# How to spend my money?



## RoofRunner1995 (Aug 21, 2019)

I am a young business owner. 24 year old building contractor. We focus on exterior work but do everything. Roofing, siding, windows, doors, building, etc. I have been doing this stuff with Dad since I was 12. He moved away and I started my business at age 22. My first year my gross sales were 480k. First year I bought just about everything I need to operate for what we do. Couple enclosed trailers, PJ High Side dump trailer, have about 15 werner orange ladders and over 10k in tools. Bought a 2015 chevy 2500hd. I am on year two. 4 months left in the season and approaching 600k in gross sales. I have nothing in mind I need to buy for my business. I don't want to "just buy stuff" to write off that won't be used. 

What do you guys who have been in business for over 20 years been doing? You aquire equipment over time.. then you get a good year. What do you buy? Just stuff? I have a long way to go and no ideas on what to purchase. I would rather not have a 60k tax bill this year.


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## griz (Nov 26, 2009)

Investment properties

Retirement acct

Savings

Pay stuff off

Equipment

Boat to take clients out on

If it is REALLY bothering you send it to me.

If i cant spend it my wife will....


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## RoofRunner1995 (Aug 21, 2019)

I have actually already bought some rentals. I own 9 units. Unfortunately I can't write off the big down payment or purchase. Only what materials I put into them. I have looked for flips I can buy for low, fix, and resell or rent out. They are just hard to come by and we are so swamped I dont have time to fix them up. Thought about investing into a traditional IRA and Roth IRA. 

Like I don't want to just drop 60k on a tractor to move snow in my driveway. Or spend 100k on a big piece of equipment for a business I'm not into. I really have to think outside of the box. I thought about buying a roll off truck and use it for dumpsters, and buy multiple dumpsters for hire and throw a guy with his Class B in it part time.


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## Seven-Delta-FortyOne (Mar 5, 2011)

You do have 6 months to a year of operating capital in the bank, right? :whistling

Then, there is anything that you currently rent, that you could save money longterm by buying. Tele-handler, boom lift, skid steer, whatever. 

Also, something extra, that would shut you down if it broke.

If your truck blew a transmission, would you still be working, or would it turn into a $#!Tshow for 4 weeks, while you scrambled to find a new rig, and some place to put all your tools?




Just some thoughts. :thumbsup:


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## hdavis (Feb 14, 2012)

Build your emergency fund, and dump some into an IRA. 

Given you're running at maximum load now, look at productivity improvers and margin improvers. Sometimes a little money here pays big dividends.


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## KAP (Feb 19, 2011)

RoofRunner1995 said:


> I have actually already bought some rentals. I own 9 units. Unfortunately I can't write off the big down payment or purchase. Only what materials I put into them. I have looked for flips I can buy for low, fix, and resell or rent out. They are just hard to come by and we are so swamped I dont have time to fix them up. Thought about investing into a traditional IRA and Roth IRA.
> 
> Like I don't want to just drop 60k on a tractor to move snow in my driveway. Or spend 100k on a big piece of equipment for a business I'm not into. I really have to think outside of the box. I thought about buying a roll off truck and use it for dumpsters, and buy multiple dumpsters for hire and throw a guy with his Class B in it part time.


https://www.fool.com/knowledge-center/the-advantages-of-sep-vs-roth.aspx


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## greg24k (May 19, 2007)

Send me a few checks keep them both just under 10k, I will help you out :thumbsup:


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## Bull Trout (Dec 6, 2016)

RoofRunner1995 said:


> I am a young business owner. 24 year old building contractor. We focus on exterior work but do everything. Roofing, siding, windows, doors, building, etc. I have been doing this stuff with Dad since I was 12. He moved away and I started my business at age 22. My first year my gross sales were 480k. First year I bought just about everything I need to operate for what we do. Couple enclosed trailers, PJ High Side dump trailer, have about 15 werner orange ladders and over 10k in tools. Bought a 2015 chevy 2500hd. I am on year two. 4 months left in the season and approaching 600k in gross sales. I have nothing in mind I need to buy for my business. *I don't want to "just buy stuff" to write off that won't be used.
> *
> What do you guys who have been in business for over 20 years been doing? You aquire equipment over time.. then you get a good year. What do you buy? Just stuff? I have a long way to go and no ideas on what to purchase. I would rather not have a 60k tax bill this year.





RoofRunner1995 said:


> I have actually already bought some rentals. I own 9 units. *Unfortunately I can't write off the big down payment or purchase.* Only what materials I put into them. I have looked for flips I can buy for low, fix, and resell or rent out. They are just hard to come by and we are so swamped I dont have time to fix them up. Thought about investing into a traditional IRA and Roth IRA.
> 
> Like I don't want to just drop 60k on a tractor to move snow in my driveway. Or spend 100k on a big piece of equipment for a business I'm not into. I really have to think outside of the box. I thought about buying a roll off truck and use it for dumpsters, and buy multiple dumpsters for hire and throw a guy with his Class B in it part time.


to write off or not to write off? which is it? :laughing:

Do you own all the stuff you bought? or are you making payments on it? 

eliminate debt, then add income producing properties, if you don't have debt and properties that make money, does it matter if you cant write off the expense?


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## griz (Nov 26, 2009)

You know there is a reason contractors have LOTS of toys....:whistling:thumbup:


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## Seven-Delta-FortyOne (Mar 5, 2011)

There's always a yacht off the coast of San Marino, a bunch of strippers, and a Kilo of blow, if you can't come up with anything else. :whistling


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## Irishslave (Jun 20, 2010)

These kind of questions always puzzled me. "How do I spend my money?" 

When you spend it then it's no longer your money....it's somebody elses money. 

Spend what you have to. Save and invest the rest. How many spend $900 on some thing-a-majig they just had to have that now sits in a corner of the garage or shop collecting spider webs? Multipy that by how many times you've done it


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## griz (Nov 26, 2009)

Seven-Delta-FortyOne said:


> There's always a yacht off the coast of San Marino, a bunch of strippers, and a Kilo of blow, if you can't come up with anything else. :whistling


so that's where your boat is ....:whistling:laughing:


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## hdavis (Feb 14, 2012)

Forget taxes for a minute, what is your take on sound business use of the money? What are the best options after tax considerations?

You make money, you pay taxes, that's pretty much how it works.


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## griz (Nov 26, 2009)

hdavis said:


> Forget taxes for a minute, what is your take on sound business use of the money? What are the best options after tax considerations?
> 
> You make money, you pay taxes, that's pretty much how it works.


absolutely correct....

however a GREAT accountant can limit your tax liability...

legally...:thumbsup:


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## Irishslave (Jun 20, 2010)

griz said:


> absolutely correct....
> 
> *however a GREAT accountant can limit your tax liability...
> *
> legally...:thumbsup:


Tax attorneys are even better if you can afford one. Mine literally saved me tons of grief and thousands of dollars when I made the big bucks. One slip with IRS can be devastating. He taught me stuff I didn't know you could do but that everyone who survives "the man" does


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## griz (Nov 26, 2009)

my accountant would be on par with one of them attorneys...

she is incredibly knowledgeable & intelligent...


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## Golden view (Feb 16, 2012)

I've seen way too many guys buy equipment they barely use to avoid a big tax bill. A buddy bought an excavator and a skid steer. He puts 100 hours a year on them.

To me, high taxes just means I made a lot of money. Even if the last $10,000 dollars I make is taxed at 33%, it's still $6700 for investments, fun, booze and women, etc. 

The first $10,000 may not be taxed, but 100% of it goes to basic living costs.


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## Irishslave (Jun 20, 2010)

Golden view said:


> I've seen way too many guys buy equipment they barely use to avoid a big tax bill. A buddy bought an excavator and a skid steer. He puts 100 hours a year on them.
> 
> To me, high taxes just means I made a lot of money. Even if the last $10,000 dollars I make is taxed at 33%, it's still $6700 for investments, fun, booze and women, etc.
> 
> The first $10,000 may not be taxed, but 100% of it goes to basic living costs.


I don't know how you read tax tables but if it shows up as profit or income it's taxed whether it's $5 or half a million


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## hdavis (Feb 14, 2012)

Irishslave said:


> I don't know how you read tax tables but if it shows up as profit or income it's taxed whether it's $5 or half a million


What, you take no deductions?


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## Golden view (Feb 16, 2012)

Irishslave said:


> I don't know how you read tax tables but if it shows up as profit or income it's taxed whether it's $5 or half a million


Even if you didn't take a deduction, your first dollar is taxed less than your last dollar. I know some people have been confused about it, thinking that if they earn $1 more dollar it would put them into the next tax bracket, and _everything_ they earn would be taxed at the new rate.


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## Big Johnson (Jun 2, 2017)

Seven-Delta-FortyOne said:


> There's always a yacht off the coast of San Marino, a bunch of strippers, and a Kilo of blow, if you can't come up with anything else. :whistling


That gets my vote. When you’re making that kind of money you have to have some fun. The Trump economy won’t last forever.


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## Fishindude (Aug 15, 2017)

My philosophy always was; keep 1/3 for yourself, invest 1/3 in the business and give 1/3 to the employees. Some ideas:

Take a hard look at your benefit programs and consider things like; setting up a 401k plan, employee health insurance, paid holidays and vacations, uniforms, etc. 

Pre-purchase consumable things you know you are always going to need; office supplies, supplies, bits, blades, fasteners, safety supplies, etc.

Might be timely to invest a little into marketing and advertising; truck graphics, job signs, business cards, website, etc.

It's also, never a bad idea to have excess cash on hand for when times get hard or when you have a slow paying customer.


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## Seven-Delta-FortyOne (Mar 5, 2011)

Golden view said:


> I've seen way too many guys buy equipment they barely use to avoid a big tax bill. A buddy bought an excavator and a skid steer. He puts 100 hours a year on them.


Yea, but...

At least he now has an excavator and skid-steer, instead of the government having his money to finance some wingbat chopping his whacker off, or some other asinine thing they'd find to do with it. :blink:


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## Irishslave (Jun 20, 2010)

hdavis said:


> What, you take no deductions?


You can't read? I said if it shows up as _profit_ or _income_ 

This is what keeps accountants in business...most Americans don't understand how to fill out tax forms. Only recently has it been simplified. 

*Look at the tables. Line 43 this is income after deductions if line 43 is at least $5 but less than $ 15 you owe $1 tax* 

*Proceeding further if you have "tax credits" then the $1 disappears. If you do not you owe uncle sam $1*


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## Golden view (Feb 16, 2012)

Irishslave said:


> You can't read? I said if it shows up as _profit_ or _income_
> 
> This is what keeps accountants in business...most Americans don't understand how to fill out tax forms. Only recently has it been simplified.
> 
> ...


Calm down there. We just missed what you were saying. Most of us don't care what the IRS calls income. We call a dollar earned income. So we missed the point you were making.

My point remains the same. My first $10,000 isn't taxed.


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## EricBrancard (Jun 8, 2012)

Sometimes it’s smarter just to pay the taxes. You realize how much you’d have to spend to avoid paying $60k in taxes? And once you buy these things, if they aren’t making you money, they will be costing you money.


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## Windycity (Oct 3, 2015)

EricBrancard said:


> Sometimes it’s smarter just to pay the taxes. You realize how much you’d have to spend to avoid paying $60k in taxes? And once you buy these things, if they aren’t making you money, they will be costing you money.




I agree with this, I see no value in purchasing stuff you truly don’t need just to save a few bucks in taxes 

And it also falls in line with the people that don’t want to pay their house off because they will lose the deduction on the interest payments.... although with the new tax law that isn’t as effective anymore but i dont understand the philosophy of spending a dollar to save $.25 in taxes

Talk to your accountant and start dumping more money into an IRA for yourself or make contributions for your employees, this will lead to more loyalty and happiness with your employees while saving you money 


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## builditguy (Nov 10, 2013)

At 600,000 gross sales, you don't have a $60,000 tax bill. Save every penny you can. You appear to be doing good. Give it 20 more years and you won't have this question.

Save your money, pay your taxes. Nowhere near $60,000


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## KAP (Feb 19, 2011)

griz said:


> my accountant would be on par with one of them attorneys...
> 
> she is incredibly knowledgeable & intelligent...


Yup... you get what you pay for... :thumbsup: :clap:

And removal of tax liability is what you're paying for... :whistling


Assets that provide tax shelter, income and deductible operating expenses are the best use of excess capital...


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## Golden view (Feb 16, 2012)

builditguy said:


> At 600,000 gross sales, you don't have a $60,000 tax bill. Save every penny you can. You appear to be doing good. Give it 20 more years and you won't have this question.
> 
> Save your money, pay your taxes. Nowhere near $60,000


Unless I missed something we don't know his profit margin so we don't know his tax bill.


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## builditguy (Nov 10, 2013)

Golden view said:


> Unless I missed something we don't know his profit margin so we don't know his tax bill.


That is true, we do not. But, honestly, I don't even know if that's possible.
Just basing my opinion on paying taxes a long time and I always feel like I pay more than I should.


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## Calidecks (Nov 19, 2011)

Irishslave said:


> Tax attorneys are even better if you can afford one. Mine literally saved me tons of grief and thousands of dollars when I made the big bucks. One slip with IRS can be devastating. He taught me stuff I didn't know you could do but that everyone who survives "the man" does




Tax attorneys are better than an accountant because what you say to an accountant is going to be exhibit "A" in a courtroom. There is no 'Taxman client privilege' like you have with a lawyer. 

That's why you always speak in hypotheticals with your accountant when asking about iffy things. Emphasize the hypotheticals too. Lol


Mike.
_______________


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## Irishslave (Jun 20, 2010)

Calidecks said:


> Tax attorneys are better than an accountant because what you say to an accountant is going to be exhibit "A" in a courtroom. There is no 'Taxman client privilege' like you have with a lawyer.
> 
> That's why you always speak in hypotheticals with your accountant when asking about iffy things. Emphasize the hypotheticals too. Lol
> 
> ...


We had one here in St. Louis back in the 60's I guess it was. Morris Schenker. Look him up. Interesting guy. Mob lawyer mostly. Involved with the Teamsters, Jimmy Hoffa and the old Sands hotel in Las Vegas.

Anyhow the IRS tried to nail him to the wall for most of his career. Took him to federal court several times. Schenker never lost. Why? He knew the tax code better than the people that worked for the IRS.

Word was he slept on a sofa in his office and worked and researched up to 20 hrs a day.

Morris however was not stingy with his fortune and gave back. He was one of the first in StL to open halfway houses for convicts who had done their time and needed help transitioning back into the community complete with job training programs. I think he wanted to make the government look like an ass as recidivism dropped after that


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## SearchforSignal (Aug 30, 2016)

Am I the only one who doesn't care about gross sales? In my business I focus on net profit. ( how much I want to earn.) If you sell $600k but you are paying out 550k to accomplish that then really you are making $50k. I would focus on saving your $ and having a real nice bank account balance when the market takes a turn down. Then you can afford to invest when prices are crazy low and wait for the market to come back up. Just my 2 cents.

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## WBailey1041 (Jan 31, 2014)

My net income is a consistent percentage of my gross. If I keep up my average cost per foot the rest takes care of itself. This is because my expenses and production are extremely consistent. 

With rain gutters it’s extremely easy. I know how many feet we average a day per man and how much that foot of materials costs, on average. 

Here’s the thing, it’s a lot easier to track my gross than my net. I track the gross daily and the net monthly when I reconcile my bank account to QuickBooks. If I tracked the net income daily or even weekly I’d pull my hair out. Too much work and too much stress from micro managing every penny. 

If you bid jobs as 1/3 labor, 1/3 materials and 1/3 profit you can figure your net almost on the fly.


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## Dirtywhiteboy (Oct 15, 2010)

A nice Rolex doesn't go down in value! The owners husband at the door taking the money last night was wearing a 250,000 watch


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## Mordekyle (May 20, 2014)

SearchforSignal said:


> Am I the only one who doesn't care about gross sales? In my business I focus on net profit. ( how much I want to earn.) If you sell $600k but you are paying out 550k to accomplish that then really you are making $50k. I would focus on saving your $ and having a real nice bank account balance when the market takes a turn down. Then you can afford to invest when prices are crazy low and wait for the market to come back up. Just my 2 cents.
> 
> Sent from my SM-N975U using Tapatalk




Interesting concept I’d like to hear more about.

I also tend to focus on net. I perform most all of the labor and tend to net nearly half of annual gross sales for labor/profit.

I agree that $1M of sales is a stupid goal if you net $50 grand for your troubles and risk.

I would rather sell 250 for 150.


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## SearchforSignal (Aug 30, 2016)

Mordekyle said:


> Interesting concept I’d like to hear more about.
> 
> I also tend to focus on net. I perform most all of the labor and tend to net nearly half of annual gross sales for labor/profit.
> 
> ...


It gets me that a lot of guys focus on gross sales. I sub to a few contractors who say they have $500k in yearly work but when they are working on my jobsites they ask for more $ because they need to pay their guys and they are running low. .... 

Like you, I focus on net profit. Goal is to have 70% gross profit on jobs I do the majority of the work on and 40% profit on jobs I sub out. It's easy to hit the 70% number but a bit more difficult to hit the 40% number. Definitely doable on jobs..

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## Mordekyle (May 20, 2014)

SearchforSignal said:


> It gets me that a lot of guys focus on gross sales. I sub to a few contractors who say they have $500k in yearly work but when they are working on my jobsites they ask for more $ because they need to pay their guys and they are running low. ....
> 
> Like you, I focus on net profit. Goal is to have 70% gross profit on jobs I do the majority of the work on and 40% profit on jobs I sub out. It's easy to hit the 70% number but a bit more difficult to hit the 40% number. Definitely doable on jobs..
> 
> Sent from my SM-N975U using Tapatalk




What do you mean gross profit?
Profit after paying yourself?
Do you take a salary regardless of hours worked?


I don’t break it down too much:

I shoot for a daily goal of $X.

X is everything above materials. The most material/job cost for jobs I regularly perform is roofing, which runs nearly 30% of the price. Many of my jobs materials’ cost is less than 10% of the price. A few trim boards, a roll of poly for vapor barrier, or a tube of caulk to caulk butt joints on Hardie siding. Most of the income goes to X.

X covers my overhead, profit, and my labor.

For me, instead of Price = L + O + P + M, 

Price = M + X

It’s not exact, but it pays satisfactorily.


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## SearchforSignal (Aug 30, 2016)

Mordekyle said:


> What do you mean gross profit?
> Profit after paying yourself?
> Do you take a salary regardless of hours worked?
> 
> ...


For me gross profit is my profit after all expenses except taxes. All my materials, fees, daily overhead, owners profit, subcontractor payments ect. So all is left is paying taxes and putting the rest in my net profit account.

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