Quick question...I know this is in regards to business. But, when you mentioned having and “emergency fund” for profit savings....do you guys also have a personal emergency fund aside from business? I’m looking at this thinking, I already have 6 accounts...in which I am going to reformat and rethink where I should be keeping what, but after all of this allocating, I couldn’t imagine having anything left over for personal savings too!
Yes, we do. I do personal savings out of my owner's comp. Again treating myself as separate from the business. This will become especially important as we scale and hire more people. It's really tough at first, you're right, but yes, we do have a personal emergency fund as well.
what is the thought process behind having pass-through accounts? I.E. profit, tax, etc checking accounts, just to pass through to another account? Also, how did you learn to create interactive clips in your youtube videos? (links inside video, animation, etc? )
This was eye opening and exactly what I needed. I didn't have fully formulated questions, just struggles and uneasy feelings and this video was the answer. I started using YNAB Oct2020 and finally found a system to get me out of my spreadsheets. Can't wait to combine these ideas. Thank you!
Haha, great timing! Glad you're listening to it. I've really loved the system. Excited to hear about your experience with it. And thanks bro! I super appreciate that :)
Very helpful Nick! I have been very undiscliplined with my business cash managenement in that I basically just let a bunch of cash sit there in one account. I can see this being helpful. Will let you know how it goes!
And video question - how effective are these power point style tutorial videos at retention and other key metrics compared to talking head with graphics put in post production? These would be MUCH easier for me to make and it is what I do in my courses.
@@CoachChadCarson Dude! Glad to hear it was helpful. I love the profit first system and think it would be really cool for you. As for your video question.... Ask me again in a few weeks, this is actually my first one :) haha I'm experimenting with it. The YNAB tutorials have done really well which are similar. It's a screen share setup and I'm teaching software. They're some of my highest viewed and longest watch time on my channel. This is my first video using the powerpoint style though. So we'll see :)
@@mappedoutmoney cool! I will ask in a couple of weeks;) I am focusing on podcasting and course stuff at the moment. But I am pumped to do more RU-vid, and your stuff is inspiring me!
@@CoachChadCarson haha, thanks man! Excited to see you attack RU-vid once you get the course and podcasting rocking and rolling. I have no doubt you'll crush it.
You can. Although these days I don’t use the various accounts. I actually just use one account and use YNAB to run this system inside digital envelopes.
Hello Nick, I have a LLC only me and my daughter is in my payroll. I use YNAB to budget my LLC expanses, income. Is it enough information for tax purposes? I tried QuickBooks but I am very overwhelmed about it. Thank you
Hi! Canadian taxes are different, so I would have to be more conservative and put 30% for prov/federal + plus 15% that I charge. How does this changes the proportion of other percentages of the PFA system?
Why would you do this with multiple business bank accounts rather than just a simple checking & savings with categories that you keep an eye on with YNAB? I worry about opening too many business checking accounts and I'm with you... I absolutely hate Capital One's integration with YNAB. It isn't worth the headache.
I use Profit First with YNAB. Rather than all those checking accounts, I just use YNAB categories. I'm firm about not moving money from one category to another once I've done the initial distribution.
Hey Teresa! I use Profit First with YNAB as well. I actually still use the different checking accounts though. I do both... But like you said, if you're good about not moving the money and are disciplined, that's awesome. I still like separate accounts for me personally. But glad to hear that it's working for you. Thanks for watching :)
How do you make a tax payment from the Tax Savings account. It's a savings account. Do you pay taxes from your personal checking so you can just transfer that money from the Tax Savings to your Personal Checking to pay yourself back?
You’ll really like it! In addition to this I personally use YNAB to set it up. So hoping to do a video on that soon. Let me know when you start reading it! Definitely interested to hear your thoughts.
Question about the accounts you set up. Do you set them up as business accounts or as personal accounts? I could see them all being business but with lower incomes and bank fees, I wondered if doing them as personal is better. Sorry if it’s a dumb question 🤣
Hi Nick, I pay myself a set wage each week that I need to live on, How should I go about allocating that percentage? Also what would you recommend when the opex account is short for paying bills? p.s love your videos.
Great video, Nick! I discovered and implemented profit first last year after hearing an interview between Jesse (YNAB) and Mike. I use YNAB to implement, which has obviated the need for separate accounts, though I understand the purpose. My PF “accounts” sit at the top of my budget so I can distribute accordingly. It has been a great system so far and definitely reduces a lot of stress. Looking forward to seeing how you use it with YNAB. P.S. I owe you some footage. I promise I’ll get this done soon. Maybe C+C will give me a good kick in the pants! Hi to Hanna :)
haha, I owe you an email response my man! Glad you enjoyed the video. And yes, hoping to get the PF + YNAB video out soon :) Have fun at C+C! I wish we were going. I was talking to Josh Summers last week and saying I'm bummed we can't be there. I have no doubt you'll have a blast!
I can't wait to see the video explaining YNAB + Profit First. With my business, I have a lot of expenses that are split 50% between business and personal (ie gas for driving around my support worker clients) so I'm not sure how to split that up with Profit First. Right now it all goes into one account and at tax time I just claim the percentage. Any suggestions?
Hi Nick! Thank you for your great tutorials! I have a question about reimbursements using PF. Let's say I made a purchase with my biz account that needs to be reimbursed from my family account. When I transfer the money from family to biz, where do recommend I put it? Income? Directly in to the Reimbursement category? Something else? Thanks so much, Nick.
Great video! All my employees (including me) are on bi-weekly payroll. My staff gets paid the same obviously, but how do you deal with letting your accountant know how much I should get paid each pay period? I feel like they would kill me always telling them different amounts for me.
Great video, I've been using YNAB for sometime now with 2 budgets, one for personal and one for my business but I like the idea of setting up the separate accounts to segregate my money. I'm going to pick up the book tomorrow!
Hey Nick. New YNAB user on the personal side, and my wife and I love it. We own and operate a small grocery with 12 employees, and we have been power users of Quickbooks Desktop Pro for a lot of reasons that have more to do with it's ability to track LOTS of small details like items, inventory, supplies, vendors, etc., than with it's ability to budget or manage money well. Any advice on how to incorporate YNAB and/or PF into a business that is using QB?
PF and Quickbooks work together. Just set up the accounts and follow the allocation. YNAB is similar to QB but without all accounting features, you need as a business owner.
Thanks Nick! I downloaded your routine check list, but I think the PDF would be more valuable/robust if the PDF included all of the slides used in your video. Any chance you would update it?
Hey Rich! Great questions. So right now we’re still just a Sole Prop. But we’re going to transition to an LLC filing as an S Corp going into 2020. As for payroll, not at the moment. Since it’s just my wife and I. We just transfer the money from business accounts at capital one to personal accounts at Ally bank when we pay ourselves.
I feel like this would be great if I actually knew how to implement it. Managing my finances as a freelancer is hard enough as is, switching everything up feels super intimidating...
@Nick True, hey so I'm on payroll too. So I don't pull money out of the companies cash asset. Or net profit. Because I receive a check like a normal employee. So with that said. I dont see a reason for the owners comp for me. Can you elaborate on my scenario?
I'm with Martin - YNAB and Profit First. My wife and I just started doing exactly that with her business, but I'm sure Nick will have some great tips and his own style to help make it better than how it is now. Can't wait to see that video, Nick!
Love the tips for allocating funds. Do you have any recommendations for low monthly fee business baking accounts? Seeing as this model empties out certain checking accounts on a regular basis, wondering which ones you use? I will be starting a virtual bookkeeping business soon and am still trying to narrow down which banks to go to for this venture. Thanks!
This is such a great video!! It couldn't have come at a better time. I just became self-employed and this video is a life-saver. Thank you so much for putting this out there.
Abby Beita hey Abby! So glad to hear that it was helpful. Congrats on going self-employed! That’s exciting. Let me know if there’s ever anything I can do to help :)
Absolutely Lou, I definitely reccommend checking out the book if you're interested. There's a lot of good ideas in there and I think you'd find a lot of value in it. I really love the general approach and underlying philosophy of the system. Thanks for watching man.
Hey Nick, sorry if you answered this already... scrolled through some of the comments and didn't see it. If you are just passing your Profit through to Profit Savings, what's the purpose of the two profit accounts? I see why you want your Profit Savings in a separate bank, but not why you set up a Profit Checking to pass through bi-weekly. Can you clarify?
Good question, the purpose is simply that transfers at the same bank happen instantly, vs when you transfer to an external bank it takes a few days. So if you use pass-through accounts, it gets your income account down to $0 immediately.
I have read Profit First and have the accounts, but don't use them except for Income, OpEx and Owner's Comp. lol Can you refresh my memory on the Profit account? When you take the 50% each quarter, do you take the Current 50% put in or 50% of the whole account? I have put my book somewhere and I am sure it is just collecting dust. I will be hunting for it later today!
It all depends on how your business is structured. I’m currently a sole proprietor and owners comes as 1099 from clients. If you’re an actual employee and structured as such, you’d use a W2
I don't really use profit first for personal side. But I do use YNAB + Profit First, if that's what you mean. I actually did a video on that, so be sure to check that one out :)
I came across (by accident) your YNAB tutorials from another blogger, checked it out and have been a "girl fan" ever since! I have been so impressed with YNAB, I've was thinking it would be great to start it with our business. Then up popped this video! Crazy how you're in sync with what our finances need. You might want to add this skill to your resume Nick. haha Can't wait to see more videos on how YNAB works with this Profit First concept (we currently are at 3% Profit and hope we can build more with a more concrete system) thanks again...great video :)
Hey there! So glad that you're enjoying the videos :) Glad this came out around the perfect time haha ;) Pumped that you're at 3% profit, that's great! Hoping that the YNAB + Profit first video is good for you. Thanks again for the comment :)
Great video! My question is what if you had a loan that needs to be paid monthly on your new business? Do you "add" an extra bank account that pays for your equipment purchased? I need to get this loan paid (It's a HELOC) and then use it to buy more equipment to add more services. Thanks!
Hey Johnny! Good question. I probably wouldn't. Personally I would handle loan payback as an expense out of the OPEX account. You could do a separate account. So it's really personal preference, but I would personally just pay the bill out of OPEX. Hope that helps!
hey hey! There he is :) TBH, I haven't found an online based, business bank account that I love anywhere. Spark at Capital One is the best I've found, but there are still some things I really don't like. Here's three main ones. > I've had consistent issues with logins over the years, especially when connecting to QuickBooks, Quicken, and YNAB. The connection for pulling transactions consistently breaks. These days I have to reconnect my capital one accounts every time I go into my software. > While I haven't interacted with customer support a lot, a couple of times I've needed something due to a delayed transfer or wiring money, it's been a long and drawn out process. No good luck interacting online and the phone was difficult. > By far my biggest complaint is no good mobile solution. Their regular capital one app doesn't work with the Spark business capital one account. And they discontinued the Spark App in 2017. So if I want to access my accounts on my phone, I have to do it through the chrome browser which just isn't a great experience. They're supposed to be adding their spark accounts to their main app, but it's taken a couple years and it still doesn't work for me. I wish there was an Ally Bank for business, or a business bank building their online interface similar to what Ally has done. But at this point, I haven't found one.
Not the way we do it, because we tax all of the money as it comes into the business. So all the profit money has already been hit with tax. So when we take the distribution, we don't tax it a second time.
I actually do use the same back For all business and then a separate bank for personal. But I’m the profit first book the author recommends separate banks for your main business accounts vs your tax savings and profit savings. But it’s all personal preference.
Very interesting concept - another one, like YNAB, that gives self-employed folks like my husband and I a "why" that actually makes sense! Am looking forward to the video that combines Profit First and YNAB. Thanks for sharing!
When you pay for something from the OPEX account, how do you make the transaction? Do you pay by paper check, use the routing and account number and pay electronically, use the bank's bill pay service, or some other method? 🤑
Something that bothers me with taking a high Owners Comp is that personal tax is higher than small business tax in my country, so all of sudden almost half of my salary is going to tax. Is it not better to keep more in Profit Hold instead of paying yourself a bloated salary of 50% of turnover? Your business can't be that healthy if you're bleeding it dry on owners salary.
Agreed completely and that's the long-term goal. I think for a lot of small business owners, their business isn't "healthy" when starting out, so they have to pay themselves a high percentage. They have to eat. But yes, over time, you'd definitely want to get that percentage down.
Yeah thought so, that's why I can't understand Mike's Owners Comp percentage of 50% for business turnover up to $250k, that's up to $10k per month, which is quite a high salary for a small business owner. Anyway thanks for your feedback. Your videos are great, very clear!
Clearest explanation of Profit First model that I've seen yet, so thanks. Quick question, why create basically two of the same accounts (profit & taxes) at two different banks when they just act as a pass through on the first bank? Wouldn't it be just as easy to make that twice a month (10th/25th) transfer to your holding bank in those accounts?
Hello Nick, awesome video. Thanks for further breaking down profit first system. Is the Owners compensation accounting necessary when you have multiple locations for your business?
In regards to the business paying for your taxes upfront then you taking the "Owners Comp %" ...do you then set aside a % for "personal income tax" out of the "owners comp" you initially set aside?
Hi Nick. Great stuff. Question...what do you do (and with what frequency) with remaining funds in the Opex account if you do not spend all that you allocated?
I use Capital One spark. It works pretty good for me, although I'm sure there are others out there. Definitely don't compromise though, be sure to find one without fees!
If I have two businesses, do I have all income go into one "Income" checking account? Or do you recommend setting up two complete Profit First systems for each business? Thanks!
I just came across your video. Very well done. I do have a question though on the checking accounts used. Are you using "personal" checking accounts for business purposes? I can't find a single free "business" checking account anywhere that either doesn't charge a $12 to $15 fee or a minimum balance of at least $1,000 or more in each account. I want to conduct the "Profit First" methodology, but not at the expense of paying $60 a month (minimum) in bank fees.
Nope! I use business accounts. Through they’re online. I bank with spark capital one. Its been great and they don’t have any fees. Unfortunately you’re right though, they’re hard to find.
@@brettjeepski It's a liability thing. so when you get your business accounts separate from personal and do an LLC, it helps protect you from people suing your business and then also taking your personal assets. Sometimes even if your business and personal are separate, if it's not a "business" account, they'll still be able to come after you. Yes, this is a super small and rare case, but that's the main benefit of "business" accounts.
Great video, few questions that cam out in my head: 1. business account has fees/cost, are you using a personal accounts or using an online free business account? 2. what about 401k/retirement saving, from where you taking it? from the salary in your personal account? or from the business account somehow?
Good questions! 1. I use free business accounts through Capital One Spark (although I'm not sure they are open to new accounts right now). But they are free, and they are business. 2. I do all my investing on the personal side. So I pay myself my owner's compensation and regular profit distribution, then out of that in my personal budget I will budget for my investments. I currently don't have a 401k through the business, just IRAs, but I may add a 401k plan in the next year and if I do I'll handle the business contribution on the business side. I'll probably setup a group for "employee benefits" and run it from there. hope that helps!
This is really helpful. I've been self-employed for 6 years and since I started my accountant told me to save 40% for taxes. Is that just super conservative? It doesn't leave me that much wiggle room for the other categories.
Whoah. 40%? That seems like a lot, but it all depends on your state and the way you run your business and how much you pay yourself. But honestly , since you've already been in business for 6 years, I would just go pull last years tax returns, and see what percentage your taxes were compared to your whole business. Then use that going forward. Hope that helps!
@@mappedoutmoney Now that I'm really paying attention because of YNAB (and you!) I will figure it out. I will say that I've been able to at least partially fund an SEP IRA every year from the 40% so maybe that's why she's being so conservative. I wish SEP IRA was one of the categories from Profit First - I'm going to put it as a separate category with its own CAP AND TAP - what do you think?
@@theadamdupuis Unfortunately I don't have much personal experience outside of capital one. I do use Ally bank for personal, and love it and have a great experience with it. Some others to check into for business would be - Synchrony - Novo - Chase Like I said I don't have personal experience with those though. My friend Robert runs this website and this article has some options worth looking into. See what you think! thecollegeinvestor.com/24366/best-business-checking-accounts/
Hey! I just do it DIY for the quarterly. I did have a CPA this past year for the first time ever, but that was mostly because I live in an RV and there are a few things that are unique about traveling and working on the road. So I had a CPA who specializes in working with full-time RVers. But I may go back and do it myself this year. It's not too difficult at this point :)
@@mappedoutmoney My home schooling family and I are considering going full time RV. Since we're both small business owners, I find it interesting that you said there are some unique situations. Could you briefly elaborate? Thanks.
I personally use multiple bank accounts and YNAB to run this. And yeah, I could definitely do that. I'll add it to my list of videos to create. Thanks for watching Gabriel :) BTW: just real quick I use Ally Bank and Spark Capital One for reference.
@@mappedoutmoney What are the ownership of those banks? I mean Primary bank and the purple (referred Saving account) banks vs the last blue bank. I guess the last blue bank is your personal bank but does the other two or specially second bank have to be on business name?
@@RaviKumar-oy2qu So the way I have mine setup is : All business bank accounts are located at Capital One Spark. That's 5 checking accounts + 2 savings accounts. All with Capital One and all under the business. All personal bank accounts are located at Ally Bank. Represented here by the one blue box, that's my primary personal checking. And once I pay myself into that, I will then sometimes take money and disperse it into other savings accounts or investments that are personal and I don't show them in this video. Does that make sense?
@@mappedoutmoney Awesome, that make sense. So you have all 7 accounts in one bank (Capital One) which is one business name/business accounts. Only bi-quarterly paid bonus is your personal bank account. I thought for moving money to saving accounts (Profit and Tax) should be a different bank. Anyways, just wondering if once you pay bi-quarterly to your personal account, is that entry taxable? Appreciate all your knowledge sharing. Love your videos!
Hey! Good question. My answer would be bank somewhere with no fees. For example I bank with capital one at the moment and have a bunch of no-fee always free accounts. If you use an online based bank that won’t be an issue. But If that’s a an issue you can use a normal bank where you’re already at and no do all the accounts and use something like YNAB to break out the money. Hope that helps!
