Spencer, I am a 60 year old attorney in Florida who has never before left a RU-vid comment. I make a good amount of money and I do woodwork as a hobby. I am so, so pleased to see this video. It was helpful, informative and most importantly reached an audience that otherwise would not have received this advice. Thank you for a great public service.
Well thanks for dropping the positive feedback. It is very reaffirming to get this type of encouraging feedback from those in professional services outside the trades!
@andrew rader , I'm my own gc on my major house remodel right now. I consistently meet the head of every trade /skill and am surprised by the thing they mention to me, about money, surprised that a crew of 10 drywallers shows up in 4 $90000 ultra luxe dually pickups. I mentioned nice trucks and guy told me it's just a write-off, uh huh! As a consumer/homeowner I think this lack of education in taxes and finance makes projects more expensive for me. The drywallers didn't need the trucks and I'm paying for most of them (minus the fed govt write-off). Also, I can't imagine the these guys are doing for health insurance. I can imagine the premiums would be very high, furthering my increased costs.
I'm glad you pointed out the part of unessesary spending to save in taxes. The same mentality applies to an employee who avoids overtime cause they get additional taxes withheld. A wise person once told me, "Never let paying taxes hold you back from making more money."
As a finance guy I'm very impressed with this video. You've honestly covered these topics better than most business/investing/personal finance channels do. This is a great resource for any young person whether or not they're in the trades.
In business for 7 years this coming March. It is at tax time every year that I come to the realization I am improving my craft and capacity but I am no better at the business end of things than I was the day I started on my own. Truck and trailer are paid off and I owe nothing to my equipment. Great job on this video, many of us are lost.
Spencer, the trades need more guys like you around. I hope that there are some young hungry people that you work with who are smart enough to latch onto your wisdom and talent and recognize a Godsend when they see one. Thanks for spreading your word wide and far with the miracle of modern technology, your videos are like a college education. Keep up the outstanding work.
So many new contractors, myself included when I green, fall behind on taxes year one thinking no biggie ill make it up later in the year. Then you don't. Then you miss a quarterly and get a penalty. Then your truck breaks down and you need a credit card to pay it. Etc etc etc. Now you're on a payment plan with the IRS. So many contractors fail year one by not charging enough and not setting aside taxes. Literally business 101 and I still screwed it up because I didn't have to balls to charge my worth and I thought I knew better then what my CPA told me about setting aside 30%. Know your numbers all the time and you are so much more likely to succeed in business by that alone!
Thank you for addressing point number three! So many people spend money unnecessarily to reduce profit & minimize tax liability when it makes NO SENSE. It is literally the option between having 80% of the money after taxes or 0% after the purchase. I grew up around small business and am about 2 months away from graduating with an accounting degree. I always cringe when I hear so many people talking about buying completely useless stuff thinking they’re getting one over on Uncle Sam.
Best advice another business owner gave me when I was starting out was show profit and pay the taxes. It allows you to have access to loans for mortgages, cars …etc. it is always interesting to see a bank or loan officer look at your books as a business owner and be pleased and comment on how uncommon it is for that to be the case. Most self employed have a harder time qualifying for loans based on how they structure their business profits to their long term detriment.
@@oColt45o The big advantage of being broke or close to broke in America is being able to go into debt and take risk without actually risking anything. If you go bankrupt, you loose $0. If you make it, you keep the profit. Telling broke people not to get into debt to invest in something that will generate a return is not a sound advice. They have nothing to loose. If you have some money already, on the other hand, you risk loosing it and you should be careful with debt.
@@xavytex nobody said anything about being broke. If you are broke it means you have problems with your finances already, adding other people's funds to your financial situation is not going to improve that issue.
Fellow carpenter and S-corps. I’d really appreciate you doing the investment video. All your videos are great my Man, this one is not the first to strike the chord of immediate usefulness to me
A beautician explained all of this to me 40 years ago, which prompted me to begin my own small business. It is a great move! Thank you for all your videos, including this video.
The best thing about this channel is that unlike 99% of the other trade/woodworking videos, you aren’t always trying to speak to homeowners who have never picked up a hammer. I should add- I’ve been working for myself for about 20 years, I’ve had guys work as w2s and 1099s. 1099s aren’t generally “taken advantage of”, they are typically paid more than w2s to compensate for the taxes and trouble.
I think what spencer might be getting at in this video is that some people do take advantage and it's more often than not and to be careful. I like his humble approach.
@@MV-wb2cz The whole "being taken advantage of" is just a dumb thing to say, and I'm shocked to hear him say it considering he is a business owner. It's a free market, its all adults making free decisions and agreeing to things. I would bet that if he thought more in depth about it, he would probably retract the statement.
@@reggiejenkins6458 I understand your point of view. He did not take onus of his mistake of agreeing to a deal that did not benefit himself without the proper education to assess this fact. I take back what I said previously, thank you for pointing this out.
I am an accountant that watches your channel to help with home improvement. Great topic for a vid. It is interesting to hear things from a client's perspective. I hear so many myths about taxes and ways to avoid them that people do not realize they are actually just hurting themselves to stick it to the government. I am glad you cleared some of them up here.
@@RiceBoy7thst examples are buying things not needed in a business just to get a tax deduction. Example: buying a new truck just for deduction instead of continuing to use existing truck which works just fine.
very nice video, Spencer, but I would make one correction. As an S corp owner, you can save on paying Social Security contributions and MEDICARE contributions ( not medicaid... medicaid is government provided health insurance for folks that fall below the poverty level, or are disabled...). One caveat........ since you are not paying social security contributions on ALL of your renumeration, your social security check ( when you retire ) might well be significantly smaller than you would like it to be. I won't go into the advantages or disadvantages of that..........
Sage advise Spencer...you are a beacon for the American small business owner...the hardest part of building wealth is keeping it, and, in my opinion, there is no shortage of "financial experts" who want a piece of your pie. Like you, I have studied the historical stock market performance, and agree that investing in solid, well managed index funds is a sound strategy for keeping more of your hard earned money in your pocket instead of theirs. Keep the great content coming.
Keep up the good work. This one is great! Here’s one tip I’ve done over the years. If I have money left. Invest in your customers businesses. If you’re remodeling/building (I mean really remodeling) a CEO’s house, it typically means his or her company is doing well.
I'm being taken advantage of the same way right now, I'm paid hourly just like an employee but no work comp and I'm paying all the taxes and insurance.
Spencer, great video. I'm a recently retired commercial trim carpenter. I had a small company with 6 to 10 employees, and was in business for 25 years. Even though I had employees and a good base of work, it was still a tradesman business with no real value. It was still basically dependent on me getting out there every day. I ended up letting a couple of my employees take over the business when I decided to get out. Fortunately I invested most of my profits in rental property. I would buy a house or small multifamily building and do the fix-up with my guys. This meant I could keep them working 40 hours a week in the slow times between jobs. Being a landlord isn't for everyone but it has worked out great for me.
From Finessing your carpentry skills, to finessing your financial skills. Mama.... there goes that man. Your content has been invaluable to me both in carpentry and as an entrepreneur "your creating systems" philosophy has worked wonders in the workplace. Keep up the great work.
I never spent money just to save taxes , you are spot on. I always laughed at these nitwits that as soon as they start making money they go out and buy a brand new truck. Stupid move. Remember that a lean dog runs a long race. Keep your overhead low no matter what
I watch your vids to up my carpentry game, but I didn't realize you were holding out on us with your business acumen. Much like your trade side, you seem to be very thorough on the business side and would love to hear more. Thanks and keep up the great work
Personally, I am just watching this video and nodding along, because I am familiar with its content. My sincere hope is that this video reaches the people that need it the most. Thanks Spencer, for all you do for the trades people. edited: "contact to content"
Fellow subscribers, Spencer continues to impress me in his pragmatic approach to his business. As a 63 year old retiree and now doing my self employed 'fun' job now, and it's because I had sound advice early in life to follow basically everything Spencer is saying. Well done Spencer!
What they taught us in the Army as a fresh butter bar. It doesn't matter how much you make, it matters how much you save. So they said "ok, get your LT-mobile then shut it down". I saw far too many who spent every cent they made and more. Great video!
Well said. Retirement is important but it can be squandered by debt in the moment. Most need to get out of debt more than they need to plan for retirement.... but we all need to plan for retirement.
Wonderful video. Thank you. Just 2 months ago I left my full-time job and I'm now subcontracting and doing work all on my own. This is a good reminder to keep my head up and keep treading water. And to keep looking to the future of where I want this business and my wealth to be. Keep the coaching videos coming please. Thanks!
15:12 Great example. I was able to keep my AGI below a certain amount between the time I retired at age 60 until Medicare which saved me about $100,000 in health insurance premiums during that five year period.
I’m a finish carpenter like you, and a single member LLC. My VANGUARD index funds have only gained 9% the past year, but just shy of 45% the past 5 years. My only regret was not having the cash to fund more of it. ($28k/year in child care). Set it and forget it. Easy.
A video with details on investing for tradespeople would be helpful for a lot of small business owners, especially those who have little to no experience with investing.
Good evening Mr Lewis. Let me say, thank you! For the first time I will say that someone is really giving advice without any financial gain. You are basically telling everyone how your experience is financially not how you can make someone rich. In regards to your insurance comment, I was looking at a video about how NOT to put your money in the bank instead invest in life insurance. I was shaking my head and started asking questions and the answers did not make sense and sure enough I kept asking rebuttal questions and after a while they stopped responding . in regards to your question about, should you do a video on how to invest? I say to that, YES! I rather listen to a carpenter on how he invest his own money than a person in a suit that is going to take my money. once again, THANK YOU!
Spencer, great info as always. This past year I’ve really buckled down on getting my finances in order and getting out of debt. I love hearing stories from people that have made it out of the debt burden and live life debt free and are saving towards retirement.
Great financial tips for building a business Spencer. I’m retired and I think everything you said about self investments and taxes is spot on. I’m sure your other followers would like to see more on this.
More of these kinds of videos would be great, Spencer. Thanks for all the knowledge and ideas. Wisdom. I've just started a new carpentry company for myself this year. This REALLY HELPS. 💪🇮🇪🇺🇸
Excellent, you are like an encyclopedia of the trade. 30 yrs ago when I relocated south and re-started my business, the first thing I needed was an accountant. I picked a winner, wish I had him in NJ. He has a Doctorates degree plus others in business accounting. He asked, do you work out of your home or shop? Both I said. Do you have a dog? Yes, a little Chihuahua. You can claim it as a watch-dog, food, shots etc. The bigger the dog, the bigger the return $$ The bigger the dump. I added a Rottie. My ACC last name ends in a vowel. Just saying.
Spencer, by far the best social media that I follow. Always leave with having learned or confirmed something. This episode was great. Thank you for sharing your experiences and providing your recommendations! In order to succeed at something, you have to stumble or fail along the way. Yea to future episodes. Investing strategies, insurance, workers comp…. Umbrella policies, expenses, the different ways to expense a company vehicle…. All I for would be helpful to share with this group. Thank you for sharing your detailed information with us. It is appreciated.
Always nice to hear a video and learn nothing new, just reassuring you're doing it right! That being said, the "reasonable salary" grey area is the only thing I wish I could get better definition on. I know guys that pay them selves terribly low, and take outrageously huge owner distributions and I feel like that's just begging for tax trouble. Getting a clear definition on that is something that no CPA has ever been able to answer for me. As a result, I just pay myself about 10k over the average pay for a "lead carpenter" in our area and assume that's a safe and reasonable rate.
My CPA does a pretty good job of making sure I'm staying in the "safe zone." Mine is even more complicated being that I wear the hats in my content creation business as well. My CPA has ran a "reasonable compensation report" in the past. I think it's some kind of an outsourced service that will show you where you need to be.
Thanks for all the different ideas and suggestions from you on this topic for tradesmen. Your concern about fellow professionals through this platform in building their skills and knowledge of operating a small business is the best online source for so many. Much appreciation Spencer, you’re doing so much for so many that could never personally thank you.
One of the problem with index funds is that they tend to over-invest in the very high valuation companies with high PE ratios, such as Facebook, Apple, Tesla, and Google. If they fail to meet growth expectations, their PE ratios will start to fall, and your index funds will follow. This is unfortunately based on the design of index funds. Worse, as people buy more index funds, they have to buy more of those expensive stock, even if expectations for that stock wouldn't reflect that high valuation, until short sellers start seeing them as a target.
Hey brutha, just wanted to say all of ur videos teach me so much of the lil tricks and details that some old timers don't want to share. I'm truly Grateful for your detailed illustrations. God Bless you
Good job Spence! I'm kicking myself I didn't start a Roth IRA years ago instead of in 2020. Ive always had a 401K & now a Traditional IRA with Fidelity but a Roth is going to allow you use that money tax free in the future.
Good stuff. When I started my construction business 20 years ago, I had little financial literacy and knew little about the complexities of actually running a business. I could grind, do great work, and stay busy, but the financial piece was always "unmanageable" for me. I've since changed careers, earned an MBA, and am now an executive at a healthcare company (yes, I still watch carpentry content and get nostalgic lol)....but if I knew then what I know now.....sheesh. I think financial literacy is important for everyone, but especially business owners/operators. Financial/business success is not just about making money, it's about managing the complexity of finances and understanding the implications of financial decisions. Good for you! You seem wise beyond your years.
I feel like many contractors watch your videos because they like to learn from your on site efficient processes, honoring your practices will make them more money. If they really want to make More money and have financial freedom this is the video to pay attention too. If you want something to listen too about financial education I really likes listening to the annual meetings for Berkshire Hathaway, you can find them on RU-vid. Listening to warren and Charlie talk about business and investing is very educational even for someone with a small business, and no one knows more about compounding money than warren. The videos go back to 1994 and I have listened to them all. Great video.
Absolutely. I have enjoyed pulling lessons from Buffet and Munger. Buffet has been on record saying the best thing most people can do for themselves is put their money in a low cost index fund. I enjoy leaning from Munger's mental models for life.
Don’t forget the revocable living trust. paying your kids through the business and starting their Roth accounts with that income so they get a head start on their wealth building journey
I would thoroughly recommend watching some of Mark Kohler’s video’s on RU-vid. He does an amazing job of dropping useful tax nuggets also. He is a Tax attorney and CPA.
I agree with almost everything you said, but I was taught that LLCs don’t save on taxes other than being able to expense stuff. The tax savings from Fica can only be done with an S-Corp having a W2 and a K-1 issued. Checkout Mark J Kohler videos. He is a CPA and lawyer.
Yeah what most people don't understand is an LLC single member LOC escorts are good if you make over to a $100000 a year and you have employees otherwise Not beneficial
Thanks for the video. I just became a Licensed General B contractor in San Diego and established an S Corp. It’s been a huge learning process as my expertise was always on the trade side and never on the business/paperwork side of it. Would love a business series of videos from you to see different topics of the business side in the trades; Bidding, overhead/profit percentages, etc.
My hat is off to you Spencer! Excellent informative video on the level of the people that actually need it. For years I have been researching and watching videos on Tax strategy for the small business owner and yours hit so many of the important topics and strategies in 1 shot. And here, I thought I subscribed to your channel today to just see a craftsman at work, but you actually offered so much more already. Thank you!
Good content here. Owning a business is the number 1 way to grow wealth period. We take advantage of all legal tax strategies. Paid my house off 6 yrs ago and that is when you can really get ahead in life. Cheers from Montana.
Great video! Most guys that prefer working with tools aren't happy about their computer and paperwork time, or maybe its just me. lol Your emphasis on keeping good records is critical to minimize taxes, plus it gives vital info on the financial health of your enterprise! Regarding investing for retirement, I think people in the trades shouldn't overlook purchasing rental properties. Rentals can have a positive cash flow but still provide a large tax deduction due to their depreciation. Plus, as a hard asset, they are more familiar than financial securities. But the main point, as you said - be saving up for when the body eventually slows down. :)
Fantastic video topic, many people aren’t informed in school about proper financial literacy when starting a business. Spreading this information is very important and I really value this informative video. I am 22 and looking to take over my father general construction business along with starting many businesses on my own so I have been binge watching many of these videos and I know they will help me in the long run to have a solid financial foundation so thank you! You just gained a sub from this :)
Appreciate the video. I knew most of what you said but I did pick up a few things. I always do watching videos. Small business owners are at such a disadvantage, every little bit helps. Thanks.
Great point about tax write offs. People also forget you need an income on taxes when you go to get a home loan. Writing off all your income will screw you when you want a house.
@@evictioncarpentry2628While the business may be able to write off more things, if you aren't paying market value rent on the house, and the government can trace that house up you, it could be considered tax evasion, which is a criminal expense. On top of that, you lose owner-occupied/homestead benefits, which vary by state. While there are ways to hide ownership through separate LLCs in states which don't require ownership records, not owning a house or paying any rent, while living in a house is a red flag to the IRS.
This is the content I’ve been looking for! Kind of a behind the scenes of the business side of a tradesmen. Would definitely appreciate more content related to this type of stuff. You’re the man Spencer, thank you for educating!
Spencer, thank you. I love your videos on these topics. I've been one year on my own and the challenge hasn't been so much trade techniques or getting jobs, but things like how to price appropriately and all the topics you touched on. My experience has been a lot of the business-owning tradesmen i know don't take these things very seriously. So I appreciate your emphasis on it and putting this information out here for me.
That was great info, and 100% applicable to specialty crop farmers like me. A couple points about avoiding social security by minimizing your own salary - first, only do that if you are investing; otherwise, you will be screwed down the road when you have little SS money coming in at retirement. Second, if you have employees, the IRS does require that you pay yourself more than any other employee, so your tax savings won't be as great as when you don't have employees. I'm always telling new farmers to get a good accountant, and man, if I had a dollar for every time someone told me that they don't need an accountant because their husband/father/sister/whatever is "good at numbers".... Finally - how hard was it not to mention Bitcoin?!
BD, I like this video a lot. I am starting out in AG with a vineyard. Any advice for my first years to make sure I am setting it right financially? This is a side job I hope to make full time. I already have a full time job.
@@berttondo6170 Get a good accountant, and incorporate in some form. You want to operate in a business-like manner from the get-go, even if you're not making money at first. You don't want to risk the IRS deciding that your business is a hobby, and disallowing expenses.
@@berttondo6170 Second, develop a multi-year monthly cash flow projection, even if it's mostly assumptions in the beginning. That will be your road map - you'll compare actual to planned to see how you're doing. You'll update it frequently as you gain experience.
Great job Spencer! I have just started my business in the trades last fall as an LLC, sole proprietor. I have already spoke with my accountant and everything you touched on was spot on. Keep up the great work!
Great video. Great advise. Now you have to go one step further, now that you are accruing assets, and look into trusts ( living, revocable etc) to protect your assets and provide for your children down the road. Ask your CPA
Thank you very much for making this video. I started my own construction/carpentry company this time last year and have been anticipating tax time. I feel far more relieve after hearing all your tips and advice. I hope to be as successful and knowledgeable as you one day. Keep up the good work
Thanks Spencer. These kind of videos really show you care about fellow tradesmen... Remember the emergency fund/cushion too everyone! (Spencer has mentioned in past as well..)
Dollar cost averaging is another good strategy for investing in your index funds. Invest an equal amount each month regardless of price. You will then be buying fewer shares when the price is up and more shares when the price is down. In the long term, this really maximizes the return.
Awesome Spencer! Thank you for sharing:) This is definitely an element of the business that I struggle with. Please keep making more videos on this topic!
Surprising video but a great video it does help those starting out. I worked in the building trades 13 years right out of high school starting on the bad side of town in Ohio rust belt rehabbing houses ending on the sunny west coast doing houses that were published in Finehomebuilding magazine. The 1099 were all to familiar and we were all too naive I wish we knew business better as the work part came easy. Our estimating really sucked as we were just too optimistic on time and all the little incidentals became an employee pretty quick only to see the company owners succeed. Growing up poor I never got the right price on things and learned too late that there are people willing to pay what it takes and not to mess around with the others. What may help the newbies is a gross breakout or proportion of what all that "dollar" rate needs to cover. Meaning for a dollar that comes how do each of the 100 cents cover a portion of the overhead. Carry on!
Spencer great topic good job. It would be good for viewers to understand that your employer figures in every cost that will cost the company bottom line for an employee wage. So taxes weather employee pays or business pays it is all the same. I would not be in business very long if I don't know what it cost my business to have an employee, such as tools, vehicle, insurance, wage, taxes, etc..... If an employer 1099 an employee with the same wage he would pay a W-2 employee then yes he is taking advantage of you.
Hey Spencer, I’m on beginning of the path that you described. Thinking about starting a business someday, determining how to plan for retirement and provide best for my family while having a vocation in the skilled trades. You mentioned that you’ve done a lot of research to educate yourself and I was wondering if you would share some of those books or material? Maybe another video on books recommendations/resources? I grew up on the mindset of work hard and save, but my family didn’t have a lot of money and so I never learned much about what to actually DO with that hard earned money. I’ve already read 3 of the books you recommended in a previous video and could benefit from all the info you can share on this topic.
I felt that way too, blow it. But Return on Investment (ROI) is paramount. I need some pneumatic guns myself. make the job so much faster and easier. Trim etc.
This is great information! I know of accountants who give the advice to buy more tools just for the tax deductions. Would love to see a more in depth video on this important topic!
Most people never gonna pay their loans off. They're literally just paying interest...get into another house..... pay on interest with that one... It's gonna be a nightmare for the next generation comin' up, just as a "grown up." As a businessman... It's pretty difficult now. I had a lot of layoff time in the pandemic and hard to come back from it, expenses are up and clients are few as I get entire year projects solo, so my name doesn't get out much..
