in the UK to stay at / under a 5% effective tax rate by income bracket
HAVE FINANCIAL SYSTEMS
Many of you might be feeling overwhelmed in where you could possibly get started to up-level your finances. Or you might be jealous that I know all these things about finances & tax that seem to have taken a lifetime to accumulate.
The short answer is, yes – it is overwhelming. And yes – I have taken a lifetime to accumulate my financial knowledge.
But if you don't start today, you'll never arrive. And while many people are willing to start… it's how they start that sets them off on the wrong foot. More specifically, I see that many entrepreneurs approach finances haphazardly.
And if you'll indulge me in a garden metaphor… imagine approaching financial management as if you decided to be completely random in how you plant your springtime veggie seeds.
Like, an uninformed gardener might choose to plant some tomatoes in a bare patch of grass under an oak tree because it was the place that required the least amount of effort to plant them.
If you know gardening, then you know that tomatoes need abundant sunlight – so they will definitely wither & die in that shady spot.
If you know finances, you know that finances need systems – or they too will wither & die in a chaotic environment.
So as sharing is caring… on a high level, financials I think about on a quarterly basis (and have some level of system for) are:
Cash flow / budget
Annual expenses projections
Tax projections & payments
Investment transactions
Net worth calculations
On a monthly basis I have systems that remind me to:
Invoice clients
Pay invoices
Follow up on coming due or past-due invoices
Input expenses
This again can seem overwhelming. Let me simplify it for you. I have a:
single spreadsheet that houses all the financial data in Google Docs
financial management tool (Quickbooks) to do my income level reporting, and I have it sending automated emails to update me on my income & expense levels
task manager (Sunsama) that automatically reminds me to check each aspect of my finances at the appropriate cadence
Simple systems pack a powerful punch. Because while balancing our time, money, energy & feelings is a difficult task… but having a deep understanding of your finances – and the systems to succeed in optimizing them – makes it a hell of a lot easier.