Under the Radar

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

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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