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mercredi, janvier 25, 2012

 Running Your Own Business: What, When and How To Pay Yourself, and Why You Need To Think It Through

...at least, in Singapore
by Lim May-Ann 25 Dec 2011 (wow I'm SUCH a loser!)
written for my friends Ed and Ad

Given that you're essentially a one-man show, you need to remember what you're doing this for, and why you're doing this. It's easy to go for broke when you're first starting out, and take on as many clients as you can, but remember - there's a reason why fledging eagles don't fly too well at first: cos they're new at it! So take your time to learn the ropes of how to manage your business, your time, your clients. With the freedom to do whatever, whenever, you have the opportunity to find some kind of equilibrium first, then ramp up if you need to. From what I hear from you, it's not hard finding clients - which is great, but what happens later, when you're maxed out of time, but you aren't earning as much as you'd like? You'll appreciate space/time to expand then. 

What do you do then? Make a plan:

1. What are your financial commitments?
Break it down: parents, church, self/travel, taxes, CPF, savings, madmoney. I usually run it by statistics: * Church 10%, Parents 10% (or however much it is), Income Tax 10% (this is an overestimation), CPF 20%. For CPF, note that you will be getting LESS than your peers who have employers, as employers contribute 16% of their income as well, making their CPF contribution 36% of their income. Which means that their CPF has an EXTRA 16% of what they earn going to it. http://mycpf.cpf.gov.sg/Employers/Gen-Info/cpf-Contri/ContriRa.htm

You might also be interested to know that according to Financial Planners, the recommended savings percentage is 40%. I know, it's CRAZY. 

This generally leaves 50% left for yourself and your travel, savings and mad money. But not really, since there's always stuff to buy and things that break and need maintenance.

2. Assume makes an Ass of U and Me - make assumptions anyway
Travel costs: assume that you have one student per weekday, and 5 over the weekend (spread over Sat/Sun). Assume that you'll take a cab to/fro their places, and each trip is a return trip (it probably won't be, but let's assume.) Assume each cab ride is $25. That's a sunk cost of $50 per student, so it will cost you $10*50=$500.

2. OK, so you've got a number from those financial commitments. How much do you pay yourself per year then?
Factor in yearly inflation in Singapore, which is approx 4-6% (most people estimate it at 5%), and a 10% increase every year, plus a 13th month bonus. So take X (from above), multiply it by 13 months, and then again by 115%, divided by 12. That's how much you should be earning per month.

3. You've got to be kidding.
Nope, it really is this mad. And I'm not even factoring in savings for the future and your retirement.

Libellés : ,

[Running Your Own Business: What, When and How To Pay Yourself, and Why You Need To Think It Through]
Sngs Alumni @ 25.1.12 { 0 comments }


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