This lesson is called how to master freelance finances, and it will show you how to manage your bankroll
so you are in control of your money and not the other way around.
In this lesson, we will be covering why forming an LLC has huge benefits.
Money strategies that the rich use.
How to invest your savings and how to avoid shiny object syndrome.
The reason this lesson is important is because most people burn their money when they get money, they
spend it if they start making more money every month.
They find a way to spend that on something.
The truth is, most people do not know how to save money and how to multiply it into more.
Instead, they get stuck, spending it on liabilities and depreciating assets that only fuel an ego
driven facade in order to be a truly profitable freelancer and to build a real, sustainable business.
You must have your finances and bankroll in order.
And this lesson will teach you just that.
First, I'd like to discuss what an LLC is now before I start, I do want to let you know this is just
my experience and should not be considered legal tax advice.
Please consult a tax professional to discuss your specific situation.
So an LLC stands for a limited liability company.
And basically what you're doing is you're forming your own legal business in the state that you live
in.
So instead of being a sole proprietor, you will be a business in the state that you live.
Limited liability companies provide huge tax and liability benefits.
There are a lot of different reasons in each of these two categories why it makes sense to file an LLC
instead of just remaining a sole proprietor on the tax side of things.
When you form an LLC, you can harness the power of deductions, so a deduction is what helps you lower
how much your taxable income is, which in turn helps you pay less on your taxes.
There are many different expenses that qualify for a tax deduction, such as your Home Office, a percent
of your internet bill, how many miles were driven because of your business and even training materials
like this course?
If you have an LLC, you can write off all of these as business expenses.
That means when you make money, you get to deduct everything you spent on those business expenses.
So you get to pay less tax.
So you should be writing off everything that I just mentioned.
If you want to take advantage of being an LLC and as a freelancer, it makes sense to do this for so
many different reasons.
If you haven't done it yet, I suggest you do it and you can even write off the cost of this course.
So to do that, I like to use QuickBooks, and what you can do is go to the profitable tools and apps
and find a link to that there.
And with QuickBooks Lets Me Do is keep track of all of that accounting and all of those tax deductions
and all of the income.
That makes it super easy to just hand that off to an accountant and for them to prepare your taxes.
When you start to learn all of the different ways an LLC can benefit you on the tax side of things.
You'll realize that businesses that are losses have a huge advantage due to those deductions, whereas
individuals do not get to take advantage of those certain tax benefits.
Next, you also get to take advantage of a new pass through deduction, which is what you are as a single
member LLC, you serve as a pass through entity where the money flows through the LLC into your personal
income, which is a 20 percent pass through deduction that they filed with this new tax law.
So you get to take off 20 percent of that pass through income, which previously you had to pay for.
So this helps you offset your other taxes like self-employment tax and other ones.
It gets pretty complex.
So I do suggest that you get a good accountant, but just understand that when you form an LLC, you're
getting multiple different types of tax benefits.
On the liability side of things, when you file an LLC, you're protecting your personal assets.
And that is one of the other biggest reasons an LLC is recommended for any freelancer.
As always, this is, for example, purposes.
So I suggest you speak with a lawyer or an account for further questions.
But my suggestion is to make sure that you set up your LLC.
It will help protect you, and if anything happens to go wrong, you will be happy you did.
For example, if you don't have an LLC establish and there's some sort of lawsuit with a client, your
personal assets may be at risk, a.k.a. your house in your car and anything you have.
That's valuable.
But when you are operating through an LLC, your personal assets are protected in only the business's
assets would be at risk.
This is a very important thing to understand, especially as you start to work with more high Typekit
clients and the projects get larger in scale.
Remember, it's not what you make, it's what you keep that matters.
The moral of the story is if you are going to make money, it's not how much you make that matters,
it's what you get to keep after those taxes.
And the truth is, taxes will be one of your largest expenses, if not the largest expense you'll ever
pay in your entire life.
So doesn't it make sense to lower your liability and keep more money in your pockets?
That's why you should go and look into ways an LLC can benefit you in your specific situation.
Now, let's talk about how the wealthy manage their wealth so you can model after them.
The trick is to stay broke, and you might be asking What does that even mean to stay broke?
It means you need to keep sacred savings accounts that you transfer any money you make into after you
take care of all of your bills.
You never should be keeping more money than you need in your checking account because money will find
a place to get spent if you keep it in your checking account.
You will find a way to swipe your credit card or to order something online or something will come up
where you need to use that.
However, if that money is in your sacred saving account and you don't touch that at all, it is much
safer there.
And then you can invest that down the line.
So this is what it looks like when you open up an LLC.
You can now open up a business checking account and saving account with your new company.
This should only be used for your business expenses and for your freelancing income.
This is the account you will enter into Upwork once you have it.
When the money comes in, it first comes through that business checking account first.
From there, you need to pay yourself first to handle your monthly expenses and all of your living expenses.
That's exactly what you should do.
The money should go directly into your business checking and then into your personal checking based
on how much you need for your budget.
Then this is the secret.
This is how you stay broke.
Once you've transferred the money you need into your personal account.
You need to get that money out of your checking account for your business and into your business saving
account.
So make this type of account the one that is so sacred that once you put the money in, there is a promise
to yourself that you make that you will not spend it no matter what, even if something comes up in
life where you need that money instead of taking it out of that account.
You need to go out there and create more money in the marketplace with your freelance skills.
You're not allowed to take that out of that savings account.
This is how the wealthy stay broke, and they ensure that they don't spend more money than they need
to.
This is where investments come in down the line because your business saving account will now be able
to sustainably grow.
However, if that money was just sitting in your checking account, chances are it would slowly be getting
depleted.
Now, once you are at a place where you'd like to pay yourself a nice bonus, you can take a vacation
with it by a family member, a gift, buy some new clothes, whatever it is, but it is important to
take bonuses once you've earned them.
But remember, with this bonus, you need to also invest into your personal savings with anything that's
left over.
Remember, always broke.
So always keep any actual money you have in your savings account and you don't touch it until you're
ready to invest.
Because when money gets bored, it will get spent on something.
I guarantee you'll find a way to spend it.
So if you have some money and you transfer it over as a bonus into your personal checking to buy some
things or to go on a vacation once you're done with that, any excess needs to go now to your personal
savings.
So use this mentality of transferring your money into a sacred account, and it will help you stay more
accountable and accumulate more wealth.
Now, with that wealth, the next step is to start making some smart investments with it.
Now that you know how to stay broke.
You need to think about what you're going to do once that money gets to a point that you're ready to
invest it.
The first step is to keep your lifestyle the same.
There's this statistic that says 76 percent of all Americans live paycheck to paycheck.
And that's in the wealthiest country in the world.
You need to understand that even though you're freelance, income might start to increase as you implement
all of these things, you're learning.
It doesn't mean you need to go out there and start to increase the level of your lifestyle.
I see this very often where as soon as someone starts getting some more money and they go out there
and they buy expensive cars, they get high end apartments, they're eating out all the time, they're
buying a bunch of shoes and clothes, but they don't remember that if they want to stay wealthy, that
they need to be disciplined.
And you might be seeing them on Instagram or just seeing like they're always going out and having fun.
But sooner or later, that's going to catch up with them.
You need to have discipline here, and that means keeping your lifestyle the same even as you start
rising through the ranks and your monthly income starts to skyrocket.
Next, don't spend invest.
So you may be asking, well, what do I invest my money on?
Well, the thing is, I suggest that you invest into yourself.
An investment is anything that will pay off for you in the future.
This can be both monetary and non-monetary.
So just like this course, and just like this is an investment you made in yourself to learn more and
increase your earning potential.
Continue investing in yourself because that's the only thing you can truly count on in trust.
And do not invest in things that you don't understand.
If you don't know how they work, do not get distracted by them because ultimately they're going to
distract your focus.
And it can even cost you some of that hard earned money that you work so hard to save.
So focus on the things that you know, such as becoming a freelancing master, invest in your skill
set and continue to become more of an expert so you can keep charging higher rates.
Next, continue investing into expanding your skills, whether that means taking more courses, getting
advanced certifications, learning additional skills that complement your existing ones.
Whatever it is, continue expanding at all costs.
Focus on getting extremely good and solving more and more problems and bigger problems.
The more you do that, the more the money will continue to flow.
And lastly, invest into upgrading your hardware, so your hardware is anything that you're using to
actually conduct your freelance work on investing into upgrading, my personal setup was my first big
business expense that I ever invested in.
I had finally saved up a few thousand from my first client, and I decided to go all in on myself.
I put all my chips into the middle of the poker table and I said, all in, let's do this and this is
what I did.
I went from working on a crack laptop on my kitchen table while my roommate was blasting music in the
living room, which you can see in this Instagram photo taken in 2016.
To investing in a legit office setup up with a few thousand dollars that I had initially saved up that
included the 27 inch iMac, I'm currently working on an additional external monitor to increase my productivity
and an ergonomic keyboard, mouse pad and chair.
This all helps me get more done in less time and more comfortably.
So just having a quicker operating computer and more room to work on it enhance my efficiency and helped
me immediately start earning more money.
And I was also able to get more done in less time.
So with whatever you're doing, always make sure you're investing in yourself first.
You're the one that knows that investing in yourself is the best decision you can make.
And now let's discuss the final part of this lesson.
Something that is called the shiny object syndrome, just like in this example.
So in this example, we have some dogs sitting at a very important meeting, and whoever is presenting
the meeting says we need to stay focused on our marketing priorities and not get distracted by every
shiny new look squirrel that is 80D had its finest.
And the truth is, many freelancers and online entrepreneurs fall victim to this shiny object syndrome
needs to be avoided at all costs.
And basically, it's when you begin to lose focus because new things, a.k.a. shiny objects, start
to pop up on your path and deter your focus.
To be the most profitable freelancer you can.
You need to accept the fact that these shiny objects will come up on your journey while you're focusing
on Upwork and getting better at the skills you provide.
I guarantee you there's going to be some new platform that pops up some new skill set that might interest
you, but you need to stay focused on what your goal is.
And don't get distracted with these new shiny objects that pop up.
I made this mistake in the beginning of my journey.
I was building my freelance business and my digital marketing agency.
And instead of staying focused on that, I decided to try to start my own ecommerce store on the side.
What happened was I ended up spending a lot of my time trying to build this e-commerce store when I
really already had paying clients that wanted more of my help.
I was spending my focus on something that looked like some new shiny object aka building this e-commerce
store that I thought would blow up overnight.
And in reality, it was just taking focus away from my real income stream.
And a part of this is understanding that some opportunities will be missed along the way.
But what matters is that you're able to remain focused and take massive actions towards your goals.
By jumping around from shiny object to shiny object, your circle of focus will get demolished.
But when you stay focused on that one skill you're providing and staying on that platform, you're on.
That's when you will start to have more and more wins.
Next, you need to protect your first flow of income with your life.
If you're jumping around from shiny object or shiny object before you know it, your first flow of income
will dry up because your attention and your energy is getting split into multiple different areas.
And I've seen this happen before.
I've even had previous clients that begin to expand into new industries that they had no experience
in before they knew it.
They spread themselves too thin in their first business began to suffer because of the lack of attention.
You need to protect your first flow, which is freelance client income with your life.
And that ties directly into the diversification myth.
This is a largely misunderstood concept.
But when you start to diversify your effort, your energy and your money into multiple areas that will
actually hold you back.
So when you make an investment, whether that's your time or whether that's your money, make sure you
don't diversify it too much.
You need to go all in on that one area in order to actually have a payoff.
And there's a lot of different misconceptions around this because people think that if you put all your
eggs in one basket and if that basket fails, then you have no more eggs.
But as Andrew Carnegie said, take all your eggs and put them in one basket and watch that basket.
Once you know that you were so dedicated that you were going to be there till the very end until you
become successful, then you know that you were watching that basket and you were protecting all of
the eggs within it.
The only way you can fail is if you quit.
And the true rich go all in on one or two big investments.
Now, this is not to be confused with getting multiple flows of income because income is different than
investments.
I'm talking about investing your time into the main thing that is having an impact in your freelance
business.
And lastly, focus on the things that can't be destroyed to avoid that shiny object syndrome, you need
to focus on your knowledge and your experience.
Those are things that no one can take from you, even if you lost all of your money and everything you
owned.
You will still be left with your knowledge and experience that will always be worth your investment
because it enabled you to get those earnings in the first place.
And you can always get them again.
So now you understand how to master your freelance finances so you can begin putting all of these things
into practice for your freelance business.
I look forward to seeing you in the next lesson.