31 Days Project // Day 17 // How much should I pay myself?

Welcome to 31 Days to an Organized Life & Business! For the month of October I will be a participant in The Nester’s 31 days Writing Challenge. Taking some of my own advice and taking you along on my journey to a life reset. I’ll be sharing (and practicing) some tips on everything from bookkeeping, shopping, managing kids, intentional parenting, work from home mom syndrome, work/life balance, spiritual reset and more. Not because I am the expert in these fields, but because they have worked for me in the past, and I so badly need them to work again for me now.

When I say I need this reset I’m not even kidding. When I say I’ll be writing about it, I don’t mean, I’m going to talk about past advice or something that worked once for me 3 years ago. I mean I’m going to hit publish on this blog post, and then go and do what I am writing about today.  That is all I can commit to for today. Which means, if you can relate to any of this, I invite you along on this 31 day journey. Watch me triumph or fail, but I’ll be here daily to give you updates. I’d love if you joined me, and keep me posted on your progress as well. There’s hope and support in community here. 

If you missed Day 1, or would like to catch up on any other day, click the link on the right hand side or right here.

Be sure to also follow along on Instagram as I post updates throughout the day. #31daystoreset @Angelsea Urban

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Welcome to Day 17: How much should I pay myself?

 

Congratulations!!! You are an entrepreneur and run your own business. While the workload increases, so does the pride of what you are doing, and knowing that your hands have a direct result in producing your own income, while doing something you love, is so worth all of the blood sweat and tears you put into this business of yours.

 

So, now that you have built yourself a job… How much should you pay yourself?

 

A. You can take a look at your bank account, do a quick once over in your mind about any upcoming expenses and yank out a chunk to pay bills, hoping you left a big enough cushion.

B. Determine the cost of your services/goods/projects. Add a few bucks on top, cash the check, and keep the difference.

C. Put yourself on a predictable salary so you can set a personal budget, and actually live off of the income you are producing.

So… let’s go with C. Because that makes the most sense, yes?

 

How much do you pay yourself?

 

Time for some 5^th Grade Math (no… not the common core, because no… just no. Good ole nostalgic “original” math).

Let’s say you are a photographer. You charge $2500 for a wedding. That wedding includes your photography, + digital images and nothing else.

You just made $2500!!! YAY!!!

 

NO.

 

Let’s skip all the red tape and remember that we have cookies at client meetings, send a client a thank you card, pay for internet service, insurance, shipping, website hosting and all the other good stuff that goes into running a business.

Let’s just say that you have a ridiculous over head cost of $12,000 per year, or, $1000 per month.

You shoot an average of 15 weddings per year. AVERAGE being the key word. This year was 12, maybe you are hoping for 20 next year.

For budgeting purposes, we’ll assume the income of 10. Because we want to consider the most predicable method of income, so you can draw a conservative salary.

10 Weddings X $2500 = $25,000

Ridiculously high overhead of $12,000 per year

$25,000 – $12,000 = $13,000

I can’t assume you will have lots of tax deductions and credits, so let’s assume you will have to pay 20% taxes on your $13,000

$13,000 X 20% = $2,600 (in taxes)

$13,000 – $2,600 = $10,400.

Your salary for this year should be set at $10,400.

 

You could draw $200 week. Or $400 bi-weekly, or just take it monthly at $866.67.

 

Now… WHEN should you start to draw this salary?

 

A. After your first 10 weddings?

B. After you have $3,000 in the bank

C. After you have booked 10 weddings a year for 2 or more years?

 

I would go with C. Truly. Because building a business takes time. Maybe you booked 10 weddings this year and only have 4 on the books for next year. That means your business can’t afford to pay you this much yet. Not on a regular basis. If you start to draw the $866.67 a month too early, you will soon run out of money and will be paying for expenses with each new wedding you book, instead of operating out of the financially stable business that you built.

 

Remember, your business needs to be financially healthy before it can support anyone.

 

Think of your business as the adult on the airplane. You are the child. When times get tough and the oxygen mask comes down, the money goes to your business’s health first. Only when your business is stabilized, can it then be counted on to help you.

 

If you want to build a long lasting business, one that not only lasts, but thrives, and eventually provides an income, a steady income for you and your family, treat it like the adult on the plane and allow it to be steady first. Then you can rely on it to take care of you.

 

 

So How much should you pay yourself?

 

Consider the simple formula given above. Take a hard look at the last 2 years of your business, and choose a number that you know you can hit over the next 12 months. Be realistic. You are not competing with anyone here. It’s far better to know ahead of time that you can afford $800/month than scrambling around every time a big payment is due or trying to budget for equipment or even a vacation.

 

Remember on day 5 where we talked about “she considers a field and buys it”. She plans for it. She gives it great thought. She doesn’t just grab the money and run. She considers it, because she is caring for the business as if she knows one day it will care for her.

 

 

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Be sure to check the blog every day during the Month of October for new content. Or sign up for the VIP Newsletter for important updates.

East Coast Fine Art Lifestyle Family Portrait Photographer Angelsea Urban

Angelsea Urban is a photographer and entrepreneur helping women use their creative gifts to nourish their homes and cultivate their businesses through practical stewardship. Her unique photography work focuses on Redefining the Family Portrait Experience by telling the story of  family through personalized foundations while creating a space to strengthen family bonds throughout the experience. As a certified tax professional and seasoned business consultant, Angelsea has helped the careers of photographers, restaurateurs, musicians and general small business owners through teaching, workshops, coaching, and hands on consulting. Her ministry work focuses on fostering creative gifts in women entrepreneurs to prioritize family and discipleship. She has photographed for families, brides, Bravo TV, NFL Films, and more and has been featured on multiple blogs and magazine print for her work in photography and in business. Angelsea teaches and photographs throughout the United States, and resides with her husband of 17 years, their two children, and their barely 3 pound Yorkie near Long Beach Island, New Jersey.  

To book your session with Angelsea Urban, please visit www.angelseaurban.com

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