Out of the Office Planning

When it comes to building wealth, most people fail because of one thing…

They focus on the things they can't control like income or trying to find the perfect investment strategy.

Those that end up building wealth don't do so because they have a high income or a special investment strategy.

They build wealth because they focus on what they can control - their savings rate💰

Drive that number up and you're on your way to building wealth 📈

After having multiple people ask if I also offer tax preparation (filing) services, I ran a survey to see what the interest would be for this & bookkeeping.

The large majority of respondents liked the idea of having one point of contact for financial advice, tax preparation, and bookkeeping.

So I've spent the last few weeks figuring out how I could make it work and I'm happy to share…

I'm now offering tax preparation and bookkeeping as an add-on service for financial planning clients!

If you're looking for someone to help take the stress out of managing your finances - your own personal CFO if you will - look no further.

If you want to learn more, send me a DM or book a free call with the link in my bio

Tattoos need proper aftercare so they don't get f*cked up

Your finances are no different

Proper estate planning is a necessity when it comes to getting your money right

Unfortunately it's usually viewed as something for people "with money" but this couldn't be farther from the truth.

Everybody needs an estate plan.

Why?

Because you're family/loved ones will already be dealing with enough when you pass - don't make them deal with a financial mess by trying to figure out where accounts are, dealing with probate, unsure of who inherits what, etc.

So what does proper estate planning look like?

▪️Adding beneficiaries to accounts - including bank accounts

▪️Creating a will

▪️Having a buy-sell agreement with a business partner

▪️Deciding who will become your kids guardian(s)

▪️Buying life insurance (if your situation warrants it)

Working hard to get your money right and build wealth without having an estate plan in place is like sitting for a tattoo with your favorite artist then immediately taking the wrap off, going to the beach on a sunny day, and soaking in the ocean

I was reading "Color Theory for Tattooists" yesterday and realized how similar color theory is to investment theory.

Let me explain…

In color theory we start with our hues - the pure colors. This is comparable to our broad asset classes - think stocks, bonds, cash, real estate, and alternatives.

Each hue can be broken down to it's own tints, tones, & shades.

Each asset class can be broken down as well - size, type, and location.

An example- stocks can be classified as large, mid, or small cap (size), they can be international or US (location), or they can be a growth or value stock (type).

Even though they may have different tints, tones, or shades (size, location or type), they are all the same hue (asset class).

The next step in investing is combining the different assets to create an investment portfolio that suits your situation.

Much like colors compliment each other, so do different asset classes.

Take stocks and bonds for example - It's a common belief that bonds compliment stocks - when one is lagging the other is likely performing well.

Other asset classes work in a similar complimentary fashion so we need to use different types depending on what we're hoping to achieve.

We can pick different colors (asset classes) of varying tints, tones, and shades (sizes, locations, & types) to create the color scheme (investment portfolio) for our financial plan (art work).

When it comes to saving money, most people will spend first then figure out how much, if any, to save based on how much money is left.

This will always leave you feeling stressed about how much you've spent and result in big fluctuations in savings.

This is the spending tail wagging the savings dog.

Flip it…

The savings dog should wag the spending tail.

Pay yourself first so you don't have to stress about trying to save at the end of the month.

Remember - smaller consistent amounts are better than random bigger deposits 🤘

Income taxes are often misunderstood.

People tend to look at the different brackets and assume their income is taxed at whichever top bracket their annual income falls in.

However, there's more to it than that.

Your income actually flows through the tax brackets - like water cascading through different pools.

The first portion of your income is taxed at the first rate (10%), the next portion of your income is taxed at the next rate (12%) and so on.

Here's an example…

Let's say you're single and earn $80,000 per year

The first $10,275 of your income is taxed at 10%

The next portion of your income (up to $41,775) is taxed at 12%

Your remaining income is taxed at 22% (this bracket is up to $89,075)

In this situation your marginal tax rate (aka top rate) is 22%.

But your effective tax rate (average) is 16.5%

Would you save money if I told you it would reduce your taxes?

That’s exactly what contributing to a retirement account does.

It reduces your taxable income by the amount you contribute.

If we look at the example in this post, the IRA contribution could result in a tax savings of over $1,000 🤯

On top of that - the money you contribute to your retirement account will be invested and growing for your future 📈

Inflation is when prices increase over time and results in needing more money for the same product or service.

As a tattoo artist it not only has an impact on your living expenses but also shop rent, supplies, and more.

The inflation rate for 2021 was 7%, which is much higher than the average of 2.47% over the last 10 years.

😱

So if you were charging $100/hour last year, you’d need to charge $107/hour to make sure those dollars are just as valuable as the year before.

I want to give another example to compare today’s tattoo prices to those of 28 years ago…

I’ve been reading a tattoo book that was published in 1994.

In the book the author states the price per hour for a good tattoo is $125-$250.

Those rates are still VERY common today in 2022.

This is crazy 🤯

Let me explain why…

If you bought something for $1 in 1994, that same item would cost $1.90 in 2022 dollars - that’s an increase of 89.7%!

And if those artists raised their rates to keep up with inflation?

They would be charging $237.14 per hour instead of $125.

Your costs of living and tattooing are increasing - make sure your prices are too.

When you break it down there’s really only four things you can do with your money

You can…

💸 Spend it 💸

💰 Save it 💰

🏦 Pay off debt 🏦

🇺🇸 Pay taxes 🇺🇸

Building wealth is about optimizing the percentage of your money that goes to each of these four areas

It’s also important to understand how these four areas can impact the others.

For example…

Did you know saving money can either reduce or increase your taxes depending on the account type and investment you choose?

Or

The one most people are familiar with - overspending which results in higher debt (credit card) payments

So after figuring out why money is important to you (yesterday’s question), the next step is to gain awareness around what percentage of your income is going to each of these four areas.

Have you ever stopped to ask yourself why money is important to you?

You're working your ass off, tattooing day in and day out…

Why?

Before you can do any financial planning, you need to know why you're doing it.

What is it that you're hoping to achieve?

It helps us determine where we may need to make trade offs and what to prioritize

Most people will have an initial response to this question but you have to go deeper than that…

Are you working hard because you want to be wealthy?

What does that actually look like to you?

Are you working hard now because you want to have "freedom" in the future?

If so, what does freedom look like?

Take the time to answer this question and use it as your guiding light for your financial decisions going forward

Financial planning can be complex and sometimes overwhelming…

But we can simplify it down to answering these five questions.

1. Why is money important to you?

2. Are you using your income wisely?

3. Are you taking the right amount of risk?

4. Do you have the right mix of assets?

5. How much wealth do you need to make work optional?

Over the next few days I’ll be laying out the framework for how we answer each of these questions.

Get rid of that lack/scarcity mindset and know that it’s okay to want to build wealth/be wealthy

Building wealth is more about doing the little things correctly and consistently.

Little steps, not leaps.

That self-employment tax SUCKS…😤

As a tattoo artist, you don't have an employer that pays half of that tax for you.

Luckily there are some options to reduce that pesky tax…

S-Corps can help you save on SE tax.

If you're currently operating as a sole proprietor or an LLC, all of your net income (income after expenses) is subject to self-employment tax (this is F**A for employees).

This 15.3% tax is applied to your first $147,000 of net income in 2022.

It consists of 12.4% social security tax and 2.9% Medicare tax.

However, with an S-Corp the SE tax does not apply to net profit like it does with a sole proprietor or LLC.

If you elect to be treated as an S-Corp, your business will file a corporate tax return (it is NOT subject to corporate tax).

You are now an employee and an owner of the business.

The key to this strategy is to make sure you pay yourself a REASONABLE salary.

You can't have the business earn $100,000 and you only pay yourself a salary of $15,000.

Now that we clarified that important point, here's how it works…

You'll receive a salary as an employee shown on a W-2 and a distribution as an owner shown on a K-1.

This is where the savings come in.

The salary is subject to social security & Medicare taxes (that 15.3%) and the ownership distribution is not.

In our example, you would save $7,650 self employment (social security & Medicare) taxes by only being required to pay them on your reasonable salary of $50,000.

How do you do it?

1. Set up an LLC with your state.

2. File paperwork with the IRS to make an S-Corp "election".

That's slightly simplified but those are the two main steps.

🚨This is only an example. Please be sure to talk to your CPA to discuss your own situation. There are some payroll rules and procedures to follow as well.

💥SEND THIS TO THE APPRENTICES IN YOUR LIFE

I’ve been trying think of a way to give back to the Tattoo community, and I finally figured it out.

A Financial Apprenticeship

It’s a new program offering pro-bono advice to one apprentice each quarter. No obligation to become a client at the end. All I ask is that you’re serious about our work together.

There’s an application process in order to be considered and I’ll keep it open for 2 weeks at a time.

Hit the link in the bio to apply!

If you live in Oregon and donate to a cultural nonprofit, you could double your gift by utilizing the Oregon Cultural Trust!

Not sure if the nonprofit you want to donate to would count? Check out their website to see. There’s over 1,500 nonprofits on their list!

www.culturaltrust.org

I’ll be joining on the IG live next Wednesday @ 3pm EST to talk about financial planning for tattoo artists.

A few of the things we’ll cover…

▪️ The biggest challenges tattoo artists face when dealing with finances

▪️What the absolute essentials are when it comes to finances

▪️ What artists can do to plan for their future

▪️Why I transitioned to working with tattoo artists

▪️How my planning process works - what we actually do

It should be a really fun conversation and I’ll try to drop as much value as possible!

It's been awhile and I've gained some new followers recently so I figured it would be a good time to reintroduce myself…

Who I am…

My name's Colton - I've been married to my kick ass wife, Bri, for almost 10 years. We have two kids, Piper and Nixon. We both grew up in Arizona but have called Oregon home for a few years now - there's no going back.

📚I'm a bit obsessed with books

🏃‍♂️I like to torture myself via running

🔥I love cooking on my Traegers (if you're in town, hit me up - let's eat)

☀️If it's summer here in Oregon, you can catch us at the lake at least once a week

🦮I used to train dogs and even had a pitbull that flew with me multiple times as a service dog

🙅‍♂️I never thought I’d work in finance, let alone run my own company helping artists. I wasn’t the guy in high school/college trading stocks

What I do…

I help tattoo artists across the country gain confidence with money and show them how they can build wealth.

What I don't do…

Sell you bu****it - I'm not the sales heavy guy. I'm not going to pressure you into working with me.

Give you stock tips - I don’t analyze companies. Please don’t ask what I think of a certain company stock

Why I do it…

Honestly I got tired of feeling like I had to put on this "mask" when working with people (see the last picture). I wanted to help people that I enjoy working with and my industry has left behind.

I wanted to work with "my tribe" - people that don't care if I end up getting multiple tattoos, if I happen to drop a f*ck while talking, and people that know I don't need to wear a suit to provide good advice.

Do you have a little one on the way?

If so, here are a few important financial areas to review.

Stop Overthinking 💭

Contrary to popular belief, money doesn't have to be complicated.
When it comes to building wealth, it's more important to do the simple things consistently (saving, investing, not spending more than you earn) than it is to pick the best investments or time the market.

Be Intentional 🧘‍♂️

Be intentional with your spending and saving.
Like Ramit Sethi says in his book "I Will Teach You To Be Rich," "It's about making your own decisions about what's important enough to spend a lot on and what's not, rather than blindly spending on everything."

That is being intentional.


Let go 🙅

Did you wreck your credit? It can be fixed.
Did you get yourself into a pile of debt? It can be paid off.
Did you make a bad investment decision? Learn from it.
Everyone has made money mistakes, myself included! Don't let your past mistakes with money cause you to not take action now.

Enjoy your life 🥳

Being mindful with your money does NOT require you to spend hours every month tracking down every penny or watching every market move.
Get a system set up, automate it, and focus on enjoying your life!

Just relax 😌

I get it - money can be stressful. And it doesn't help that it tends to be a taboo topic to speak about. But it's important that you do talk about it. Talking about money and your relationship with it will only help you going forward.
It's not something to be feared.
It's nothing more than a tool. A tool that YOU can use to create your ideal lifestyle

The Rule of 72 is a quick way to estimate how long it would take to double an investment.

It's also an effective way to understand the compound effect.

The way it works it to divide 72 by the expected rate of return of the investment.

# of years to double = 72 / Interest Rate

*Interest rate is the rate of return of the investment

For example - if your growth rate is 10%, you could estimate the investment would double in 7.2 years (72/10)

A lot of people try to over complicate investing, and it ends up hurting them.

When it comes down to it there are 5 factors that lead to investment success.

▪️Have a plan
▪️Diversify
▪️Pay attention to taxes
▪️Keep your costs low
▪️Behave

That’s it.

Before you start investing it’s important to understand the basics, like what you’re investing in.

So this week I’m doing a short series of posts titled -

Let’s talk: Investments

I’ll be covering everything you need to know, and everything you can ignore, to start investing.

Two of the most common investments are stocks and bonds so I figured we’d start there.

Stocks and bonds can be classified in multiple different ways but I’ll leave that for a future post.

For now just know that…

Stock = fractional ownership of a company

Bond = a loan to a company or government

What is net worth?

It’s the difference between what you own and what you owe.

It can be positive or negative depending on your assets and liabilities (debts).

Assets include your bank and investment accounts, real estate, and any other items with significant value -like jewelry or vehicles.

Liabilities are your debts - mortgage, loans, credit card debt, auto loan, etc.

Figuring out your net worth can help you see your current financial status.

And reviewing net worth periodically will show you if you’re using your income wisely by investing in assets or spending too much and increasing your debt.

As a tattoo artist you aren’t offered any kind of retirement plan.

This means retirement is up to you.

Here are 3 options to save for retirement:

1. Traditional/Roth IRA
2. SEP IRA
3. Solo 401k

There are a couple important questions you need to ask yourself when deciding which account to open:

▪️How much can you contribute?
▪️ Do you have any employees?

Your answers to these questions could help simplify your decision process.

Budgeting is one of those things that tends to scare people.

But it doesn't have to.

The 50-30-20 budget rule is a simple way to get a handle on your money.

This is how it works…

50% of your income covers your needs.

30% of your income covers your wants.

&

20% of your income covers your savings & extra debt payments.

So what falls under each category?

Needs includes things like rent/mortgage payments, food, utilities, insurance, minimum loan payments, and child care.

Wants includes meals out, entertainment, travel, clothes, and any monthly subscriptions. This is where you can spend on WHATEVER you value.

Savings includes building an emergency fund, saving in your 401(k), investing in a brokerage account, and making extra payments on your debt.

That's it.

We’re live! 🎧

You can listen to my first interview with Jayson Lynch ( ) now!

Link in my story

I’ve shown you two of the biggest taxes you’ll pay as a tattoo artist - income and self-employment taxes.

Now let’s talk about ways you can *legally* reduce your tax bill.

One of the most common ways to do that as a business owner is utilizing tax deductions, also known as “write offs”.

These deductions reduce your taxable income.

For example, if you travel to another city to tattoo then you can deduct your travel expenses (flight and hotel).

Buy a new tattoo machine? You can deduct that too.

This is one of the reasons it’s so important to properly track your business expenses!

You could be leaving money in the table 💸