How do I know what to pay myself and what to save for taxes?
This is a question that Madison says she gets all the time! There are so many differing opinions on this question but the method she shares is what she uses for herself and what she advises others to use as well.
Madison says you want to look at your monthly net income that can be found on your profit and loss statement. From there you need to calculate your tax savings. Paying taxes is not optional so you want to make sure you keep that money aside to pay your taxes! Madison recommends you set aside 30% of your net income for taxes.
After that, you have 70% of your net income left and you want to take into consideration what your business debt is. Take out any monthly payments towards the business debt.
Next, LOOK FORWARD! Ask yourself if you are planning on making any large purchases or have anything you need to be saving for in your business. If so, take that money out.
Now you should have your bottom dollar. If you need all of that money, take it! If you don’t need all of it and can leave some in the business account, that is a great option too! This isn’t a one size fits all situation and can be customized to support you!
