Under the Radar

Under the Radar 116: The Going Indie Spreadsheet, Part 2


00:00:00   welcome to under the radar show but

00:00:02   independent iOS app development I'm

00:00:03   Marco Arment

00:00:04   and I'm David Smith under the radar is

00:00:06   never longer than 30 minutes so let's

00:00:08   get started so today we are kind of

00:00:11   doing the part two to last week's kind

00:00:14   of I don't know going into 101 or going

00:00:16   into the spreadsheet way discussion

00:00:19   where we talked a little bit about

00:00:20   forming a forming your business

00:00:23   considerations around taxes and to

00:00:25   considerations around income so if you

00:00:26   haven't heard that go listen to the head

00:00:28   before this before you listen to this

00:00:30   because those are more important in some

00:00:32   ways and more foundational to kind of

00:00:34   what we're gonna talk about now but

00:00:36   really what we're going to be unpacking

00:00:38   for the rest of this episode is trying

00:00:40   to think through all the different

00:00:41   expenses that you are going to have once

00:00:44   you kind of workout at a vague level

00:00:46   what your income goals might be what the

00:00:48   tax is around that are going to be and

00:00:50   then you have to like work out well what

00:00:51   are the other expenses when suddenly if

00:00:53   you're self-employed and you're becoming

00:00:55   you know you're suddenly becoming

00:00:57   responsible for all of the expenses

00:00:58   associated with running a business

00:01:00   what are those going to be so you're not

00:01:02   caught out or surprised by what they

00:01:04   they may be and some of these you may

00:01:07   not have thought of but the one that was

00:01:08   probably going to start with that you

00:01:10   almost certainly have thought about if

00:01:11   you live in the United States is health

00:01:14   care and health insurance because almost

00:01:16   certainly if you work at a traditional

00:01:19   employer currently there you know that

00:01:21   employer is providing in some way your

00:01:24   your health care yeah they're they're

00:01:26   paying for it themselves or you're

00:01:27   paying for it but they're choosing it

00:01:28   and it's a group plan and this is

00:01:31   something that I feel is so often the it

00:01:35   can be a little emotional and personal

00:01:37   because you know health care is a very

00:01:40   if not it's not this kind of it's not

00:01:43   like choosing your business card

00:01:44   provider or choosing you know which

00:01:46   computer you buy like those decisions

00:01:48   while important for your business

00:01:49   perhaps like aren't nearly as personal

00:01:53   and impactful for things that other than

00:01:54   you know this affects your family and

00:01:56   can affect you know your family in a

00:01:57   very substantial way

00:01:58   so can end up being I think feeling

00:02:01   something very scary now but I would

00:02:03   encourage you to always think that the

00:02:05   health insurance is just another number

00:02:08   that you have to pay for and

00:02:12   it's not the you know it's like you can

00:02:14   easily become something that is a bit

00:02:16   you can build it up to be something

00:02:17   that's a bit more emotional or a bit

00:02:19   more scary like you know right now my

00:02:21   employer just takes care of that now I

00:02:22   have to do that it's like well hey

00:02:24   you're kind of already paying for it now

00:02:26   because you're it's not like your

00:02:28   employer gets their health insurance for

00:02:29   free like they're paying for it for you

00:02:31   and that's in some ways your money that

00:02:33   is just being their you know their core

00:02:36   they're having control over it so at

00:02:37   least one advantage of paying for your

00:02:39   own health insurance is you can you know

00:02:41   tailor and choose and match it to your

00:02:44   family's needs goals risks tolerance

00:02:46   savings etc like you can choose that but

00:02:51   ultimately just understand that it is

00:02:54   just a number it is something that you

00:02:56   now have to choose and make that those

00:02:58   choices can be complicated and you know

00:03:00   kind of challenging perhaps but it is

00:03:03   just a number and once you turn it into

00:03:05   a number I thought I found for myself

00:03:07   that it made it a lot less scary a lot

00:03:08   less problematic that I could just say

00:03:11   like okay I'm gonna spend this amount of

00:03:13   money on health care I put that into my

00:03:14   budget I put it into my spreadsheet it's

00:03:17   and then just it's just covered it's

00:03:18   taken care of I don't have to think

00:03:19   about it or worry about it because you

00:03:21   know ultimately that's all it is it's an

00:03:24   expense and then you know it'll have

00:03:25   implications perhaps you know put in

00:03:27   your personal life in terms of the

00:03:28   different depending on the kind of

00:03:29   insurance you have you know when you go

00:03:31   to a doctor different things will happen

00:03:32   you may have a high deductible or you

00:03:34   gave to pay a copay and you know that

00:03:37   part of it is certainly something that

00:03:39   you can is worth considering but it's

00:03:41   not this big scary thing it's mostly

00:03:43   it's just an expense and it's pretty

00:03:44   expensive it's probably after taxes your

00:03:46   next biggest expense but it's not

00:03:50   anything more than just another number

00:03:52   and just another budget item that you

00:03:53   have to take care of exactly like the

00:03:55   the debate in your head should not be

00:03:57   like I can't go indie because I would

00:04:01   need to pay for health insurance or I

00:04:03   wouldn't be able to health insurance

00:04:04   instead it's when I go indie I have to

00:04:07   find a way to make you know X extra

00:04:10   dollars per month then what I then what

00:04:12   I might have originally thought because

00:04:14   it has to pay for health insurance cuz

00:04:16   you know like as you mentioned like

00:04:17   right now like someone's paying you know

00:04:19   what whether you're paying for part or

00:04:21   all of it yourself or chances are your

00:04:23   employer is paying for you know part

00:04:25   of it you know there's there's a lot

00:04:27   that employers pay to have an employee

00:04:30   that is not just the salary that you get

00:04:32   and you know we started talking about

00:04:34   this last week with with like you know

00:04:35   the employer half of a lot of these

00:04:37   taxes and other various you know

00:04:39   employee employment taxes that you will

00:04:41   have to either pay or pay some kind of

00:04:44   alternative to now but also you know

00:04:47   health care is part of that you know

00:04:48   just office expenses like if they pay

00:04:51   you say fifty thousand dollars a year

00:04:53   you might be costing them sixty five

00:04:56   thousand dollars a year or seventy

00:04:58   thousand dollars a year or more like

00:04:59   that you know depending on what kind of

00:05:01   expenses they have to have employees and

00:05:03   and so when you go independent it's not

00:05:05   that you can't do that it's not that you

00:05:07   can't pay for those things you just have

00:05:09   to know how much to charge for your

00:05:12   consulting services how much you how

00:05:15   much income you need from products like

00:05:17   stuff like it's these are not numbers to

00:05:20   scare you off but to instead inform how

00:05:25   you make your projections how you know

00:05:27   what you need and how you set your

00:05:29   prices I remember early days and I was

00:05:32   doing consulting I would sign a contract

00:05:34   to do a work and the number like the

00:05:37   income that I was getting seemed so big

00:05:39   and so like wow that's like that's a lot

00:05:43   of money like I'm gonna use like this

00:05:44   contract just for $20,000 like which in

00:05:48   a in regular day-to-day life is a lot of

00:05:51   money like but it the important thing

00:05:54   that I always had to in the back of my

00:05:55   mind have and this is just a rule of

00:05:58   thumb that I found to be pretty helpful

00:05:59   is to say like whatever that

00:06:00   top-of-the-line number is it's like at

00:06:03   least half of it is going to something

00:06:05   else and so like it's not that I didn't

00:06:08   I didn't just make in that in this in

00:06:10   that example I didn't make $20,000 I

00:06:12   made $10,000 and that additional 10,000

00:06:15   is going to be going to all manner of

00:06:17   things taxes health care office expenses

00:06:20   etc and so it's important to just have

00:06:23   that in the back of your mind that you

00:06:25   know think these are all just numbers

00:06:26   that you just have to balance and know

00:06:27   what they are but you know it's good

00:06:30   then the reason you're doing this is so

00:06:32   that you can make sure you're charging

00:06:33   enough because you know ultimately if

00:06:35   you don't then that's when things like

00:06:37   health care can become problematic

00:06:38   you need to have the money to afford to

00:06:41   pay for it exactly because like you

00:06:43   weren't like I kind of said last week

00:06:44   like your whole mindset of like how to

00:06:46   pay for things has to change to some

00:06:47   degree and your mindset about how much

00:06:49   money you need to make also has to

00:06:51   change because like your whole like if

00:06:53   you've been only employed by other

00:06:55   people until now your whole life up

00:06:57   until now you've had a certain amount of

00:06:59   money in your head is like what's like

00:07:00   what's my salary or what's a good salary

00:07:01   or what kind of salary do I quote need

00:07:03   you know to maintain the lifestyle I

00:07:05   want to maintain and you you still have

00:07:08   to make those kind of calculations the

00:07:10   numbers just have to be higher and it's

00:07:12   not that like you know the idea of

00:07:15   spending say two thousand dollars a

00:07:16   month for family health insurance which

00:07:18   is a reasonable number actually these

00:07:19   days which is sad but you know the idea

00:07:21   of spending $2,000 a month if you are

00:07:23   getting paid and you know regular

00:07:25   middle-class job that sounds insane like

00:07:27   that sounds incredible why would anybody

00:07:28   how can anybody pay that much but the

00:07:31   answer is not thinking of it from the

00:07:33   from the point of view of a payroll

00:07:34   employee thinking about it as the point

00:07:37   of view of somebody setting prices for a

00:07:38   business to know like okay how much

00:07:40   income you need every month do we need

00:07:42   $8,000 a month of income to sustainment

00:07:44   we need okay then that's the number like

00:07:46   you know it's it's almost an any figure

00:07:48   out how to do that you know you kind of

00:07:50   backs off you start with what kind of

00:07:52   income do I need to cover all this stuff

00:07:54   and then you back solve to say okay how

00:07:56   do I get there you know like a quick

00:07:58   story here like when we first moved to

00:08:00   New York we moved to a very nice suburb

00:08:02   and I didn't know what the heck I was

00:08:03   doing I moved to where my cousins lived

00:08:05   because it was nice got an apartment

00:08:07   there you know just renting and I looked

00:08:08   around and you know TIFF and I were in

00:08:10   our relationship and we wanted to you

00:08:12   know get married and get and buy a house

00:08:13   and we looked around the neighborhood we

00:08:15   were living in which was a very very

00:08:17   expensive neighborhood and all the

00:08:19   houses were like a million dollars and

00:08:22   so and sometimes even more than that for

00:08:23   like a basic house so rather than do

00:08:26   what we eventually did but just move

00:08:27   somewhere cheaper I initially thought

00:08:29   well I guess if a house is a million

00:08:32   dollars I guess I have to figure out how

00:08:34   to make a million dollars that like

00:08:37   inform like salary negotiations all

00:08:40   sorts of things until I eventually rose

00:08:42   like I just moved somewhere cheaper but

00:08:43   like for a while like that's that was

00:08:46   the right way to look at it which is

00:08:47   like all right well here's the

00:08:49   environment I'm in I don't want to

00:08:51   change the environment I'm in or

00:08:52   the certain goal that I want to reach so

00:08:54   rather than seeing it as this impossible

00:08:56   thing that I could never do instead say

00:08:58   alright this is what I need to reach

00:09:00   that goal how do I get there like how do

00:09:02   i how do i afford a house that cost that

00:09:04   much you know and yeah and so when

00:09:06   you're looking at a business you know

00:09:08   you have to think like if the idea that

00:09:10   I just said making eight thousand

00:09:12   dollars a month has a minimum if that

00:09:14   sounds crazy high to you

00:09:16   backs off a little bit and instead so

00:09:18   I'm thinking alright what could I do to

00:09:20   make eight thousand dollars a month yeah

00:09:23   so that it is just numbers like it's

00:09:24   just that's why I love spreadsheets for

00:09:26   this kind of stuff you just kind of work

00:09:27   it out backwards and one of the side

00:09:29   note too and a lot of these expenses is

00:09:31   the one a nice thing about business

00:09:33   expenses is that almost all of them are

00:09:35   tax-deductible so it's also just need to

00:09:38   keep in mind that the you know if health

00:09:40   insurance costs you $2,000 a month

00:09:43   it isn't $2,000 in the in the way that

00:09:46   you would have had that money after

00:09:48   paying taxes like theirs if you don't to

00:09:51   go get carried away with like the

00:09:52   discount that you're getting essentially

00:09:54   by things being tax deductible but it is

00:09:57   certainly something to keep in mind that

00:09:58   a lot of these expenses are the raw

00:10:02   number is much bigger than what it will

00:10:03   actually end up costing you yes it's not

00:10:05   for free

00:10:06   but it is discounted it's like you

00:10:08   getting your paying you get like

00:10:10   one-third off you know all these a lot

00:10:12   of these types of expenses but anyway so

00:10:16   back to health care there's really two

00:10:19   ways that you can get health care in the

00:10:21   u.s. right now anyway there's two main

00:10:24   ways that I think I've seen people use

00:10:26   and I've to use both of these myself the

00:10:28   first and this is often the easiest way

00:10:30   when you're starting out is there's a

00:10:33   it's called Cobra I don't know what that

00:10:36   stands for but it's the essentially in

00:10:38   the United States you your employer is

00:10:40   obliged to allow you to continue on your

00:10:43   previous group insurance plan premium

00:10:47   for I think it's up to eighteen months

00:10:49   after you leave it leave a job and

00:10:51   basically you pay I think it's a hundred

00:10:53   and two percent of the cost that you're

00:10:56   the total cost that the employer was

00:10:58   paying so whatever that actually is and

00:11:01   you can just sort of keep whatever the

00:11:03   insurance that you have now

00:11:04   and this is a really useful thing even

00:11:07   if you don't end up doing it in the

00:11:10   early stages of kind of working out you

00:11:12   know putting together your spreadsheet

00:11:13   about what going independent is going to

00:11:15   be like this is probably going to be

00:11:18   your it's often going to be your

00:11:19   cheapest version because group insurance

00:11:21   is just cheaper than individual

00:11:23   insurance

00:11:24   well sometimes sure I mean not

00:11:26   necessarily but if the very least it's a

00:11:27   great baseline and it's a really easy

00:11:28   baseline because the number of working

00:11:31   out what your the cost of your current

00:11:33   plan is is should be relatively

00:11:35   straightforward to you in terms of your

00:11:37   employer should be leather tell you that

00:11:38   or it's on your payroll stub or whatever

00:11:40   and you can look at that number and you

00:11:42   can say well I can just keep my current

00:11:44   insurance you know if you some you like

00:11:46   it I suppose but like you can keep that

00:11:48   and that should be able to get you going

00:11:50   you can do it indefinitely

00:11:51   you know it's free the first year year

00:11:53   and a half or something but it's a good

00:11:54   way to just kind of get started with

00:11:56   this process and it has the least

00:11:58   disruption to your family in the sense

00:11:59   of you know your insurance just sort of

00:12:01   stays the same it's you're just paying

00:12:03   all of it yourself rather than sharing

00:12:06   that expense with your employer and if

00:12:09   that doesn't work or if that but for

00:12:12   every reason you don't want that

00:12:13   insurance the alternative is usually to

00:12:16   go to one of the health care exchanges

00:12:18   used to you previously it used to be I

00:12:20   went to like a insurance broker and

00:12:23   worked it out that way recently I just

00:12:25   go to healthcare.gov like the Affordable

00:12:28   Health Care Act insurance marketplace

00:12:31   stuff and you kind of fill in a bunch of

00:12:33   forms it takes the process takes a

00:12:35   little while so if you're thinking about

00:12:36   this process like you can this probably

00:12:38   wise to go through that and just

00:12:42   understand what all the things you're

00:12:44   gonna have to do like you provide a lot

00:12:45   of data and then you'll just you know be

00:12:47   shown a variety of health plans and you

00:12:50   can choose whichever one sort of fits

00:12:52   your needs and your family's goals and

00:12:54   you know it's depending on where you are

00:12:56   in your life and your family life

00:12:58   different plans might make sense and I

00:13:01   will say it's kind of nice that I've

00:13:02   been able to as since I've been

00:13:03   self-employed I've been you know I was

00:13:06   able to tailor my insurance based on you

00:13:09   know life stage like when we were in the

00:13:11   the phase of life when we were

00:13:14   you know having children so having the

00:13:16   process of having children in the u.s.

00:13:18   is very expensive and so we had very

00:13:20   good insurance during those periods and

00:13:23   as we've transitioned out of that phase

00:13:25   like I've been able to transition to

00:13:27   slightly less robust insurance I guess

00:13:30   I'll have good insurance but it's not

00:13:31   quite to the degree it was before and it

00:13:33   is kind of nice because it shows that

00:13:34   but you know you go through the

00:13:35   marketplaces and you'll get be given a

00:13:37   whole variety of choices of different

00:13:39   styles you know it's the large a lot of

00:13:42   them end up being the high deductible

00:13:43   style plans or you can there are still

00:13:47   typically options for like the PPO copay

00:13:51   version of it but you just kinda have to

00:13:52   choose and decide make a plan and you'll

00:13:55   you know tell you is it's just like is

00:13:56   it's weird but it's kind of like just

00:13:58   like you're just shopping for anything

00:13:59   else online like you'll get a cost and

00:14:02   you just start paying that to the

00:14:03   insurance company yourself yeah it's

00:14:06   it's way easier than it used to be like

00:14:08   back in it with like when we had to go

00:14:09   to brokers and everything and and you

00:14:11   know not to get too political but like

00:14:13   before the ACA there were a lot of

00:14:15   there's a lot more things you had to

00:14:17   worry about of like if you pick the

00:14:19   wrong kind of plan or if you missed like

00:14:21   some small print you might open yourself

00:14:23   up to some major risks whereas with the

00:14:26   ACA normalised a lot of that and it put

00:14:28   it put in place a lot of like minimum

00:14:30   guarantees of levels of coverage such

00:14:33   that it's a lot less stressful than it

00:14:35   ever was now to shop for health care

00:14:36   yeah and so in that sense like you say

00:14:39   decide what decide what plan works if it

00:14:42   works for you and then you just buy it

00:14:43   and now you have a number you just put

00:14:45   that in your spreadsheet and move on and

00:14:46   you know the big scary thing okay you

00:14:48   know being self-employed is really hard

00:14:50   to do you wouldn't because from a

00:14:53   healthcare perspective like it isn't

00:14:54   really it's it's it's expensive but it's

00:14:57   it's not difficult we are sponsored once

00:15:00   again this week by fresh books to all

00:15:02   the freelancers out there you know how

00:15:04   important it is to make smart decisions

00:15:05   for your business our friends at fresh

00:15:08   books can save you hundreds of hours

00:15:10   with their cloud accounting software for

00:15:12   freelancers that is ridiculously easy to

00:15:14   use by simplifying tasks like invoicing

00:15:16   tracking expenses and getting paid

00:15:18   online fresh books has drastically

00:15:20   reduced the time it takes for over 10

00:15:22   million people to deal with their

00:15:23   paperwork for instance when you email a

00:15:25   client an invoice fresh books can show

00:15:27   you

00:15:28   whether they've seen it which puts an

00:15:29   end to all the weird awkward guessing

00:15:31   games did you did you get the invoice

00:15:33   did you see the invoice and they have

00:15:35   all they're always added new stuff so if

00:15:36   one of the things I've had it recently

00:15:37   is the new project feature this lets you

00:15:40   share files and messages with your

00:15:41   clients contractors and employees right

00:15:44   in fresh books see how quickly things

00:15:46   can happen when all your conversations

00:15:47   live in one place so if you're if you

00:15:50   listen to this and you have not used

00:15:51   fresh books yet now is the time to try

00:15:54   it fresh books is offering an

00:15:55   unrestricted 30-day free trial for

00:15:57   listeners of this show with no credit

00:15:59   card required all you have to do is go

00:16:01   to fresh books comm slash radar and

00:16:03   enter under the radar in the how did you

00:16:05   hear about a section thank you so much

00:16:07   two fresh books for their support of

00:16:09   this show so beyond health care there

00:16:11   are probably a few kinds of insurance

00:16:13   that you may need to think about these

00:16:16   depend you may want to have some kind of

00:16:18   professional liability or errors and

00:16:20   omissions insurance it depends on the

00:16:23   kind of work you do personally in my

00:16:25   experience I haven't carried this type

00:16:27   of insurance unless a contract requires

00:16:29   it so sometimes you'll be you know doing

00:16:31   a big consulting project and the people

00:16:33   you're consulting with will one of the

00:16:35   clauses in the contract is that they

00:16:37   require that you cover perform have a

00:16:39   professional liability insurance and so

00:16:41   you may have to have that depending on

00:16:44   your state you may need to have things

00:16:45   like workman's compensation insurance or

00:16:47   unemployment insurance usually those

00:16:50   only kick in if you have employees that

00:16:52   aren't yourself for yourself and your

00:16:54   spouse or something like that but just

00:16:56   good to keep in mind I highly suggest

00:16:58   not doing that if you could help it it's

00:17:01   having having any other full-time

00:17:04   employees like not not just paying

00:17:05   contractors here and there but if you

00:17:07   have any of full-time employees it

00:17:09   massively complicates a lot of these

00:17:11   factors and I I did it very briefly I

00:17:14   think you did too I would HIGHLY advise

00:17:17   if if you can do your work with just

00:17:20   yourself and occasional help from

00:17:22   contractors do that and it certainly is

00:17:25   one of the benefits of this type of work

00:17:26   is that you probably won't need

00:17:28   employees at least to start with in the

00:17:31   sense of the work you're doing is just

00:17:32   you know you and your laptop or you and

00:17:35   your iMac you know working away you're

00:17:38   not it's not like you need a production

00:17:40   facility that you're like me

00:17:41   gang widgets in and so hopefully you can

00:17:44   avoid it or at least defer having

00:17:46   employees for a while you also now may

00:17:51   need to think about retirement types of

00:17:55   investing like 401k or IRA type of stuff

00:17:58   this is something that I mean you

00:18:01   depends depends on how you view this

00:18:03   type of thing you could potentially

00:18:04   defer this for the you know the first

00:18:06   couple years of being self-employed but

00:18:08   that's up to you but either way it's not

00:18:10   going to be something that your employer

00:18:12   is providing anymore so it's some that

00:18:14   you have to take care of yourself and if

00:18:16   it's something that you would like to

00:18:16   contribute to in your as you're setting

00:18:19   up your business you know you have a lot

00:18:21   of choices available to you I think the

00:18:24   ones that most self employers would you

00:18:26   is the simple IRA or a SEP IRA seem to

00:18:29   be the two that you will likely take

00:18:31   advantage of interestingly depending on

00:18:34   your situation they may actually be able

00:18:36   to consummate it but be able to

00:18:37   contribute a lot more than you would

00:18:38   have from a traditional 401k so

00:18:41   something that could be a benefit to you

00:18:43   but it's again it's just another line in

00:18:45   your spreadsheet that you need to

00:18:46   understand and you're gonna be setting

00:18:48   up the plan yourself like you'll be

00:18:50   going to you know a investment bank or

00:18:52   you know Vanguard or somewhere like that

00:18:54   and you'll be setting up the accounts

00:18:55   and making the contributions yourself so

00:18:58   that's just something you'll have to

00:19:00   know now as with all the stuffs like now

00:19:03   it's now that's your job now you have to

00:19:04   take care of that and if setting that up

00:19:06   is scary to you you know be thoughtful

00:19:08   about if this really is for you well and

00:19:10   also like you know you can also do

00:19:11   things like hire a financial planner to

00:19:14   talk you through a lot of this stuff

00:19:15   especially when it comes to when it

00:19:16   comes to things like long-term

00:19:17   retirement savings and things like that

00:19:18   that that often helps I'm sure you know

00:19:21   whatever accountant you have for your

00:19:22   business to do your taxes which you are

00:19:24   definitely now doing that you know the

00:19:26   accountant can probably give you some

00:19:27   basic guidance on this as well to give

00:19:29   you some idea of the much higher

00:19:31   contributions a SEP IRA the limit this

00:19:35   past year I believe was $54,000 that you

00:19:38   could contribute total now there are

00:19:39   some limitations on this so for instance

00:19:41   first of all if you have employees that

00:19:42   the whole thing that's messed up don't

00:19:43   have employees but if you but but if you

00:19:46   the I believe the limitation is it can

00:19:50   be up to 25% of the business's income

00:19:53   for the year so if you want to

00:19:55   contribute

00:19:56   to 4,000 you had to make like 200 and

00:19:57   you know 12,000 whatever but anything

00:20:00   you contribute to the Sepp I believe is

00:20:02   either a tax deduction or a credit it's

00:20:04   a it's a big advantage in your taxes so

00:20:06   like these are things that you know any

00:20:08   good accountant should tell you you

00:20:10   should investigate you know if you have

00:20:12   enough income coming in to a business

00:20:15   where you where asset makes sense it can

00:20:18   be a pretty substantial tax savings yeah

00:20:21   and the other advantage to this just as

00:20:23   a side note there is it's nice that you

00:20:25   have more so much more control as with

00:20:27   so many of these things over this and so

00:20:29   it isn't the kind of thing where you

00:20:31   have to like on January 1st decide

00:20:34   what's your employee retirement

00:20:36   contributions are gonna be for the year

00:20:37   you have a bit more flexibility about

00:20:38   when you do that about when you time

00:20:40   that so if you have a great year and you

00:20:42   get to the end of the year you know you

00:20:44   can make it larger or attack the

00:20:46   retirement contribution that year so

00:20:48   that you can lower your tax liability if

00:20:51   that makes sense like there's lots of

00:20:52   cool things that you can do because you

00:20:54   have flexibility because you're not just

00:20:56   you know one of a thousand employees and

00:20:58   so you you had you you actually have the

00:21:00   ability to make these choices yeah also

00:21:02   by the way if you didn't know about this

00:21:03   stuff it is not too late to do this for

00:21:05   this past year because you can

00:21:07   contribute to at least a step I don't

00:21:08   know what the other ones but you

00:21:09   contribute to except I think up through

00:21:10   up until tax day up until April or

00:21:12   something so yeah so like you can do it

00:21:14   for the previous year so so definitely

00:21:16   like if you're into this for this year

00:21:17   ask somebody about it ASAP because it

00:21:19   isn't too late and but yeah it's these

00:21:22   are things that you know again and you

00:21:24   know which is with the control it's

00:21:25   great because like if you had a not so

00:21:27   good year you can either skip it and not

00:21:29   contribute or you can contribute a

00:21:30   smaller amount and you otherwise

00:21:31   would've if you had a fantastic blowout

00:21:33   year you can contribute as much as you

00:21:35   possibly can you know it's it really

00:21:37   puts everything in your hands just like

00:21:38   much of self-employment yeah other

00:21:42   expenses so you're to get into things

00:21:44   that like just otherwise your employer

00:21:46   would have typically covered for you so

00:21:48   things like mileage to are from

00:21:50   consulting clients potentially those

00:21:52   type that type of thing or travel for

00:21:54   work to conferences any educational

00:21:57   expenses you may have so if you need to

00:21:59   take a course or a certification or

00:22:00   something like that for your for your

00:22:02   work that's now like a you know a

00:22:05   business expense and it'll in debate it

00:22:07   deductible from your income

00:22:09   as well as just something you need to

00:22:10   take into account that if you know if

00:22:12   your employer every year is sent you to

00:22:13   WTC and took care of all the expenses

00:22:16   that's now going to be you paying for

00:22:18   that and so working out you know what

00:22:20   that costs are associated with that

00:22:21   whether that still makes sense you'll

00:22:24   need to use by your own office supplies

00:22:25   you know whether that is you know

00:22:28   pencils and paper or if that's the

00:22:31   business cards and letterhead like I

00:22:32   mean depending what kind of business you

00:22:33   have you may or may not need any of

00:22:35   those but that's now something that

00:22:38   you're gonna have to take care of

00:22:39   yourself so you're gonna buy your own

00:22:41   coffee for the breakroom yeah that's

00:22:42   that's true they you can't you can't

00:22:44   just mooch off their terrible's your

00:22:47   coffee anymore

00:22:48   oh I should get a water cooler installed

00:22:49   on my office there you can I know you

00:22:51   can have conversations with yourself

00:22:53   there on a regular basis those are

00:22:55   probably expensive can you get can you

00:22:57   have a guy come and like bring those

00:22:58   giant glass dude those giant jugs to it

00:23:00   is that a thing you can do your house

00:23:02   I'm sure if you paid for it they would

00:23:05   be happy dude they would be happy to

00:23:06   bring the giant five gallon drums into

00:23:09   your house and set it up for you

00:23:11   probably not very cost-effective and you

00:23:13   just did a tap with a filter on it might

00:23:15   be more effective or probably just a gas

00:23:18   so you may you now be responsible for

00:23:21   your own hardware in terms of your

00:23:24   computer any testing devices that you

00:23:26   now need in depending the kind of work

00:23:29   you do you may want to have a collection

00:23:32   of test devices that's now your

00:23:34   responsibility to purchase probably also

00:23:38   something just as it's always a good

00:23:40   idea but I was going to mention it in

00:23:41   this kind of topic is make sure you also

00:23:43   like your fun of your first purchases it

00:23:46   was probably gonna beat if you don't

00:23:47   have it already like a good backup hard

00:23:49   drive because suddenly now you are

00:23:52   personally responsible for you know your

00:23:54   work like if you somehow your hard drive

00:23:57   you know your computer dies and you

00:23:58   suddenly don't have that project that

00:24:00   your your client has been paying you for

00:24:03   six months to build like that is a

00:24:05   tremendous problem so you need to make

00:24:07   sure you have a very good back of

00:24:08   situation both in terms of physically

00:24:11   like having a like I do a daily mirror

00:24:13   of my main machine in addition to a

00:24:15   variety of cloud backups but like that's

00:24:17   an it's a hardware expense that you may

00:24:19   need to

00:24:20   to factor in a really good chair sure if

00:24:24   you sit in a chair for two hours a night

00:24:26   after you come back from work that has a

00:24:27   very different needs and if you're

00:24:28   sitting on one for eight hours a day

00:24:29   yeah yep you'll have a variety of kind

00:24:32   of home office things like and all say

00:24:34   don't go no necessarily go crazy right

00:24:36   away it's it's like we as if you listen

00:24:40   to us talk for long enough you

00:24:41   understand we take these things very

00:24:43   curiously like having good good

00:24:45   ergonomics make sure you have a keyboard

00:24:46   and a mouse and things that work but but

00:24:48   like if it's gonna be hard to get

00:24:50   started like you know you could these

00:24:52   are the kind of things they can be nice

00:24:53   goals for you know buying at the end of

00:24:56   the year if the year goes well these are

00:24:58   like Cydia things that you can certainly

00:25:00   you don't need to do these right away in

00:25:01   the same way like I fur my fur to start

00:25:04   with like I didn't have that great of a

00:25:05   laptop or that great of a computer I

00:25:06   just made it work you know you may not

00:25:08   necessarily go out and buy a

00:25:10   top-of-the-line iMac pro on your first

00:25:12   day of starting your new business like

00:25:13   yeah that's a terrible idea

00:25:15   that's probably unnecessary like you can

00:25:17   kind of get started with what you have

00:25:19   and then grow and develop as you may

00:25:22   have need you're also going to probably

00:25:24   have to buy some software like things

00:25:26   that your employer may have previously

00:25:28   provided like if you use Photoshop or

00:25:30   illustrator or transmitted or tower-like

00:25:33   any of the kind of utilities and tools

00:25:36   that are just a part and parcel of you

00:25:40   know B being an iOS developer you are

00:25:42   gonna need to now pay for those yourself

00:25:44   similarly you'll have a bunch of certain

00:25:47   online services that you're gonna pay

00:25:49   like I you know I have accounts with

00:25:51   Dropbox you may have things with github

00:25:53   or Linode for hosting you have some a

00:25:57   havoc an account to something like fresh

00:25:58   books or QuickBooks you may probably few

00:26:01   have any kind of web servers you'll

00:26:02   probably have a count to like Kingdom or

00:26:03   hover you may be doing backups with

00:26:05   Backblaze like you're gonna be a variety

00:26:08   of these kind of services and well any

00:26:10   one of them individually is may not be

00:26:12   that expensive in aggregate you know

00:26:14   they're not an insubstantial part of

00:26:16   your expenses so make sure you have them

00:26:18   in the spreadsheet and know what they're

00:26:20   you know what what that what kind of

00:26:21   expenses you're gonna have to to manage

00:26:23   with that are also make sure that the

00:26:26   licenses or the service plans that you

00:26:28   are getting for things allow business

00:26:30   use most of the things we've mentioned

00:26:32   it's the same no matter what you use

00:26:33   for but there are occasional services or

00:26:36   some or some software packages where

00:26:38   like if you're using it for business use

00:26:39   you're required to pay more to be

00:26:41   compliant with a license yeah it's just

00:26:43   good advice in general yeah it's pretty

00:26:45   rare but but those do still exist sure

00:26:47   early you know make sure that you're

00:26:49   being up above board with all of these

00:26:51   these types of things exactly like you

00:26:53   hear like this is not a place to like

00:26:54   pirate your copy of Photoshop like you

00:26:56   can't no you can't do that with your

00:26:57   business stuff because suddenly you're

00:27:00   the liability that you're putting

00:27:02   yourself under and your clients under

00:27:03   and things suddenly become very

00:27:04   problematic so like in general good

00:27:06   advice like be above boards like

00:27:08   understand that this is a business

00:27:09   treated as such

00:27:11   and if you've factored these costs

00:27:13   incorrectly into your you know into your

00:27:16   spreadsheet into your expenses like it

00:27:18   shouldn't be a problem in that regard

00:27:19   and so it should be fine and then by the

00:27:23   last area to think about is professional

00:27:26   services so you're like we've talked

00:27:27   about many times you Vega need to have

00:27:30   either a lawyer in an accountant or just

00:27:33   an accountant or some kind of in terms

00:27:35   of some type of professional advice on

00:27:37   the financial side you may also need to

00:27:40   periodically hire a graphic designer not

00:27:43   entire as an employer but just hire in

00:27:46   terms of do some consulting for you if

00:27:49   you need even even icon the icons for

00:27:53   your apps or an icon for your business

00:27:56   if you think that's important or

00:27:58   whatever like these are kind of

00:28:00   professional services that you're going

00:28:01   to need to suddenly start paying for

00:28:02   that you just need to keep into mind and

00:28:04   they're not typically crazy expensive

00:28:06   it's just an expense that needs to have

00:28:09   its I have a have a line item and be

00:28:10   considered as you're going into this

00:28:12   with your eyes open this all sounds like

00:28:15   a lot and it is a lot when you when

00:28:17   you've never done it before but you know

00:28:18   it's not that different from like the

00:28:20   transition from renting the place you

00:28:22   live to owning a place that you live or

00:28:24   the transition into being becoming a

00:28:26   parent if you've done that like it's

00:28:28   it's a thing where like you might not

00:28:30   beforehand you might not have fully

00:28:31   appreciated like all the things that

00:28:33   were needed that were being done for you

00:28:34   or that you that weren't necessary to do

00:28:36   that now you have to do but millions of

00:28:39   people do this millions of people have

00:28:42   figured this out before you many of them

00:28:45   you are smarter than

00:28:46   it's it has a lot more to do with

00:28:49   experience with these things than it has

00:28:52   to do with skill or intelligence or

00:28:54   anything else like if you want to tackle

00:28:57   this you probably can yeah and we'll say

00:29:00   - it's probably just a good indication

00:29:02   of whether you should that like if the

00:29:05   if the thought of starting this process

00:29:08   is completely overwhelming and you just

00:29:09   can't handle it maybe being a regular

00:29:12   employee is for you but if you can get

00:29:15   over that like obviously we both

00:29:16   recommend it we both like this lifestyle

00:29:18   but it's a probably a good litmus test

00:29:20   for doesn't this make sense for me that

00:29:22   if the last you know this episode in the

00:29:24   previous one is just like totally blown

00:29:26   your mind then like okay maybe it's not

00:29:28   for you and that's okay like this is

00:29:30   like neither one is like the right one

00:29:33   the right choice for you but you just

00:29:35   have to it's a good thing to understand

00:29:37   that these are these are the things that

00:29:39   you're gonna have to take care of if you

00:29:40   go down this road Thanks listening and

00:29:43   we'll talk to you next week bye