The company I started 4 years ago is doing so much better than I expected, now I don’t know what to do with all of the money I’m making

[aishling]

I’m 35 years old and I started my business of mobile DJ’ing four years ago as a way to make some side money. It’s taken off and I’m making more money then I know what to do with. I’ve never been much of a financial planner, I don’t have a 401k or any other investments for that matter. Everybody in my family has lived paycheck to paycheck for as long as I can remember and they have no assets to show for it. I’ve saved up something over $50,000 but it’s just sitting in my savings and checkings account. I’m also now making over six figures a year in profits and it’s still growing.

I get a lot of different advice from a lot of different people. I’m sure it’s all good advice, but I just don’t know if it’s what’s best for me. People mention I should be buying my first apartment or condo, or buying a property then renting it out, my accountant says I should start a retirement fund, others say I should invest, others say I should travel the world... frankly it’s a bit overwhelming and I don’t know where to begin. I like to do my research before making any big decisions, but like I said I just don’t know where to begin. Are there any books or sites that you would recommend?

I also feel like I’m being a bit frivolous with my new found money. My credit card bill each month is between 2k and 4k. Some of that is investing in the business or other miscellaneous business expenses, but a lot of it is going out to eat or drink, going on trips or vacation, or to buy myself nice things. Maybe I’m lying to myself I when I say that in my line of work of dj’ing and entertaining that there are a lot of events that I’m going out to network and build relationships, so it’s justified. But sometimes I wonder if it’s too much too. I feel like I’m definitely getting more care free about it as well and I might be biting off more than I can chew. I want to be more disciplined about my spending habits.

TL;dr : I don’t know what to do with the money I’m making, I’m also spending more than I’m comfortable with. I want to invest properly in my future but I don’t know where to begin and I’m getting anxious about it.

Edit: I don’t have any debt besides a work vehicle loan of about 12k. I paid everything else off recently including school debt and past credit card bills. My monthly credit card that I pay 2k-4K is accrued monthly and paid off every month, mainly just so I can get the points/cash back for them.

 

[resjudicata]

@aishling How much is your credit card bills in full? And other debt? You can start by paying off or down that. Do you have insurance and are you an LLC? If not you should to protect yourself. Seems silly but it’s not worth a kid tripping on a wire and now your sunk because he smashed his face in. Is this your only income now? Either way you can be investing for retirement with it. You should make a monthly budget that dictates how much you spend in each category so you dint eat out too much. Save x per paycheck for vacations instead of randomly going on one. Be thankful for what a good job and hard work you’ve done and remember your life before this so you don’t get carried away. Budget so you have a mix between fun and savings. It’s only money you can’t take it with you but at the same time you want to have some fun with your life!

You keep mentioning you spend too much and that you want to spend less, only one person can turn that from worlds to reality. You can have fun and still save at the same time. You want to have a mix between living your life and being able to support your elderly self as best as you can.

 

[cowntryboy]

@aishling Invest in assets that can make you income. Don't make your company the only source of revenue.

Socks
Bonds
Anything you can think of to make passive income.

 

[emigro]

@aishling Seems like you could use the flowchart from the r/personalfinance wiki! I’d encourage you to check out those resources to help organize your priorities.

 

[aishling]

@emigro Perfect, thank you!

 

[nicolacov]

@aishling

1. Start to track every expense and Create a budget for monthly expenses moving forward YNAB (you need a budget) or Mint are good mobile app versions to track, but excel never fails listing by general categories.
   2.. save up a 6 month emergency fund
2. Max out a traditional 401k
3. Speak with a fiduciary financial advisor to discuss you goals. Do you want to retire early, Finanical Independence Early Retirement (r/FIRE)? What age? How much do you need invested by what age to start living off of Stock growth and dividends? What is your expected income you would be comfortable living off of in retirement? Are you a risk-seeking or risk-averse person?

There are likely a lot more resources out there which I am just not familiar with, but the above is working well for me as I am in a similar boat to you as of late

Goodluck!

Also look into brokerage accounts and/or invest yourself in S&P 500 index funds. Stock Market has been tanking this last week (start of bear matket?) so you would be in a good position to jump in.

 

[chillchristian]

@nicolacov If he owns his owns business and does not have a 401k, how can he max out a 401k? He would need a solo 401k, but that makes hiring others hard to do, same with a SEP IRA too. Easiest thing is to start is a Roth or traditional IRA depending on his income.

 

[aishling]

@nicolacov Sweet, I used to use mint a long time ago but kinda stopped after I got too much into debt and the numbers weren’t looking good anymore lol. I’ll set that up and get that running again though, good advice.

I just reached out to a financial planner and I’ll look into the other things you mentioned, thanks.

 

[patrickburwell]

@aishling I would recommend talking to your accountant about business structure. If your business is an LLC you might want to file taxes as an S-Corp, which would make you an employee of the business and could save you some money in taxes. I'm not an accountant or tax expert, but went through the process with my accountant several years ago and I'm glad I did.

I'd suggest a retirement account. You could set up a 401(k) for your business or an individual 401(k) if you have no employees and don't expect to hire employees. With the 401(k) you can put away a nice amount of money each year and reduce your taxable income. Again, your accountant would be the person to talk to about this.

 

[studentoftruth]

@aishling First, hire a financial planner. Then go through all your goals, needs, and wants.

 

[bellagirl]

@studentoftruth yep, that's good advice!

 

[tampasteve]

@aishling Pm me for my PayPal address, will be more than happy to pay off debts. Will even throw in feet pics if you want em!

 

[tytj8899]

@aishling 1) Given where the market is, save money
2) Given where the market is, take some play money and buy some S&P index funds
3) Maximize 40k, Roth IRA, Health Savings account
4) Open American Express business platinum. Charge all expenses on that. You can take free vacations. I personally use AMEX Delta Reserve card but some of people prefer AMEX Platinum. Def worth the fee.
5) Cut back spending where you can and ensure you have a year of expenses covered
6) Talk to a good CPA and see what tax strategies you can/should use to minimize your tax liability
7) Enjoy life!

 

[ttryl09]

@aishling Haven't seen any comments about budgeting so here's some advice there.

Most people who start making alot of money tend to live up to that income level. More money does NOT mean less problems. You have to keep yourself in check.

Set 2 different budgets. 1 for your business and 1 for yourself.

Set a budget for yourself that your comfortable with. This budget should also include retirement investing. When your income increases, try your best to keep the original budget. You're going to want to spend and splurge. This is normal. If you do, keep it limited. Again, you need to keep yourself in check.

Set a reasonable budget for your business. This budget is different than your personal. There are eligible deductions that can be taken for business related expenses. However, do not play the game of eliminating taxes by eliminating taxable income. It is a rabbit hole that will suck you in and limit your business. Yes there are reasonable expenses for your business. You need to meet clients, advertise, network. However, when your cross the threshold into buying a Lamborghini because you "need to fit the bill" when meeting clients, you're crossing a line. Here is where you ask yourself, is this purchase justified with the business? Or am I making the excuse so I can drive/own a Lamborghini? I hope this paints the picture for the expenses I'm talking about.

Perhaps it wouldn't be a bad idea to even hire an accountant/financial expert (or, dare I say, a CFO) for your business? This would help delegate that kind of work to someone else so you can direct more mental focus on growing the part of your business that you have been so successful with. Business growth does not just look like an increase in profit. To fully maximize your profit growth, you're going to want to start hiring staff to offload some work. You're only 1 person. Do not burn yourself out on trying to handle everything.

Hope this helps.

 

[manillabar]

@aishling Sit down a financial planner, not a financial advisor. They should only charge fees (hourly rate or something) and do not work based on commissions. They can provide objective advice for you, depending on what your goals are.

Its worth saving for retirement while you're young so you should look into that soon. The vehicles of investment will depend on what your risk tolerance is. Btw, since the market is the middle of a correction right now, it's a good time to get in. In the grand scheme of things, it's not a big deal though.

Best of luck!

 

[djlitton]

@manillabar Small addendum financial planner, financial advisor etc have no bearing on quality control in the industry. They can call themselves what they want. What you need to ask the person that you speak with is what their compensation structure is what will tell you if they are a planner vs a sales person.