Unscripted: Life, Liberty, and the Pursuit of Entrepreneurship pdfdrive com

3. TA
X
 RELIEF
Some years ago, a very successful entrepreneur visited my forum and told his
tale of fortune and ruin. He owned an explosive business that made him money
by the wheelbarrow. Naturally, hedonic adaptation followed: material
excessiveness, periodic drug-induced partying, the weekend suites in Vegas—
whatever came in, most of it went out. His downfall was something no one
warned him about—not the recreational drugs or lavish extravagance, not a
business failure or an economic collapse, not an industry shift: 
it was taxes.
I searched Google and found very little on this huge oversight that plagues
many newly successful entrepreneurs. 
It’s the unplanned and unpaid taxation of
business income that demands purposed saving.
For newbie entrepreneurs
destined for success, pay close attention or suffer the same fate.
Let’s assume you’re an execution master. At year-end, your profit is a
whopping $500,000. Congrats. During the year, you also paid yourself a nice,
comfy salary of $60,000. Because you’re smart and read 
UNSCRIPTED
, you’ve
also adopted purposed saving, or so you think. You’ve saved 20 percent
($100,000) of your $500,000 profit and spent the rest on a lake cabin, complete
with ATVs and a speedboat. Smart? Not exactly.
By appearance, this might be perceived as purposed saving, but it isn’t. Your
$500,000 business profit will come with a tax bill at year-end. Technically, you
should be paying the IRS quarterly tax payments as your profits occur. Many
newbies forget to do so, which tacks on additional interest and fees. The IRS
doesn’t care if you “forgot” or “didn’t know” and charges up to .5 percent per
month plus interest on all failed tax payments.
Back to our example, with fees and interest, your $500,000 will be taxed
approximately $200,000.
121
And this assumes they don't question your small
salary relative to your profit. Yes, the IRS will send you a bill for 200Gs which
must be paid IMMEDIATELY. Not tomorrow and not next month when more
money rolls in. Get out your checkbook, champ, and learn how to write PAIN.
Oh shit. Looks like the $100K you saved isn’t going to cut it. You only saved
20 percent of your profit and now it’s time to sell the Bayliner. Save purposely, or
pay painfully.
FINANCIAL RECONSTRUCTION: PURPOSED SAVING

---

Your stage, page, or age in life is irrelevant. I don’t care if you already own a
business, want to start one, or are still drudging a job—you can be a purposed
saver right now. A total financial reconstruction consists of five retooling phases.
They are:
1.
Reframe
2.
Reform
3.
Reduce
4.
Reallocate and Remind
5.
Reward
STEP 1: REFRAME
Reframing is changing your perception about money.
First, rename money as value-vouchers. Reread Chapter 21 if you need a
refresher.
Second, see one saved dollar as a tiny passive-income machine that produces
a nickel in lifetime passive income. A buck saved today is one you won’t need to
earn tomorrow. While passive-income yields fluctuate with economic
conditions, money always creates offspring. In today’s economy, one saved dollar
generates around 3.5 to 5.5 cents per year. In history, it has been as high as ten
cents per dollar saved. Once enough value-vouchers are saved, exceeding your
monthly expenses, the need for work evaporates.
My favorite money reframe is approaching it as a ruthless conqueror: Each
dollar saved is another freedom fighter added to your slave army. You army also
procreates more soldiers. Altogether, your saved soldiers are fighting for your
freedom. On the other hand, every dollar spent on the latest fad is one fighter
killed.
STEP 2: REFORM
The second step is reforming expenses and cash outflow. This involves
eliminating any expense that is not conducive to an 
UNSCRIPTED
objective.
You can say reform is about 
temporary
frugality. That pile of magazines you
never read? Cancel them. Is your McMansion precluding you from taking risks
and allocating time and money to better yielding opportunities? Dump the
house. Escalade too costly to maintain with insurance, repairs, and gas? Maybe
it’s time for a used Prius—or take the bus, ride your bike, or walk. Yeah, I know,
none of that is cool or easy, but is discipline ever easy? Remember, 
unearned

---

luxury equates to earned suffering.
You can be the undisciplined 99 percent or
hold yourself to the standard of the 1 percent.
STEP 3: REDUCE
The third step of attack is reducing debt, eventually paying back everything
you owe. You must attack your debt and label it an enemy of the state. Here I
urge pragmatism over fanaticism. Fanaticism is extreme frugality, settling for less
and marathon coupon clipping. The pragmatic approach for attacking debt
within a purposed saving mindset is that every dollar spent should fall into one
of three categories: 1) 
Business expenses;
net-worth acceleration is anchored by
your business. Don’t fear spending money here. If one dollar spent translates
into ten dollars tomorrow, the risk and returns are worth it. 2) 
Living expenses
;
food, shelter, transportation, insurance—your household should be run like a
fine-tuned machine. 3) 
Debt reduction
; if it isn’t needed for basic living expenses
or can’t be reinvested in your business, it should go toward repayments. Pay
down credit cards or reduce the principal on loans, such as mortgages or student
loans.
Debt attack’s first step is to plug your financial hole from taking on more
water. Paying an extra $200 on your credit card doesn’t mean squat when next
month you add $500. Stop freaking spending. And when you do spend, pay cash
only, or carry a debit card or a “spend card” linked to a separate, budgeted bank
account. This spend card is for discretionaries: drinks, dining out, entertainment,
clothes, 
etc.
Every month, give your spend card a budget, creating the proper
financial environment for debt reduction. When the spend card’s budget is gone,
it’s gone. Card declined. You might be embarrassed at the checkout register, but
you stick to the program.
Another tactic is to carry no cash at all. The goal here is to put everything on
a credit card that offers reward points, and then pay off the balance monthly. If
you aren’t disciplined, don’t bother. This is a great strategy to rack up reward
points for stuff you always buy. Everything I buy goes on my credit card, from
utilities to groceries. As a result, I get a ton of free stuff (gift cards, trips) from the
accumulated rewards.
From the conqueror mindset, debt is another army, except this one wages
war against you! And yes, this army also holsters the interest weapon,
procreating more fighters determined to trap you into a servitude system. The
question is 
whose army are you funding?
The one working to free you? (I saved

---

$500 last week!) Or the one working to enslave you? (I charged a round of drinks
on my Visa!)