Hi, this is Rob carbon. Now I want you to think of yourself as a business. This is an important mindset shift. You're not a freelancer exchanging hours for dollars, you're a business, or you should set up an entity that is a business that is a separate legal and accounting identity. So I'm from the UK. So I set up a limited company and Ltd.
If you're from the US, you should set up an LLC, a limited liability company. And if you're from somewhere else in the world, it might be called something else. But it will be fairly easy, fairly inexpensive. It may sound scary, boring or obvious, but you must do this at some stage. You don't have to do it straight away in the UK. There's a way you can be a sole trader.
In the US you can be a sole proprietor, but I wouldn't do that. For too long, I would create the company as soon as you can. And for me, it was easy, a few hundred pounds, or a few hundred dollars in the US. And then it was a great mindset shift. I was working as a freelancer at the time, but my freelance employment revenues could go into the company, which was great. And even better, anything that I bought that was for the company, stock images, from software, phones, computers, or getting other freelancers to do work for me.
That came out of the business that came out of the business bank account, mindset shift. I had a business. I was not like everyone else who works for a company and gets a paycheck. And the next step is to get a business bank account. Very important, straight after incorporating very easy I had to pay $50 I put that $50 straight into the business bank account. So the business bank account balance was $50.
I don't know why I had to do that. But that's what I remember doing in your country, it will be something else, but it will be relatively cheap. And then once you have that company account, you should pay all the business expenses out of it, and pay all the business revenues into it. How do you get your hands on the money? Well, that's where the next stage comes in. You should get yourself an accountant.
So in my case, my accountant tells me to pay myself a very small salary, it's something like $700 a month, but then pay myself dividends of a few thousand dollars when I need it. And that's what works for me with my company and the country. I have created the company in but it might be different in yours. You need your accountant to tell you what to do. All you have to make Is the payments go in and out of the correct accounts. And don't worry if you get that wrong, because you just tell the accountant that you paid a business expense out of a personal account, and he or she will make allowances for that in the accounts.
And it's the same with PayPal, or a credit card, get a PayPal business account. And if you want, get a credit card for your business, but pay off the credit card every month, I do it with a standing order. So don't get into debt with the credit card company, whatever you do, but it does help to have a business credit card to keep the finances separate again. So if you have to pay something with a credit card, you can do so with your business credit card. If it is a business expense. All I have to do is download the business bank account, incomings and outgoings in an Excel spreadsheets.
Download the business papers Count incomings and outgoings in a spreadsheet and download the business credit card, incomings and outgoings in another spreadsheet and give them all to the accountant and he does the rest. I may have to mark up some of these spreadsheets to itemize the incomings and outgoings and for the income that I get that's invoiced. my accountant likes to see the date that the invoice was raised and the date that the invoice was paid. And I do this in a Google spreadsheets. So when I create the invoice I put it in the spreadsheet and when the invoice is paid, I'll note that down in the spreadsheet as well. So at the end of the year, I have very little to do, and the accountant will submit the accounts to the correct authorities.
My accountant charges me $1,000 a year for this very important point here is its death. from receiving a paycheck every month, you've got to get out of that mindset of receiving a paycheck every month and spending that paycheck every month, you need to have at least three to six months worth of money in your account, either in your business account or your personal account to prepare you for a few months of making no money if that will ever happen. Hopefully it never will. I've interviewed several people during the course of making this videos. One of them Mary shore, was very helpful on this had a business for a long time and she said something very clever. I thought every dollar you earn is really only 70 cents, it's obvious thing to say.
But it just really makes this point very clear. You have to keep 30% of your income in an account ready for the tax bill when it comes and it will come. So it's essential that you separate your personal and business affairs as soon as you can. If you haven't done it, don't worry, because your accountant will sorted out. But the sooner you do this, the better. It will make life easier for your accountant so he won't charge you so much.
And it will separate you from being a one entrepreneur or a dreamer into an entrepreneur. You have a business, it's a separate legal and financial entity. And it just gives you this mindset shift that I think is so important. This is all you have to do. You have to set up a company, get a business bank account, and get an accountant. These simple and inexpensive acts change everything on a deep level for your life, your freedom, and even your personal development.
I'm not exaggerating here. But remember, business and tax laws vary from country to city. country and from year to year, so please consult a professional accountant before making any financial decisions. My name is Rob coven. I'll see you in the next video.