How Much Money Do You REALLY Need To Make?

In this video, I dive deep into a framework I consistently use to help me with setting the right financial targets whether that is for a business or my own personal finances. 

The goal of this framework is to provide clarity on how much money you need to be earning to support your lifestyle and long term financial goals. 

I call it True Needed Income and you can find that number for yourself by following the model below. 

This is an important place to start because if you want to earn let’s say $250k per year - this is actually not your target.

We need to take into account personal and business expenses, taxes and cash reserves in addition to our monthly profit take home.

Using our example above, $250k rounded into monthly targets is $21k per month of income.

First two things we need to add to this are:

1) Taxes

2) Reserves

I have always followed the rule of thumb that you should assume a 30% cut right off the top of everything you earn for taxes.

As money flows into your bank account, transfer 30% into a tax designated business savings account and earmark that money for taxes.

Here is the math:

- Goal = $21,000 per month in income

- Divided by .7 (to accommodate for a 30% tax bill)

= $30,000 per month in top line

No matter what your goal is, just divide by .7 and you will get the figure 

(example: goal = $10,000/month? divide $10,000 by .7 = topline goal of $14,285/month)

Reserves provide security, they provide certainty and most importantly they provide the feeling of freedom you are after. 

A reasonable goal to shoot for is this: “Retain 3 months of reserves over the next 12 months”

Here is the math:

- Goal = $21,000 per month in income

- 3 months of reserves = $63,000 saved

- $63,000 / 12 months = $5,250/mo

New monthly top line revenue goal = $35,250 per month

- Spend = $21,000/month

- Taxes = $9,000/month

- Cash Reserves = $5,250/month

Don't let your number scare you! We are trying to build **clarity** with this exercise and define what you actually need to earn to hit your targets. 

So many people want something but are unclear on what is required to get it which leads to feeling discouraged and burnt out because they were never clear on the roadmap to take them to their goals in the first place. 

Start with the end in mind, set your targets and get to work. 

To all my builders, I salute you!