By Analyzing Income Streams
Occasionally every person poses the question to themselves, whether they are making enough money, and how can they maximize the amount of money available in their life. This goes for everyone from the business owner an office downtown to the couple that both work to receive a W-2 wage and have a home in a suburb.
So the real question is, how much does it cost me to make the money that I make?
For a home with two working parents the cost of childcare, additional fuel, possible eating out, etc. must be factored in when deciding if both parents working the standard workweek is the best idea. (So the young couple has a baby father is a carpenter and the mother teaches 2nd grade. Is it more fiscally responsible to put the new baby in daycare, the father put away the hammer for a few years, or the mother put down the chalk. And then the trickier question is, how does the decision affect the overall home life and monetary future of the young family.)
For the store owner who sells many different products through many different points of sale, the decision-maker must factor in their cost of goods for each product and compare it to the income received from each point of sale individually. (Is it worth it for me to sell hotdogs at my corner store with a profit margin of 20% on $100 of gross sales, when my marketing on UBER Eats yields a 25% margin of $300, which I then pay 3% back to UBER. And then the even trickier question is can one income stream survive stand-alone without the other. Either way, someone must be there to cook the hotdogs.)
The examples are endless, and the options could be considered forever. But he fact of the matter is, these decisions are made every day, and by everyone.
So to start the process, in any financial situation, you must right out all the factors that you know and while processing that data keep note of the factors that may come up during the options that seem viable to you. This is by far the most daunting part, so if you feel like this is a big decision, have a consult at his point. Not necessarily with an accountant, business consultant, or tax professional, but just a person that you trust to have your best interest in mind that may have some insight to shed. You’d be surprised what you can learn from a free consult with a tax preparer while they are preparing your return, well from the good ones anyway. If you begin the process on the right foot, the rest is very simple. Outside of the emotional part (do I want my child in daycare or maybe I like the customer interaction and that’s why I keep coming to the corner store to make hotdogs) the remaining factors are mathematical and incredibly cut and dry. Gross Income – Expenses = Available Funds. And in nearly all cases, clearing out certain gross income does not yield a 1:1 ratio to expenses saved.
If you aren’t recognizing all your income streams and analyzing their net effect on the overall financial well being of you as the decision-maker. Then you could be missing out on a huge part of money management. Learn how to do what you enjoy doing, in the ways that make you the most profit, and possibly even have a personal life while you do it.
Contact us at BBTS, where your business and personal financial well-being is our priority.