Overall, it was a much better day today than yesterday. For that, I’m happy and I’ll take it.
I’ve talked about it before in earlier daily posts, but I leverage a pretty detailed Excel model that allows me to forecast my financial future.
For example, I know that if I execute as planned, I should be able to reach my goal of making $10K/day passively by 30. If that’s the case, then life is GOLDEN. I spend at least 30 minutes a day in this model, updating and tweaking it to ensure it’s as accurate as possible.
I do this because I think it’s helpful for me to have a specific plan and know whether or not I’m on track. For example, here is a screenshot. I’ve cropped out some personal detail that reveals info about who I am (check out why I’m doing this anonymously).
The Y Axis is monthly income (post expenses) and the X axis is time. The Blue line is the forecast, and Yellow is actuals.
Yellow has obviously been sloping down (COVID is my explanation), but overall I’ve been on or ahead of plan for a while now.
For the amount of time I dedicate to it, I think the model is a relatively accurate forecast.
Until yesterday actually.
I’ve been getting targetted ads to try Keeper Tax, which supposedly makes it easier for freelancers to do their taxes. I have an accountant on retainer who typically does that stuff for me on a yearly basis. He also specializes in real estate, which is great because that’s often confusing as shit and I’ve found a lot of non-real estate accountants who have fucked that up.
So I downloaded the Keeper app and learned a couple of things.
First, apparently I’m supposed to be paying taxes 4 times a year as a freelancer. Who knew? I did some research but apparently it’s also unclear if I need to be doing that this year with COVID changing tax due dates.
That changes the model because that means four smaller tax outflows per year rather than one big tax outflow. I made that adjustment real quick in the model for the following years. 2020 is still a TBD because of COVID.
But here’s the biggest change, and this is one I wasn’t expecting: taxes.
I knew my tax rate should be relatively high. Based on all income sources, I’m looking at roughly ~$230K in 2020 income, if I continue consulting at a similar rate.
For that reason, I did some research on tax rates and thought I was being conservative by assuming a 40% tax rate. It’s advice I tell my clients all the time: better to be conservative than not when building a financial model.
Well, turns out I was extremely wrong.
Keeper Tax told me that my estimated tax rate is 55%.
55% fucking percent.
I went to the top business school in the world. I understand the economics of taxes and the governmental flow of money better than almost everyone. The professor I had at school who taught me this has been an advisor to the presidents, regardless of party, for the past couple of decades.
I also understand that I am more fortunate than most in this world to make that much money in my 20’s.
But, I’m not a billionaire. I’m not a millionaire. I actually am not even worth $100,000. I’m not the “bad guy” that people criticize who is flying around in a private jet.
Here’s the very rough math to illustrate my point:
- $230K in income
- $103.5K in post tax income
- As you see below, my daily expenses are $250. That’s not because I drive a Ferrari (I don’t have a car), but because like most Americans, I have debt. $250 * 365 days is $91,250
- Take home earnings, therefore, are $103,500-91,250 = $12,250 a year
Why the hell am I paying a tax rate that makes it seem like I’m a millionaire when in actuality I would need to make this same income ($12,250) for 81.6 years ($1,000,000/$12,250) to become a millionaire.
I recognize that taxes are a political issue. But I’m sorry, that’s fucking stupid. It means I’m working ~80 hours a week for approximately $12,000 a year.
Time to adjust my financial model now.
Because, if I truly want to reach my goal of $10K/day at 30, it means I really need to make $20K+ a day.
I guess this case study just got a lot harder.
What I did yesterday to make $10K a day at 30
The current phase of the plan
I’m in Phase #1: The Job & Side Hustle Phase. You can read more about the phases and my plan to get to $10K/a day at 30 here.
Wake up & sleep:
I went to bed at 10:08pm and woke up at 6:21 for a total of 7 hours and 30 minutes asleep. The sleep didn’t count as much, so I only got a 59% recovery score.
I need to figure out how to consistently get that recovery score of about 80%. I’m tired and lacking energy in the mornings, which is a problem and exactly what I need to improve
I walked 10,000 steps around the apartment while on calls, so I am somewhat active for a COVID world
Diet was absolute crap. It was the NFL draft, which I love to watch, so I ate deep dish pizza and just watched that.
My Day Job
It was a Thursday, but I had limited stuff to do for the team. I’ll have more tomorrow.
Investment real estate
We heard from the other property manager on the running bunch of issues we’ve had with the properties the past couple of days.
Good news, though. It looks like we’ll get at least one more tenant in, meaning 5 of 7 units are occupied and paying rent. This tenant will help cover expenses and generate a bit of profit for us.
I have a few projects going on now.
Still waiting on feedback from the powerpoint
This is the project that went horribly and killed yesterday. I went back through today to figure out my mistake and where I screwed up. I’m talking with the team today, so I hope this is completely resolved, but fingers crossed.
Real estate write up
I wrote up some real estate strategy for a client for a quick project for them
Sourcing new work
No new work right now!
I spent 30 minutes, according to Rescue Time, to publish yesterday’s post and work with my developer guy on the redesign.
My fiancee and I watched the draft together (it’s my FAVORITE thing to do.)
Rescue Time Daily Screenshot
I invested in Rescue Time, to help me understand where I’m spending my time vs. not, but really for the purposes of the case study. Busy as shit day!
(I know all these photos are pixelated! Working on fixing it)
What I made today
Rental Income: $33
Affiliate: Not doing yet
Micro-SAAS’s: Not doing yet,
Hotels: Not doing yet
Dividend Income: Not doing yet
Today’s pro-rated amount of monthly expenses
Once I pay off my debt, I’ll break out expenses into a line by line as well.
Today’s Income (pre-tax)
My plan for tomorrow
Tomorrow is Friday and I have to:
- Follow up a presentation with private equity client
- Pitch call or two with an old client
- Tons of day job meetings
- No crazy work to do though
About the Author & The $0-$10K/Day Case Study
Dean’s goal is to create $10,000/day in passive income through entrepreneurship. Too many people write “success porn” that skates over the struggles many face in entrepreneurship. His goal is to create something real that highlights the lack of sleep, disappointment from family, and setbacks you really face in entrepreneurship.
To read more about how this case study is set up, check out the ground rules here.
The hope is that this series of posts will inspire someone else out there to make their entrepreneurship dreams happen.
Dean Woods is currently an executive by day and a bootstrapped micro-startup CEO by night. Prior to working in startups, Dean was a management consultant. Dean graduated with honors from The Wharton School.