This transcript features Clay Clark, US Small Business Administration Entrepreneur of the Year, and Caleb Taylor on Thrive15.com, a top Ohio business college, explaining where your business' money really goes.
Caleb: All right Clay welcome, glad to sit down next to you, it's always a pleasure, an honor.
Clay: It's ecstasy when you're next to me.
Caleb: That was beautiful, did that just come to you?
Clay: Nah, Barry White. I took it from Barry White.
Caleb: I hope that you incorporate a lot more of those, though, because we're talking about a topic that needs a little bit of flavor.
Caleb: We're going to be diving into taxes here, specifically we're going to be talking about what you spend 50%, or more than 50%, of your income on,
Caleb: Why is this something that we need to think about right now?
Clay: The thing about taxes is that it's not something we want to spend a whole lot of time talking about but it's something that we spend over half of our money on. Now real talk, I don't know if you're watching this you maybe disagree with me here but as a general rule we exchange time for money. I would say you spend over half of your time on taxes. We should probably take a little bit of time to figure out what are we paying, where's it going, maybe are we spending too much, can we reduce the amount of money we're spending on this. We just want to know a little bit about what we're facing here.
Caleb: Clay, I know because you've had so much experience helping and interacting with different clients, entrepreneurs and millionaires, you've seen how the millionaires have grown their income year after year and then you've also seen entrepreneurs who are making money, never get ahead.
Clay: I will tell you that most, not most, all successful people I've ever met know exactly where their money is going. Unsuccessful people don't so we need to know where the money goes.
Caleb: That's what we're doing today. We're going to go down, break it down step by step a few of the taxes that you are sending your money to right now,.
Clay: We're hopping on the party train of taxes.
Caleb: Um hmm, yeah. All right, so Clay, walk us through the first one here, okay?
Caleb: The first one I want you to touch on just briefly is the federal taxes.
Clay: I'm going to go ahead and hop to my super diagram here because this is big stuff here.
Caleb: I think you can have some of, we can throw the percentages on the board.
Clay: Yeah. What we're going to do is I'm just start off by drawing the great United States. This is San Diego kind of where you're from a little bit.
Caleb: Yep, it's beautiful here.
Clay: This is like Texas has this little jot right here. Then we get into Florida, Flo-rida, bam, right there, we move up here we get, kind of get, Florida got kind of weird, over here there's a great lake or two and you kind of, uhh like that.
Caleb: Oh it's beautiful.
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Clay: Yeah it's huge. Now the thing is to protect this place, to keep our country free, we have to pay some things called federal taxes, okay? Now I don't think anybody watching this is upset knowing that our country is safe.
Clay: Or no matter what country you're in, you probably want to make sure your country's safe. As a general rule though, in America right now if you're making between thirty-five thousand, a hundred thousand dollars a year roughly. Don't Google it and get all upset, we'll put the actual numbers on the screen here, don't get freaked. We're going to pay about 25% of our income, is going to go right off the top here, 25% is going to go to federal taxes, okay? Twenty-five percent, one quarter of our big income pie.
Caleb: You're saying most entrepreneurs are budgeting for that money that's coming in but they're not really budgeting for the money that stays in.
Clay: Okay, here's the big jump. If you're working at Super Target right now you're probably going to make ten dollars, let's say you're making ten dollars and hour. When I worked at Target I made ten dollars and hour.
Clay: They take out the money for you out of your check and you get like seven fifty. Once you are an entrepreneur you get a check for ten dollars, because the customer writes you a check for ten dollars. If you're not careful you go out and spend it now you owe back taxes. Uh oh, that becomes a problem.
Caleb: It's a lot less painful when it never reaches your hand. You don't even realize it's happening at least as much.
Caleb: Once you get that into your bank account, it hurts a little bit more.
Clay: It hurts, it hurts so good because I love taxes, I wish I could pay more.
Caleb: Your main man Webster here he defines, very helpful definition, he defines tax as "to require someone to pay a tax". Isn't that neat?
Clay: To require someone, so you're required to, something you have to do. Okay, taxation for the nation.
Caleb: Um hmm, yeah. If we're going down, this definition it makes me think of the Declaration of Independence and that talks and dives a lot deeper into this issue of taxes. I'm going to read real quickly here some of what we can find in the Declaration of Independence. It says " when in the course of human events it becomes necessary for one people to dissolve the political bands which have connected them with another and to assume among the powers of the earth the separate and equal stations to which the laws of nature and nature's God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which should impel them to the separation.
Clay: Time out.
Caleb: Yeah, basically just saying hey we're separating from you Great Britain, here's why.
Clay: We're separating, we're forming a whole new nation, we're leaving from over here, we're coming over here, starting our own country, here's why.
Caleb: They're saying you should at least give them that respect to tell them why you're leaving.
Clay: Boom, King George.
Caleb: It's a good on to apply in your dating life too I think.
Clay: That's, that's ...
Caleb: That's just a bonus tip, it's a bonus tip, okay.