If you are considering becoming a professional independent photographer, look at some of these numbers. Of course, you may want to keep your day job and do this as a hobby instead.
One thing most self-employed people know about their business, if they are successful, is that only a tiny part of what you charge a client is what you will take home to pay the bills.
These are my numbers, which will vary widely from business to business. Your age makes a big difference in medicine, for example.
According to my numbers this morning, I could break down every $100 into four major categories:
- $19 Medical Expenses
- $36 Business Expenses
- $14 Federal and State Taxes [Self-Employed pays double vs. staff person; no, you don’t get to take home more because you don’t spend more as a staff person. The company pays that other 1/2.]
- $31 Net Income
Once you start figuring out where all your money is going, you get a lot better at ensuring your prices are high enough to survive. Surviving is paying all your bills and doing it on time. If I weren’t debt free, another piece of the pie would be for interest. 9% credit card interest may turn into a 3% loss of income to pay off debt.
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So after working on those numbers, I went to lunch and, while eating, broke my tooth. After a trip to the dentist, I now changed some of the numbers by 1%. Medical went up by 1%, and net income went down by 1%.
You cannot plan for all emergencies. You cannot count on a certain income coming in, either.
Most business owners run a tight ship most of the year and then, in the last quarter, talk to their accountants and then might do some upgrades to equipment or other purchases to help lower their taxes and make capital improvements.
Many business owners will give more to their church in the last quarter or a charity. The reason for the delay is the importance of reserves.
If you are young, in your twenties, and unmarried, your medical expenses could be drastically lower than mine. I am covering my family, and I am in my fifties. Just being that old will give you higher rates for medical insurance.