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It's tax time...and maybe you were hoping for a return this year. Instead of getting money back, you receive a bill saying you owe some money.
You aren't alone.
Stylists who own their own business have to face these types of situations. I know I have.
This year I was prepared, and in this episode I am going to teach you exactly what you need to be doing so you can be prepared too.
You're tuned into Reviving the Stylist, a business podcast for hairstylists looking to build a dream career that creates financial freedom and flexibility. I'm your host, Kristen Lumiere and as a stylist I've had my share of successes. Building a successful six plus figure business working only three days a week while being able to prioritize my family, travel and buy my dream home. I know it doesn't sound easy, but if you put in the work, I guarantee you'll see results. No matter what your goals are. I'm super stoked that you're here so I can help you crush them. Let's start today's episode.
Kristen Lumiere 0:00
If you're tuned into Reviving the Stylist, a business podcast for hair stylists looking to build a dream career that creates financial freedom and flexibility. I'm your host, Kristen lumir. And as a stylist, I've had my share of successes. Building a successful six plus figure business working only three days a week, while being able to prioritize my family, travel and buy my dream home. I know it doesn't sound easy, but if you put in the work, I guarantee you'll see results. No matter what your goals are. I'm super stoked that you're here so I can help you crush them. Let's start today's episode.
Hey, guess what time it is right now. It is tax time. And maybe you were hoping that this year, you are going to get some money back. But instead you received a bill saying that you actually owe some money. You aren't alone. That was actually me this year, too. I got a estimated tax from my accountant. And he was like, Oh, by the way, we recommend that you pay $53,000 Because you made a little bit extra last year. And we didn't expect that. So because my business boomed which I will not say is a bad thing. I had a gigantic five figure, I mean halfway to six figures tax bill, which I've never had something nearly that large. Now I did have a tax bill back in 2019. And it was still for five figures. I didn't pay into my taxes how I needed to at that time. And it was pretty devastating. I had to drain my accounts I had to do so much. And I was going through all this while we were purchasing a house. It was insane. And I came through that, and I came out on top. But this time, I didn't stress because I actually had that money saved for tax purposes. And I'm going to teach you exactly what you need to do in this episode to make sure you don't have to deal with the exact same situation that I dealt with when I wasn't prepared for unexpected tax bills. So let's go ahead and get started. First, before I go and tell you like what exactly you need to do. So that way you don't have to worry about this, again, in the future, is I want to give you resources to be able to help you get through this time. Because if you received a bill from the IRS, there's nothing that you can do about it right now other than pay it. But what I do suggest is you contact a CPA that you trust, and you get their advice on what to do. Number two would be after that, you can go on to the IRS website. And you can do a short term installment loan or a long term installment loan depending on how much you actually owe. And that will give you time to pay it off over a short or longer period of time, I believe the short term payment option is about 180 days, where the long term payment option can be pushed out for quite some time. Now I had like a long, long, long time ago, probably back in like 2014. I had a smaller like $3,000 tax bill. And at that time, I didn't have anything saved. So I couldn't pay for it. I did an installment loan. And it really wasn't too horrible other than just you have to pay money every single month. But it did work for me and I paid it off over time. So let's go back to that $53,000 tax bill that I paid this year that I saved for and how I did it. So this is the one thing that you need to do to save for an unexpected tax bill in the future. Every single month on the first you're going to save 50% of your gross income and put it towards taxes. That is going to be the single most important thing that you do that is going to get you above water when it comes to unexpected tax bills because they absolutely suck. I will tell you when I saw that $53,000 tax bill I was like oh my god, like you got that pins and needle like the blood draining from your face. Everything felt like the walls were getting closer to me. You know all of that. I don't like having to send gigantic bills like that to the IRS because the IRS sucks in my opinion. You suck IRS. First of all, how does it make sense that you can't tell us this is exactly like how much you owe for taxes. It's like a guessing game. There seriously is no rhyme or reason to it. And even like CPAs or financial professionals will not be able to give you straight answers. It just never happens. Because it's seriously a guessing game. It seems like it's straightforward, but it's really not. And that's because there's like depreciation, there's deductions, there's all different types of things that come into it when you are an independent business. So there are just so much and it's like, Why do you have to make the process so complicated, make it less complicated. So we know exactly how much we owe, instead of just randomly getting a bill from like, 2016 that we're supposed to pay. And we have no idea what it is. The IRS is just screwy in my opinion, nice. Okay, but enough of my rants, if you build a habit right now, and save 15% of your gross income, that means income that you get, before anything comes out before your rent comes out before you you know, pay for gas or whatever it is, before you buy color, anything like that it's 15% off the top, so grosses before anything comes out. Net is after everything comes out. Now, I also know that paying that kind of money into like a bank account, and saving it away can seem really, really tempting throughout the year, especially if you come to a time where you're a little bit tight on your bills, maybe you paid yourself a little bit more, maybe you bought like too much at the beauty supply, and you just need $300 And that money sitting there. So it's really not that big of a deal. Whatever it may be, I will tell you right now that the last thing you want to do is touched that money. So instead of doing that, these are the steps that you're going to take to ensure that you don't go in and actually grab that money, and then have an unexpected tax bill and don't have enough to cover it. The first thing I want you to do is find a small bank in a city that is at least 45 minutes away from you. That is going to be number one. And I actually use Chase. It's a large bank, but I live in a small town. So I decided to go to a big city, which is about an hour and you know, 15 minutes away from me. And I went there. So I bank at a small bank with all of my other accounts because I live in a small town. It only has about like 13,000 people in it right now. But it is getting bigger. I'm in Bastrop, Texas, by the way. So by the time you listen to this episode, it probably has gotten bigger. So I went and I opened up an account with Chase. And I do not recommend if you are in a city or a town that has multiple bank locations of the banks that you're wanting to go and open an account at, you do not use that bank, you need to go to a town that has a bank that doesn't have any branch locations near you and is at least 45 minutes away, you've got to make sure that it is far away. And I'll give you a reason in a little bit. But after you go and you find your bank, you're gonna open an account, and you're not going to get a debit card for that account. So step number one is go find that small bank that's at least 45 minutes away. Or if you're in a small town or city, go find a large bank, as long as it doesn't have branches that are close to you. Remember, we went that 45 minute distance, open an account is number two. And of course you want to open a business account, you do not want to open up a personal account. And as far as the business account goes, I would just open up a business checking, you don't have to open up a savings account. A lot of banks they have like restrictions on how much you can draw out, or how often you can draw out and you don't necessarily want that. So I 100% recommend that you open up a business checking account. Number three, you're going to not get a debit card for this account. Because if you have a debit card, it makes it easier to use that money, especially if you walk around with a debit card in your pocket. You don't want to touch that money, you don't want it to be tempting. And what we're doing with these steps, we're taking away that temptation of going and finding that money and using it or grabbing it for random reasons. And then when you get that unexpected tax bill, you're not prepared. That's the last thing we want. So right now what we're going to do is we're going to give you the steps that are needed. So that way you don't have to worry about any of that happening. And that temptation can be gone. Number four, and I'm going to go into this one like really in depth from your usual business bank, you're going to set up your new bank account at the smaller bank on bill pay. And what I mean by that is that every single month, remember I told you every single month you're going to transfer 15% of your gross income over to that tax account. And that account at the smaller bank is going to be the tax account where 15% of every single month gross income transfers over there. And you do that so that way you do not touch that money and it doesn't destroy Pierre, we want to make sure that you have that there and that you are prepared for it.
And then step five would be on the first of every single month, you take that 15%, you go into your online bill pay, and you transfer that money, and you don't look at that other account. And these are things that you are not going to do. Once you work through all those steps, you're not going to create an online account at that small bank, because you need to be able to drive to that bank to check your balance. Or you can keep a record of how many transfers that you make. And you'll be able to know exactly how much you have in that account. But the point is in not opening up an online account at that smaller bank where you have your tax account, you are going to not have the ability to easily go on and transfer money or take money out. As simple as possible, right, we want to make it more complicated, because more complicated is, the more likely you're going to keep that money in there. And I will tell you from me, it is really difficult to not touch money, if you see it in front of you all the time. So we want to make sure that you do not have any kind of temptation, when it comes to touching your tax money, you want it there, you want to forget about it, it's just something that you do out of a routine every single month. The first comes, you transfer 15%. The first comes you transfer 15%. The first comes you transfer 15%. And the only time that you go and you check that account balance is when it's tax time and you receive an unexpected bill, or you don't receive an unexpected bill at all. And if that happens, I will tell you exactly what you can do with that money. Now you can of course take my advice because I'm it's coming from a place like I've done this, and it is worth it 100%. Or you can say you know, that sounds good, Kristen, but I'm gonna do things different way. Either way, whatever works for you, I'm super down for that. But this is just what really worked for me. And what I know is going to help change. So so many people out there and their tax time, so that way, you don't have to worry about it. So now let's fast forward to a year from now you've taken my advice, you've done everything that I suggested in this episode, and you get a tax bill that says you owe $7,000. And guess what, you've got 9000 some odd dollars in that account, you're able to pay it and guess what you got money leftover money in the bank. So at this time, you can pay that tax bill. And you can also give yourself a little return and take the rest of that money out. Or you can save that money in there. And you can keep it there just in case you have another unexpected tax bill. So that way, you don't have to worry about it. So you have two options, take some money out and go and have a little vacation that you definitely deserve. Or you can just keep it there and save a little bit for the future totally up to you. For me, I've taken some money out before, I have also gone and taken all the money out and transferred it into a savings account. It's totally 100% up to you what ever you feel like you should do do it. Those are just the three things that I've done before. Now I do have a recommendation on a book that I would absolutely love you to read. It's called profit first. And it was a really great book for me. It just helped me with some of the financial aspects. Now I will say as a hairstylist in the beauty industry, the way that we pay ourselves is a bit different. And the way that we set up accounts is a bit different. I actually have a method that I teach in my business course revive that helps with being able to build that profit and being able to pay yourself correctly, I have an entire module specific on paying yourself correctly. So that way you don't have to worry about these unexpected tax bills. And I would absolutely love for you to join the waitlist. I'll link it again in this episode. But I do just want to say that if you receive an unexpected tax bill from the IRS, you are not alone. But if you follow these steps, you will not have to worry about it in the future. You'll be prepared and you'll feel so proud of yourself that you prepared for these crazy situations. Because a lot of people don't prepare for this. And then they're smacked with a big bill and it just sucks but if you do the steps you will be prepared and I know that you will have less stress when it comes to tax time. I hope that you enjoyed this episode if you did remember, shout me out on Instagram take a screenshot so that way I can share your wins when it comes to this episode.
Thank you so much for joining me today on Reviving the Stylist. If something we resignated with you during this episode, take a screenshot share it to your Instagram story and let me know what you love most don't forget to also send it to a friend so that way they can reap the incredible things from this episode too and leave me a rating and review. I'd also absolutely just love to connect with you outside of the show too. So you can find me on Instagram at Kristen dot Lumiere that's L u m i e r e or my website, Kristen lumiere.com. And before I go, I just want to leave you with one reminder. It isn't about living to work. It's about working to live. And that is my goal for you, friend, because you deserve it. I'll see you on the next one.