hey guys, bridget from money aftergraduation here to talk to you about how to pay yourself when you'reself-employed. i've been self-employed for more than a year and a half now. iincorporated money after graduation in march 2015 and six months after that iactually quit my full-time job as a consultant or early-stage startups torun my business full time. i'm sorry to admit that many of the lessons that ilearned about managing my business finances and paying myself were learned by making mistakes. however, i am excited to spare you frommaking the same mistakes i did by sharing what i've learned and some ofthe strategies in this video. the first
thing i want to encourage you to dowhether you're freelancing or running a blog or running some other kind ofbusiness is to pay yourself 50% of what your business earns. a lot ofpeople don't think that this is possible for entrepreneurs because it seems likeentrepreneurship kind of goes with that i'm so broke running my business thati'll just pay myself later. this is a terrible way to live your life and it'ssuper stressful, especially when you're in charge of your entire income andthat's what you're relying on to pay your bills.i didn't start paying myself 50% of what i earned until the start of 2017 andhonestly that was more than a year of
too late. as soon as i did, not only did ihave enough to pay my personal bills, i also had enough to run my businessbecause i was leaving 50% of my income in the business for business expenses.this 50% rule is one i've heard from one of my favorite podcasts called beingboss, and i also got it from this excellent book called profit first. andi'm going to link that book in the description below. if you'reself-employed now or you're thinking of becoming self-employed or starting abusiness it's an absolute must read. it completely transformed how i run mybusiness finances and changed how i pay myself as well as i how i pay all thoseother expenses. one of your biggest
concerns when you are paying yourself isyour income taxes. an easy way to manage these is if you're not calculating themwith every payday is to simply set aside about30% what you bring in to allocate towards income taxes. now thismight seem like a lot of money or not enough depending on how much yourearning, but i find 30% is usually a good starting point. it'smore likely than not you'll a less so you'll have a little bit left over foryourself. or if you do for some reason owe slightly more it's not that much morethat you have to catch up on. when you are paying yourself, you really need tobe organized about your business
finances and i don't just mean yourpayroll i mean all your expenses and whether you're collecting sales tax andso on. the software platform i use to track all of this is called freshbooks,and they didn't sponsor this video i'm really just sharing it because they areso awesome. it's totally worth the price to pay for a software that will do a lotof your bookkeeping for you. obviously if your business is small you can do allthe tracking in a spreadsheet but as it grows larger using a software platformlike freshbook is great just because it connects directly to your bankaccount and it will actually import all those expenses and organize them for you.the other software i use and again not a
sponsored mention just really a greattool, is wagepoint i issue myself my own payroll through wagepoint because itreat myself like an employee of my corporation,and wagepoint takes the onus of all those personal income taxes i mentionedearlier off of me calculating them and they calculate them and remit them tothe government for me. this has saved me so much of a headacheoverall in not having to worry about contributing to my provincial or federalincome tax or even to the canadian pension plan. all of that's taken care ofautomatically and all it cost is like $25 every time i runpayroll. depending on the stage of your
business and what kind of business yourun you can decide if you want to pay yourself a salary as an employee like ido or if you want to pay yourself in dividends. there's benefits to both, igenerally find paying yourself a salary is better when your income is lowerbecause you want to get that rrsp contribution room. really the mostimportant thing is just that you have a record of how much you're earning incase you need it for things like renting an apartment or getting a mortgage. paying yourself from your own business isawesome, it feels so good and it's such a great feeling of accomplishmentespecially when you can issue yourself a
bonus but it is super important that youkeep track of where every dollar is going so you're not missing importantthings like taxes. i hope you guys found this video helpful and feel inspired andencouraged to pay yourself 50% of what your business earn and keep track ofevery penny. if you enjoyed it, please give it a thumbs up and subscribe to mychannel and i will see you next week.
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