Episode 3

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Published on:

15th Nov 2021

Modern Day Money Guide

Would you take money advice from a crusty old white man using technical jargon? Me neither. Finances are gate-kept and overwhelming, for no good reason.

Let's take a step back and investigate our money beliefs. For one, that all debt is bad - it's not. Debt is just a decision to borrow money, for a fee. You don't need to pay your mortgage off to be financially responsible. Long term, it's actually better to invest more into retirement than it is to pay off your mortgage early. Make sense? I'm tired of traditionalists treating online businesses like they aren't valid.

Let's improve your financial knowledge and confidence.

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DISCLAIMER: I am not a financial advisor and this is not financial advice. My podcast is for educational purposes and is my personal opinion only. To make the best financial decision for your situation, please do your own research and if needed, seek the advice of a fee-based, fiduciary.

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Transcript
Katelyn Magnuson:

Okay, so we need to talk.

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I, like I said before, I am not your parents money expert.

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I am not here to dish out crusty ass old advice about, oh, if you

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just save your money and you just budget, like bullshit, bullshit.

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We have so many other factors that go into our financial wellbeing.

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In today's era, whether you are a business owner, whether you have your corporate

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job, there are so many more facets that complicate things compared to our

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parents or our grandparents generations.

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And I'm here to walk you through the modern day person's guide to

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exactly what you need to know, money and finances and accounting.

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are gate kept.

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They are made to be hard.

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They are made to be confusing.

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They are made to be inaccessible because if you don't have access,

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then you are stuck in the hamster wheel of working to make money.

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But then you're working so much that you pay for conveniences.

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And then, because you pay for convenience as you need to work more

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because you don't have any time.

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And if you don't understand your finances, then you have to pay other people.

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To constantly be doing things for you.

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And if you do try to learn and you do try to improve yourself, the majority

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of the financial advice and information out there is filled with old crusty

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white men using technical jargon.

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I have ran through my fair share of them, and it is so frustrating to be

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working, to improve your knowledge.

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And be patronized to be talked down to, to be made, to feel less than.

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All because maybe you don't have background in that, you know, maybe

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you're a really talented graphic designer, maybe you didn't go to business

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school, but all of this information is laid out for people that went to

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business school that, you know, became a CPA that became an accountant.

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And there's no reason for this information to be gate-kept.

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To be made so much more difficult and overwhelming.

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And so I'm here to keep things from continuing to be hard.

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I break it down easy and I make it so straight forward for you to understand,

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you need to know how to do these things, but it feels overwhelming because

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you don't know how or where to start.

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And that's the other really big part of misinformation.

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You know, I'm a big fan of Google who is not.

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But if you go and you Google a lot of this information, there are so many

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variables, you know, state by state, individual scenario by individual

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scenario should you be an LLC?

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Should you be paying quarterly estimated taxes?

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How should you be saving for retirement?

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Should you pay all your debt off now?

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What debts should you pay off debt is bad?

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Which we're going to earmark for a hot second.

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One of the biggest things that I am so against is the shame

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culture that goes around debt.

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Almost all of us have, or have had some form of debt, student loan,

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debt, mortgage, credit card, car loan, personal loan, you name it.

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I'm not here to tell you that you did a stupid thing or a

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shitty thing or a bad thing.

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You made a decision that served you based on your knowledge

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at the time that you did that.

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I currently have debt because debt is simply the decision to pay for something.

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With an interest rate, it comes with a fee like you're choosing

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to borrow money with a fee

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that's literally what debt is, right?

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You're you're leveraging someone else's money.

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Because you've decided that the fee that you were paying is worth the opportunity

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costs of paying that additional fee.

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Right.

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So debt's not bad.

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I have a car loan, I have a home mortgage.

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Um, I have, credit cards that I use all the time and I have no

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desire to pay my house off early.

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And this is something that, I talk about a lot with clients because

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they'll come to me and, you know, They have this like scarcity your

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lack mindset around like, oh my God, what if my business fails tomorrow?

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In order to be financially solvent or secure or financially responsible

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there's all this bullshit stories that we tell ourselves that have

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been told to us over the years.

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And.

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You don't need to pay your mortgage off to be financially responsible.

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So I invite you if you're, in that area to like take a step back

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and wondering, you know, where did that information come from?

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Is that truly your desire?

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Because if it's truly your desire and it aligns with your financial goals,

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by all means, however, If you've ever followed Dave Ramsey or you're familiar

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with his teachings or a lot of other really traditional, financial information.

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A lot of them will encourage you to have no debt that you don't need to utilize

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a credit score because who needs debt.

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You are literally losing potentially hundreds of thousands of dollars by not

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utilizing debt in the course of your life.

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let's take a mortgage.

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For example, for most of us, mortgages are under 4% interest.

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Okay.

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If you were to be prioritizing paying your mortgage off, instead of investing

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in retirement, for example, on average, you would be losing somewhere

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around 4% in interest per year.

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And then that interest would compound because your investment would have grown

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you'd then have 4% interest on that.

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And then 4% interest on that.

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And then 4% interest on that and it continues to grow.

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So for example, say your mortgage is 4% for a really straightforward number.

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And your average return on investments is 8%.

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For most of us, they fluctuate between four and 12, but anywhere between

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six and eight is kind of an accepted norm for an, an annual average.

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If your interest rate is less than like six or 7%, you should generally be

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prioritizing investing that money over, paying off debt that is lower than that.

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So for many of us that is a car that is a mortgage, and that is some.

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Federal student loan debt, depending on the interest rate there.

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Now, the reason being there is a psychological benefit

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for sure, to not having debts.

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And if that benefit is the most important part for you or you're looking to retire

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early, or you have chronic health issues, or you don't know that you're going to

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be able to work for as long as you need, or you don't have as high of a living

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expense or cost of living for a year, then paying your mortgage off

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or paying your car off may make more sense, or you're planning to go back

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to school or have your income drop.

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All of those, you know, are really personal reasons that you may want

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to consider doing things differently.

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However, for the average person that I talked to that is wanting to.

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Basically make more and maximize our investments instead of prioritizing

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an extra 2, 3, 4, or $500 to paying off your mortgage early, you should

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be investing that money instead because that money will out-earn.

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Cause if you take 8%.

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Return on investment on that, then you subtract the 4% that you're

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paying an interest on your mortgage.

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You're still coming out ahead 4%.

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And again, this is really, really simple math, but for most of us,

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we should be investing that money.

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Now, the worst thing that you could do.

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Is make the decision that yes, I'm going to invest this extra money.

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Uh, I'm going to, you know, earn this great, and then not doing it because

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then you're not only not paying your debt off any quicker, but you're

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also not maximizing the years of compounding returns on your investments.

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And that is the biggest mistake that you could do.

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So if you're going to prioritize investments and overall earning, get

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that money started, get investing.

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You can use robo advisors, you can.

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use something like, you know, betterment, Ellevest, I don't love Robin hood,

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but betterment has been really great.

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So has ellevest it is specifically for women, and has, you know, relatively

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low fees, all things considered, and it is better to get your money in

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there as soon as you can, because the more time that your money can

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sit, the more time it can grow.

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And the more time that growth will compound and speed up

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your investment growth.

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That was a big sigh.

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The other biggest area that I see people running into problems here is so many

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business owners are trying to learn finances from people who don't understand

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modern day or online businesses.

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I've worked with countless clients that have come to me and their business has

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been downplayed or they've been treated like an afterthought because they're an

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online business and a lot of old school accountants or financial professionals

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don't think that they're legitimate.

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This is the new wave of business.

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And it's starting that new right.

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This has been 20 plus years.

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Now that we're looking like people are making 6, 7, 8 figures as online business

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owners, like get with the program, we need to adjust our teachings accordingly.

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And so many people have not.

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So the reason that so much of this information and so much of our tax system

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feels overwhelming is because we're still working in an archaic system that

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is built for brick and mortar stores.

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I always say our tax system is built.

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Like it's the 1950s.

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It's based off of your prior year.

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Like they don't expect you to see more than 10% a year in growth.

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You know, there's a lot of small little things that are not taken into

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consideration that if they were taken into consideration, which is what we

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do, you would have a really different.

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Set of teachings.

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And so, I had a client that for example, was working with an accountant.

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Old school, uh, they were working on quarterly estimates.

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Now the traditional or the accepted way to do quarterly estimated taxes is

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to base this year's tax payments off of your prior year's tax liability.

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So, if you look at your 10 40, for example, and you go down to, I want

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to say, it's like line 17 and you look at your total tax liability.

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There will be a number on there.

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That number is how much money you needed to pay to the IRS in

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taxes based on your earnings.

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That's not necessarily.

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What you owed at the end of the year, because you may have paid in via jobs

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via quarterly estimates, et cetera, but that was your tax liability for

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the year based on your earnings.

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So the accepted way to do your quarterly estimates is to take that number

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from the previous year divided by four because of quarterlies and pay.

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For equal installments based off of your prior year's taxes.

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If you make more than $150,000, you need to actually pay 110%.

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So you add an extra 10% overage.

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So let's give an example.

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Let's say you owe $10,000 last year as your total tax liability,

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we would divide that by four, you would be expected to pay $2,500 per

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quarter in quarterly estimated taxes.

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That's all well and good.

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If you were over $150,000 in adjusted gross income, you'd be expected to

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pay 110,000, which would be $11,000, which would be $2750 per quarter.

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Right.

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So just a little bit more here's where the problem lies.

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So this client was doing that with her accountant.

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Right.

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So they're going along, they're making these payments.

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She thinks she's totally good to go because she's been paying her

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quarterly as, as the year goes along.

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She gets to the end of the year and she owes an additional $12,000.

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It almost put her out of business.

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Why does she owe the extra money?

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She owes the extra money because her business made more this year than the year

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that the quarterlies were based off of.

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And her accountant did not properly educate or explain to her that what

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they were doing was simply paying enough in quarterly estimates to avoid any

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underpayment penalties or interest, because that is all that number is.

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So that's all well, and good.

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If you were a brick and mortar that has growing, you know, 10% a year, right?

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You might owe a thousand dollars in taxes, something along

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those lines, nothing insane.

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But for online businesses, service businesses, we can grow 50, a hundred,

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200, 300% one year over the next.

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And if you are not estimating your taxes based on your current year's projection,

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you can get to the end of the year and owe tens of hundreds of thousands of

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dollars in taxes, depending on how much.

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Your income has grown this year over the last year.

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So you have to work with someone that understands your business.

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Are you a photographer?

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Great.

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We work with tons of photographers, wedding, industry vendors.

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Are you a copywriter or content writer.

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Fantastic.

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Your business is legitimate.

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You can make six, seven plus figures.

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I had a client who had a family member that was an accountant

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doing her taxes, and he literally like patted her on the head.

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This is a mother of two children making six figures.

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As a technical copywriter, he patted her on the head and treated

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her like her business was so cute.

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You know what a cute hobby you have and I'm over it.

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I'm so fucking over demeaning those around you because you don't see

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their business as being viable.

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So.

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I understand why you're feeling stuck.

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I understand that you've probably gotten so much information and a

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lot of it's not applicable to you.

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No one's ever broken it down and made it easy to understand

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you don't need traditional.

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You need information built for today's business owners.

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And I understand this from a women's perspective and a business

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owner's perspective, and I'm done with the gatekeeping.

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I'm done with the shaming I'm done with the bullshit.

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I am here to make this fun, to make this easy, to build your

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confidence and set you up with a set of action items that you can take.

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And with very little time.

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If you buy into this and you're willing to put in 10 or 15 minutes every day,

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you will have a completely different financial life in 3, 6, 12 months from

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now because the compounding effects of the changes that you can make

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diamond, it's like anything, right?

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Get up and move your body for 15 minutes a day, prioritize writing

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content for 15 minutes a day, wherever you choose to focus.

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You're going to see vast improvements and vast changes.

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So I challenge you to improve your financial, understanding

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your financial confidence.

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And if you are feeling like you're lacking information, you're lacking knowledge.

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It's okay.

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We're here.

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And I want you to.

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To drop comments, give me a five star review.

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If you found this really useful and also send me an email, go to confident

Katelyn Magnuson:

money.com and reach out with your questions because we're here for you.

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About the Podcast

Wealth Witches
Where financial empowerment meets magic!
Welcome to the Wealth Witches™ podcast, where financial empowerment meets magic! I'm Katelyn Magnuson, your guide on this enchanted journey to holistic wealth and prosperity. Here, we honor all identities and invoke our inner witches to create a community where everyone feels welcome and inspired.

Formerly known as the Confident Money podcast, we've transformed into Wealth Witches™ with Katelyn Magnuson. This change is about embracing the once-taboo topics of money and magic, blending them into a powerful mix of practical advice and mystical insights. Whether you're here for financial tips or to explore the magical side of life, this podcast is your new home.

What can you expect from Wealth Witches™? We combine actionable financial advice with a holistic approach to life. You'll hear from guests like astrologers, neurodivergent business owners, and magical creatives, discussing everything from business requirements to the latest trends in holistic wealth. We're breaking down the barriers that make finance feel dry and inaccessible, making it exciting and relevant to your life.

This podcast is for anyone who feels out of place in the traditional financial world. If you've ever felt like your interests in magic, human design, or holistic living didn't belong in a financial conversation, this is the podcast for you. We're here to tell you that you can embrace all parts of yourself and still be financially successful. We're not just talking about money – we're talking about creating a life of abundance and freedom. Our community is dynamic, diverse, and inclusive, and we want you to be a part of it.

Join us as we explore new ways to think about money and life. We're here to challenge the status quo and help you embrace your inner witch on your financial journey. Each episode is designed to inspire, educate, and empower you to take control of your financial destiny.

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About your host

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Katelyn Magnuson

Katelyn, the driving force behind The Freelance CFO and creator of Wealth Witches, is revolutionizing accounting with a sprinkle of magic. With a decade of experience, she’s not your typical number cruncher. Her unique blend of expertise and approachability, infused with a touch of spiritual insight, has made her a go-to authority. Katelyn believes finance should be a stepping stone to success, not a barrier. With a judgment-free ethos, she simplifies complex financial topics, making them actionable for entrepreneurs and small businesses. Her ultimate goal? To empower you to manifest your authentic life—not a cookie-cutter one!