The average American needs a salary of $107,000 annually in order to feel financial healthy, according to Personal Capital in September 2022. How much do you need in order to feel financial healthy? If you were to quit your job, how much income would you need to replace in order to keep your current lifetsyle?
These are the questions I discuss with clients every day. The piece which is often overlooked or ignored is the tax element. So if you earn $107,000 as an employee, you will likely pay close to $20,000 in income taxes which means that you actually live on about $85,000 a year. If you are self employed, those numbers look very different. You cannot compare a salary of $107,000 with self employed income or net business income of $107,000.
I highly recommend you ask your tax advisor to run a tax projector for you on your net income and your taxes so that you can determine your actual cash situation versus your taxable income situation. The money you have available to pay bills and support your lifestyle is after tax money. You have more tax deductions as a business owner or being self employed however you will still have to pay taxes so make sure you take that into consideration.
I am also going to ask you some hard questions. What do you have in rainy day savings? What is your monthly cash out? You need to know these numbers before we talk about next steps for your life. You CAN do this. I can help you. If owning your own business is your dream, reach out to me and let’s see how we can make that happen for you.