Mark and Jesse answer a question from Beginning Balance listener Allison (thanks for listening Allison!). Allison asks: what do you do when you get paid? How much should you set aside for taxes and retirement savings?
It's a great question, and many business owners struggle with this. Mark and Jesse explain the concept of "profit first" and why the business should pay you first, then take care of bills and expenses. As it turns out, using YNAB makes this process easy to implement in your business, but profit first does require some patience and discipline. Starting with a small percentage of profit (Jesse offers a few ways to calculate a good profit percentage to distribute) and slowly increasing that amount over time keeps you from overreaching and distributing too much money, which you might have to contribute back to the business in the event of unforeseen expenses. A slow and steady approach also gives you time to dial in your budget, and plan for future expenses as well as build up reserves for unforeseen expenses.
