Looking Back: Year One Results
People have a hard time talking about money, and I’m no different. There’s just something private about how much we make and how much we spend. But, I think it may be very helpful to some of you to know what a first year might look like. What follows is as honest a look at my numbers as I can provide.
Also, before I jump in, know that I’m at a strange point to give results. My official financial year runs from January to December, but I have three months before 2014 that I would like to include (I’ll make notes to try to make it as clear as possible).
2013 (Oct–Dec): $40,113.25
2014 (Jan–Dec): $117,004.02
2013 (Oct–Dec): $4,574.12
2014 (Jan–Dec): $37,368.01
Cost of Sales (Stripe and Wire Transfer Fees)
2013 (Oct–Dec): $121.01
2014 (Jan–Dec): $503.28
Set Aside for Taxes
2013 (Oct–Dec): $14,215.65
2014 (Jan–Dec): $31,854.40
Set Aside for Operation Expenses
2013 (Oct–Dec): $647.44
2014 (Jan–Dec): $2,128.74
Set Aside for Charity
2013 (Oct–Dec): $2,132.35
2014 (Jan–Dec): $4,778.16
2013 (Oct–Dec): $0.00
2014 (Jan–Dec): $37,531.75
For those keeping score at home, the numbers don’t add up precisely – that’s because there are a few minor expenses, times where I was over on operations and a couple of project related investments that just aren’t worth going into. I feel confident that these numbers will give you a really deep insight into the financial workings of the company at this stage.
Don’t be fooled by my take home salary because that number is way different than the salary another employer may offer you. Remember that my taxes have already been taken out, so all of that is actually usable. To get a true feel for things, divide my number by twelve ($3,128) and compare that to the actual amount you deposit into your bank from your paycheck(s) each month. Also remember that I’m saving up to be a year ahead, and at this point I have money in the bank to pay my salary through the rest of 2015 (that’s $3,336 each month).
It’s also worth talking a little more about taxes. Let’s take a closer look at the 2014 tax year (as that is my only complete one so far). Since, at this juncture, Guerilla Labs is a sole-member LLC, the company taxes and my family taxes all go together somewhat. I obviously don’t understand all of it, which is why I have an accountant I trust, but the final amounts are certainly impacted by more than the numbers you see above. With all said and done, I set way more aside for taxes this year than I needed to – like more than double. But, I live in Tennessee, which doesn’t have an income tax, and I had a lot of deductions, so your mileage may vary. As it is, I’m going to continue to set aside the same percentage for 2015, and then maybe make adjustments if I continue to be as far off as I was this year.
Beyond the federal income tax (which includes the estimated quarterly tax payments – talk to your accountant), there are a couple of other taxes (at least in Tennessee) that I learned about. I paid a Tennessee franchise and excise tax ($100), a Robertson County business tax (~$50) and I filed an Annual Report with the state of Tennessee to renew my LLC (a bit over $300). There may be other things you’ll have to take care of depending on where you live, but figuring out these things was one of the things I stressed the most about (and am the most relieved about now that I’ve lived through it).
All in all, I consider it a very successful year. A lot of people could complain about my take home pay, but like I said at the beginning, this is all about what is really important to you. I have no doubts that my salary will grow over time – up to what I had grown accustomed to in my prior job and beyond – but it’s certainly something to think long and hard about before you take the leap.
Continue A Field Guide to Self Employment with chapter 7: Looking Ahead.