Episode 187: How much do you need to pay yourself?
If you are somebody who runs a small business, chances are, you may not have paid yourself the same wage that you might have got. In today's episode, Fiona shares a quick tip on how you can be more knowledgeable about your money. Tune in!
Topics discussed in this episode:
Introduction
On Paycalculator
Benefits of using Paycalculator
Conclusion
Get in touch with My Daily Business Coach
Resources and Recommendations mentioned in this episode:
Hello and welcome to episode 187 of the My Daily Business Coach podcast. My name is Fiona Killackey. I'm your host. And today you are listening to a quick tip episode. That's really where I offer a quick tip tool or tactic that you can implement in your business immediately. If you are new here, thank you so much. I hope you really enjoy this episode and you go back and binge on 186 episodes before this. And if you've been here for some time, thank you. And if you have been here for some time and you're listening and enjoying this podcast, it would mean so much. If you might leave a quick review on Apple, Spotify, Amazon Music, or wherever you listen to this, it just really helps our podcast get seen and heard importantly by other small business owners. And hopefully, they can learn from this as well.
The other thing I wanted to mention before I get stuck into today's quick tip episode is that our marketing for your small business course and coaching program is open now. And you can find all the information at marketingforyoursmallbusiness.com. If you're on the My Daily Business Coach website, you can also just find it at mydailybusinesscoach.com/marketing. And in this, we go through a nine-week program together, we look at the marketing for your small business course online, and that has eight modules. So every week you do one module in your own time, and then you come for an hour, live coaching with myself and other people who are on the call. And at the end of that, you are going to present your marketing plan, your marketing strategy, and anything else that you wanna go through with the group. So it really keeps you accountable to actually not just buy the course, but finish it, and then even further accountable to present your plans to the group.
Now, that last part is optional. If you're like, “I don't wanna present my plans”, that's fine. It's a really good way of keeping you accountable, making sure that you get through the whole program. So again, if you're interested in doing that, just head over to mydailybusinesscoach.com/marketing. And finally, before we get into today's episode, I just wanna pay my respects and acknowledge the traditional owners and custodians on this beautiful land in which I live and record this podcast, the Wurundjeri people of the Kulin Nation. And I acknowledge that sovereignty has never been ceded. And I also pay my respects to any of your elders past, present, and emerging, and also pay my respects and give a huge welcome to any other indigenous Torres Strait Islander groups that might be listening today. All right, let's get on with today's episode.
So if you are somebody who runs a small business, chances are, you may not have paid yourself the same wage that you might have got. If you were working for somebody else, perhaps you are listening to this and you have never paid yourself a wage. In which case I would like, “Pay yourself a wage right now,” if I can offer you any advice, start taking money out of the business for yourself. But, one of the things that comes up when I talk to people about their money and it's something I talk to people about a lot is what they take home. So what they actually take from the business, not for business reasons, but for personal reasons. So if they have childcare to pay, if they have a mortgage pay or rent or other things that they're saving up for maybe a holiday, maybe something else, and they need to be paying themselves a wage.
Now I'm not an accountant, I'm not a financial advisor. It really depends on how your business is set up. You might be a company, you might be a sole trader. You might have a trust. There are all sorts of ways to set it up. But if you are somebody who either is not taking a wage, hasn't taken the right wage. So you always feel like it's not actually covering everything or it's just somebody that is interested in understanding what they could actually take from the business and what that would actually look like after-tax and maybe other things that you have to pay. I wanted to tell you about a tool. So this is an Australian tool. I'm sure there are similar tools in other parts of the world, but this is an Australian tool and it's literally a website called Paycalculator.com.au.
And of course, we'll link to that in the show notes, but this is a tool that I have used for so long. And even when I used to manage people in the house, in corporate jobs, if somebody came to me and they said, “It's that time of year, I'm thinking I would really like a pay rise” or, “Hey, we wanna buy a house” or “We are having a baby” or whatever it is. And we've started looking at our finances and I need to get more money. I would always say to them, can you please check this website first? Because you might decide that you actually will be happy with X amount of money being paid to you, but actually your needs. And maybe those have changed. You have to go through it. And one of the quickest ways to look at this is the Pay Calculator.
So if you've ever worked with me, or you've done my money mapping course you'll know that I often talk about your survival and your thrive figures. So your survival is absolutely what the business needs to survive. Plus what you, as somebody working in, needs to take out of it, usually in the form of wage to survive in your own life as well. So let's just say from the argument's sake, you were like, “I need a wage of $50,000 to cover the things that I need to cover in my life”. One thing is that people might say, “I need $50,000”, but they're not including that, I need to pay tax or out of that needs to come by superannuation, which is equivalent to a 401k or your pension in some countries. And then it might also be things like if you've got a student debt, so in Australia, call that a HECS Debt, higher education certificate.
Is that what it's called? I don't know what it actually stands for. I should know that, but I've had my own huge HECS debt over the years, I had three degrees. But you may have those things that have to come out of your weight. And so you might think, “$55,000 or $50,000 equates to $4,000 a month roughly or foreign a bit.'' That's fine, but it's like, that's actually not what you take home. If you earn $50,000 here in Australia, I'm literally going to do this live as I record this. So if you go to the Pay Calculator tool, which is Paycalculator.com.au, you can literally just check, know how much tax you'll need to pay. Obviously, the tax is really dependent on how your business is set up and all sorts of other things.
So this is just getting to give you a ballpark figure, but let's say you put in your annual salary of $50,000 and you can look at your pay cycle as annually. You can change it to monthly fortnightly, whatever it is. So if you're like, actually every month I need X amount of dollars. Then you can put that in. But let's say, for now, we've just put in an annual salary of $50,000. You can then include super or not. It'll just have a toggle button here. So we could say, this does not include super, so maybe that's paid extra, or it does include super. You can also put in if you've got a student loan or not a student loan, then there are other things. So whether you want to pay more for your superannuation. So in Australia at the moment, it's 10% that needs to go into super, but you might decide, I actually want to up that.
I wanna put my own extra, super into it. Or maybe as a company, I'm going to pay myself a little bit extra with super, you might put in salary sacrifice, all sorts of things. You might contribute to your spouse's super. If you've got one or a partner, there might be other things that you need to put in there such as if you're over 65, if you've got dependent children, if you've got a dependent spouse, if you are a senior, you've got pension kind of offsets there. So there are lots of things that you can put in. And also I should mention there are other parts. So if you're not actually a resident of Australia, you can put that in. You can put in, if you're a working holidaymaker, although, with pandemic and lockdowns, I don't know if there are that many people over here doing that, you can put in all sorts of kind of variables here and then what it will do, which is kind of the really important part is that it will spit out this table at the bottom.
So let's say in the instance, like the example that I've said is that you're like, “I need four and a half thousand dollars a month”, and let's say that's $50,000, but that's what you actually need to take home that is in your bank account, that is in your cash, in your wallet. And so what it spits out here is that based on Australia and based on some things that I've put in such as student loan and some other stuff, it'll spit out that yes, you get paid $50,000, but actually what you get paid annually cash in hand is $40,513. So that's not $4,000 a month. You'd need $48,000 to be $4,000 a month. So you can see instantly, my wage projection of $50,000 is actually off. So again, this does not by any means replace having an accountant or having a licensed financial advisor going through this stuff with you, but it's a good place to start.
So Paycalculator.com.au and you can play around with the numbers and try to get to a figure that you like, weekly or monthly, I need this amount of money. And so what do I need to pay myself? And things like superannuation is really important. I always literally just talk to clients today and I often say to my female clients, especially that superannuation in this country is like, the differences between females or people who identify as women with their super versus men is huge. And what you don't wanna do is get to the end of your life and be like, “I don't have a fallback plan”. I don't have property or I don't have investments or I don't have good super that's in there. And there are so many different super calculators out there.
I'm not gonna get on. This episode is not about super, but it's about looking at your wage and making sure that you are paying yourself a wage, firstly, and that you are looking out for your future as well. And what I'm meant to say is that women in this country are fast becoming in, especially in the like fifties and sixties age, kind of brackets homeless because they have taken time off work to have children. They have taken time off work to look after elderly parents. They may have taken time off work to go back to study, especially after taking a long maternity leave. And then what happens is because they've been outta the workforce, they are not getting the same level of super. So then when they go to retire, they don't have as much and maybe a relationship breaks down, and then they're left out, literally in the cold.
So I don't want that to happen to anyone who's listening to this. So I know that it might seem like a bit of a stretch, but Paycalculator.com.au is a quick easy tool that you can have a look at and start seeing the numbers. Like if you need a thousand a week, let's just say, so if you need a thousand dollars cash a week, I'm just gonna play with the numbers here. That would be even $57,000 is not gonna bring it to you. So let's say $65,000. What does that bring? $65,000 a week. We'll still only bring you $898.95. Again, this has different caveats. Some people may have more or less depending on if they've got, student loan and dependence and everything else. So if you need a thousand, I'm still playing around with the numbers here, a thousand dollars a week, even on $75,000, you're not getting that.
So let's say $76,000, on $76,000, you're getting $999.52 a week. So just under a thousand, but you can see how $76,000 sounds a lot more than $52,000, which is what people might think. I need a thousand dollars a week. I need to pay myself at least $52,000. It's like, you actually need to pay yourself another $24,000 on top of that to get there. So it's just an illumination. It allows you to get a bit more knowledgeable about your money, what you have to pay in things like a tax in things like Dependables, Medicare, levies, all other things. So again, anything that I mentioned on this podcast, I am not getting a kickback from. I just know that Pay Calculator has been really helpful for a lot of my clients and a lot of the people that I've worked with and myself as well. So if you are interested in that again, it's Paycalculator.com.au. So that is it for this quick tip episode. If you want a link to Pay Calculator, or you want the transcript from this and find that over at mydailybusinesscoach.com/podcast/187. Thank you so much for listening. I'll see you next time. Bye.
Thanks for listening to the My Daily Business Coach podcast. If you wanna get in touch, you can do that at mydailybusinesscoach.com or hit me up on Instagram @mydailybusiness coach.
