The focus of this article is on helping you figure out how much money you need to make in your business in order to meet your goals.

What is your goal in starting this business?

• To be able to work for yourself, replacing your current job
• To enable you to work more flexibly so that you can take care of a child or a parent, or pursue avocational interests
• To provide something productive to do and a stream of income in your retirement
• To get rich quick

If you marked the last one, you are at the wrong website. Your own business may make you happy, it may support you and your family, but if you ever get rich from your own business, it will be slowly.

How much would I have to earn to replace my current salary?

When you consider how much you would need to make to replace your current salary, there are a number of things to consider.

First, remember that the money coming in isn’t all profit. It took money to bring in those first dollars – probably lots more than what you initially brought in. You had start-up costs, and you have continuing costs in running a business. The money that comes in is your gross. Once you subtract your business expenses, you have your net, or your profit. But even your profit isn’t money you can spend.

Once you have profits (the gross income from your business minus your expenses), you’ll need to start paying quarterly estimated taxes. These estimated taxes are the income taxes that were previously withheld from your paycheck and FICA, your social security and Medicare taxes. When you are an employee, your employer pays half of your FICA and Medicare tax and you pay the other half. But once you are self-employed, you have to pay all of it.

From your first dollar of profit, you owe FICA and Medicare (15%). You also will owe income taxes. While income tax rates are tiered, remember that your marginal tax rate is determined by the household income. So if you have income from other sources or if your spouse has income from other sources, you should probably estimate your marginal tax rate as 25%. Thus, 40% of your profits go to federal taxes. You will also have to consider state and local taxes.

Most people who are salaried workers have some kind of retirement sponsored by their employer. Often it is a 401k that you put money into which is invested for you retirement. Some employers also offer some match of what the employee contributes. For instance, you employer may allow you to contribute up to 10% of your income to the plan, and the employer may match one dollar for every two or four or five dollars you contribute. This money is tax-sheltered and is not taxed until you withdraw it. You do pay FICA and Medicare on the money you contribute, but not on your employer’s contributions.

As someone who is self employed, you can create your own retirement plan. There are two options. One is the SEP IRA, which allows you to contribute up to 20% of your net on a pre-tax basis, up to a maximum of $49,000 in 2009. The other is a SIMPLE IRA, which has a maximum contribution amount of $11,500 in 2009 ($14,000 for people over 50). The SIMPLE IRA contribution is not limited to a percentage of your net income.

An Example: For every $100 of net income to your business, you’ll pay $15 in FICA and Medicare and $25 in Federal income tax. This leaves $60.

But if you contribute to a SEP, you can contribute 20% of your net, $20 out of that $100. That changes your taxes, as this money is tax-sheltered. You do pay FICA and Medicare on the money, but not income tax. So your quarterly taxes would take 15% of $100 ($15) and 25% of $80 ($20). So out of the $100, you’ll find you have $45 that is yours after taxes and your retirement contribution. When you contribute $20 to your retirement plan, and it costs you $15 because of the tax advantage of contributing to a retirement account.

Remember also that being self-employed means no paid vacation, no sick leave. You need to have reserves, money you save out of your profits to allow for this.

Health insurance is also a consideration. Your employer likely pays a significant amount go your health insurance premium. Now you will be paying your whole health insurance premium.

You do get some tax breaks. You get a tax deduction for half of the amount you pay for FICA and Medicare. You also get a tax deduction on half of the health insurance premium you pay.

Do I need to replace my salary?

If, at this point, you are looking at the numbers and thinking there is no way I can replace my salary, consider whether you need to replace your salary.

Many people start their own business as a transition to retirement from their old job. In this case, you are not aiming to replace your salary but to augment your retirement income to bring closer to your old salary.

Also consider whether you can live on less money. Working for yourself is often a lifestyle decision. Being self-employed can give you more flexibility about when and how and where you work. You may be willing to make less money to have the advantage of, say, no long commute or being able to see your children off to school in the morning or to take your mother to the doctor in the middle of the day.

If you believe you can live on less money, try it – not just for a month but for a full year. Not only will this tell you whether you can realistically live happily on less money, but if you save the difference between living on less and spending what you previously did, you’ll have some money saved for starting your business.

Remember that no one starts out replacing his or her salary. The rule of thumb is that it takes 2 years to make money in your own business. “Making money” means different things to different people, but most people take this to mean nearly replacing their salary.

Starting your own business is a good example of the old adage that “it takes money to make money.”

This discussion of the finances of starting your own business is not meant to be comprehensive, but simply food for thought.

What is it you want to do? How do you choose? For some people, a business idea grows out of a passion or a long-time interest. For others, a business idea grows out of the necessity of supporting themselves and their family.

There are many resources to help you draw up a business plan and learn the practicalities of starting a business. Research the business you want to start. The Small Business Administration has people to help you develop your business plan, to ask questions you may not of thought about. Who do you know who has started a small business somewhat like what you want to start? Talk with them, ask questions, and ask them what you haven’t considered in your plan.

To start your own business, you’ll need two kinds of money: Seed money for your start-up costs and money to live on while the business gets up and running. The general rule of thumb is that it takes two years in a new business before one earns enough money to be self-supporting. So what do you do between now and then? For most people, continuing their current job as long as possible before quitting to manage their business full-time makes sense. That means they need to come up with money for start-up costs, but can continue to pay the mortgage and put food on the table with the income from their current job or a while.

But how will I ever start a business if I have to keep working at my job? Finding time to work on your business when you are already working full time is a challenge, no doubt. Some people, mindful of this, save start-up funds for their business. They continue their jobs until the new business needs them full-time, and use their savings to support themselves through the early lean times.

What kinds of start-up costs will you have? Do you need to rent office space, for instance, or can you work from home? Renting an office also means expenses like furniture and perhaps an employee or two. What kinds of supplies and equipment will you need? What kinds of work will you need to contract out?

No matter how small your business plans, it takes money to get your business off the ground. The two questions are how much and where will it come from?

Some start up expenses can be delayed. For instance, you may be able to work out of your home initially, even though you’ll need an office later. Or you may be able to use a computer you already have, even though you’ll need more computer equipment later.

Think about routine business expenses:

Rent
Phone and internet connections
Equipment and supplies
Local taxes, like Business and Occupations taxes. There are also start-up expenses such as getting a business license. Every state, every locality is different. Do your research.

Also think about what kinds of things you will need to contract out or hire a consultant for. Often people are reluctant to hire someone else to do something for the business, especially when no money is coming in, but some things it’s unwise to delay. For instance, I believe that every business needs some sort of web presence. If you aren’t proficient in creating websites, I highly recommend that you hire someone to do it. You can start with a simple site at first (and that may be all you will ever need) and add or elaborate as your business grows. You will probably also need to consult with an accountant even if you plan to do your own taxes initially.

Again, it’s important for you to be informed and always do your research – you should be able to plan for how much money you’ll need initially, then how much more in start-up costs you’ll have in the first year or so.

It’s not entirely due to the recession. In fact, I’m liking my job better these days which helps a lot. But, I’m also spending nearly all of my “off hours” working on building a business of my own.

Let’s face it, I don’t want to stay at this job more than another 3 years, max.

Building a business isn’t for the faint-hearted. The biggest lesson learned over the past couple of years is that I have to have a plan and I have to have focus. What does that mean?

My plan is taking shape in a couple of excel spreadsheets right now. I’ve also create an LLC and I’ve gotten a business license. In addition I’ve got a business bank account and VISA card. I’ve even got my own UPS account. Doing this has made it very real for me. On paper I am in business. Come tax time I’ll be reminded of this - but by that time I fully expect to have at least something to report.

My focus? That’s another story. Internet marketing can lead one down a million rabbit holes to nowhere. Without focus my business will get nowhere. I’m getting better at following my plan and not getting caught up in the latest and greatest training that’s offered. In fact, I’m currently getting untangled from something I wish I hadn’t signed on for, but that’s how it goes. It’s making me tougher and helping me to understand that I need to do my homework before signing up.

Of course I am picking and choosing the tools of the trade and I’m finding some really good ones. If there’s any interest in the tools and resources I am choosing, please comment and let me know. I’d be glad to share them.

I’ll most likely write another post in the fairly near future listing what I am using. Believe me, when I don’t like a tool I ask for my money back (there’s one in particular that I was turned onto that turned out to be very problematic - and while I finally got my money back it was a big hassle - make sure there is a trial/money back period… ). The ones I’m using now, I’m very happy with and I find them to be extremely useful. Especially because I’m still working and need all the help I can get if I ever want any time off at all!

Thanks for reading this and please comment with your own experiences. I’d love to hear from you.

There are other ways to go back to school, though. You can volunteer at a school. Tutors are always in demand and you could even get paid for that. Or you could volunteer as a teacher’s aide in an elementary school classroom. Special education classrooms are usually in need of more people to help out, especially if you have any expertise in this area.

Maybe you’re a great storyteller. You could create your own “storytelling” hours at your local library and become famous with the local kids. They’ll love being entertained by you and you’ll love hamming it up for them.

If storytelling isn’t your thing, but you enjoy being around books, most libraries welcome extra hands to shelve books and answer questions. I’ve worked in libraries and personally love the atmosphere and the people who I’ve worked with.

Another way to earn some money with your own unique skills is to teach a Discover U or other college extension class. Do you have special talents in gardening, martial arts, writing, sports, crafts, travel planning, painting or drawing? How about teaching computer applications, such as Photoshop or Microsoft Excel? I could go on and on.

Speaking of computer skills, if you’re a computer wizard, whether is be programming or networking or systems, you would most likely be welcome at your local community college to work in the lab to keep the systems running and help students with their programming assignments.

These are just a few ideas, some would be volunteer and some might get you a little extra money. Any of them will get you into a new community and out of the house.

And, who knows, you might actually be able to sign up for a class to learn something you’ve always wanted to learn but haven’t had the time before retiring. You can go to an extension class and learn anything from ballroom dancing to oil painting to art history. You may even be able to audit a college class.

Don’t forget to polish an apple for the teacher and if the teacher is you, sink your teeth in and savor every delicious bite!

I can remember four years ago being absolutely certain that I would be retiring on this date. Well, here I am, but I’m not retiring yet!

Thankfully, my job is more enjoyable and satisfying and, of course, that counts for a lot. And, well, it’s a job that I’m not worried about losing. As I read stories in the paper about people who are having anxiety attacks and losing sleep over just worrying about losing their jobs, I feel extremely fortunate.

I feel fortunate not only because I have a job that pays well and that I enjoy, but I also feel fortunate because I crossed a threshold a couple of years ago where I became fully aware that I create my own reality.

Today, if I really hated my job, I could leave it. I’ve reached this milestone where with my employer’s rules of retirement I could walk away with a small pension and health insurance for the rest of my life. Today, I’m choosing not to do that.

There is nothing more empowering than knowing that I am truly the captain of my own ship. I call the shots and I know that the decisions I make are my own. I am not a victim.

I’m also aware that if I watched television for 8 to 10 hours a day as most people do, I might be having needless anxiety attacks about losing my job or about being attacked by a terrorist or fill in the blanks. It’s bad enough reading the newspaper for a couple of minutes every day.

Doesn’t anyone besides me wonder about all the amazingly wonderful things happening to people every day that are not reported in the news? A couple of days ago the Seattle Times was filled to the brim with news of multiple killings. What about killing someone makes it newsworthy?

I’m afraid I’m about to go off on even more of a tangent. A couple of weeks ago I was at the gym. There are TVs in the locker room. There was surprise, surprise, a killing that morning. The TV reporter actually said something to the effect of, “well, it’s been a busy morning, we have lots to report, stay tuned.” Yikes!!!!

Ok, stepping off my tangent because I’ve given this too much air time already, life is a wakeful dream and it’s everything I continue to make it every single minute of every single day. I’m not always wildly happy because, well, I’m human, but I am aware. And that is so very wonderful.

Happy birthday to me!!

Mr. Loy states, “It’s because our sense of self, being a delusion, is incapable of finding lasting satisfaction.”

Well, ok… That’s a little hard to grasp, or my ego sure finds that hard to grasp. But then he goes on to give examples from history on how it’s not just a personal issue, but a cultural or societal issue. As he puts it, looking at it in Buddhist terms, social/society vs. the cosmos.

In early times, rulers in Asian Buddhist countries “maintained harmony between the state and the cosmos.” In essence, they were considered to be gods by their followers. And any unfortunate circumstances were explained by karma.

Ancient Greeks, on the other hand, were the first to think in ways that are distinctly Western now. That is, they made a distinction between the cosmos and society and believed in individual choice. This was pretty radical for the times.

So, I put together my short list of what may be causes of our dissatisfaction.

Our history
How we compare ourselves with others
Who we are individually
Who we are culturally
What we know and what we’re exposed to (this could be considered a sub item to any of the above items.

Imagine being very poor but having access to a TV. I realize this example has been used before, but it’s relevant. This poor individual, living in, say, Cambodia, watches American TV day in and day out. He sees affluence unimaginable to his life.

But this gets me off track of my own dissatisfaction. After all, I live in the US and by world standards, I am very wealthy. By US standards I am middle class, as long as I continue to work.

However, I don’t want to work, I want to create my own financial independence. I am told that I can and I believe that I can, but I’m not there yet. My father was a self starter. He believed that education was a ticket to working for the man or worse yet, living a lifetime of poverty. He built his own business and did very well. In fact, if he were alive today he would surely be a multi-millionaire from the internet.

When I got my technical degree in Architectural drafting in 1979, he suggested that I create a book of architectural plans to mass market. I didn’t listen then, but now I wish I had!

Even still, I’m doing ok. I actually like my job these days and I have a nice work arrangement. I work with great people and continue to learn new things every day. At the same time, I’m determined to make money on the internet. I’m building a business that I have every intention of being successful.

So, does my dissatisfaction come from my history or from myself? From my ego? Or am I delusional as the Tricycle author states? You know, maybe the delusion of self he was talking about isn’t that hard to grasp after all.

Until then, my life is anything but simple.

But, to sleep (or maybe to wake!) perchance to dream…

I imagine getting up in the morning after the sun has risen. I’ll leisurely do some stretches or some yoga or the 5 Tibetans with no worry of being late for work if I don’t hurry it up. After my shower I’ll make myself a tasty smoothie and if the weather is nice go out for a walk in the sun.

And now comes the fun part. I’m off to my studio to create art. Every day I have the time and luxury to draw and create and get better and better every day. Every day!

Hmmm, and I have friends. I actually have time for friends. Not just my online friends, but real flesh and blood humans in my life that I meet downtown to have lunch with.

I’m also making music again. My guitars are coming out of their cases. I’m taking my favorite guitar out of its case and actually playing it. My fingers are getting callouses again. Oh, the sweet feeling of mastering a song and then another and another.

I have a journal and I’m filling it with my observations about life, my joys, my ups, my downs and I’m reading everything I can get my hands on about Buddhist art and I’m writing about it. I have time to go through the troves of pictures I’ve taken in SE Asia and I’m writing about them and sharing them on my blog.

Ah yes, to sleep, perchance to dream. Maybe my freedom will look much different than this. Today my life is all about keeping my job and continuing to learn new skills for my job which is rewarding in its own way but very time consuming.

As I get older I become more aware of how important my time is. Some days I feel as though I need to live as though today is the last day I’ll be here. But obligations prevent me from that. Is that crazy or what?

So, the challenge now is to schedule time for myself. I know that I can live this way because once upon a time I did live this way. When I was younger I worked part time at jobs I could leave behind at the end of the work day. I played guitar, I sang in choruses, I took classes, I had lots of friends.

But, then, I wanted to have a challenging career. So, now I have it.

Ha ha, are we ever satisfied?

I have to say it was cathartic to write the post on Worry and Fear. I’m not kidding. A weight has been lifted.

And what I’ve discovered about myself (that I’ve really known all along) is that persistence pays. It pays in self esteem and it pays in actual productivity. I’d been feeling like I was peddling backwards some. Like I was really getting no where because I was trying everything out… yet not following through on anything in particular.

In the last month that’s changed and what a relief!

Right now while so many people are losing their jobs and everything seems to be on such a downswing, my plans for retirement got sort of trashed. I really wanted to leave my job in April. I had some backup plans, such as to work part time as a contractor.

Now, it feels kind of ludicrous to even think of leaving my job.

However, in the last month I have created an LLC, gotten a business license, and begun the process of really building something that belongs to me and, I really believe, will replace my current income and then some.

While I may not be able to leave my job in April as originally planned, I’m fairly certain that I’ll be able to leave by the end of the year. I’ve also made some changes at work and I’m enjoying my job more. That never hurts!

Bottom line is that it’s vitally important that I stick with my plans and keep plowing forward, even as I work through stuff I’ve never done before. I don’t let that stop me, I allow myself to learn, and more importantly, I allow myself to make mistakes while I’m learning. They’ll teach me more than if I don’t take the risk at all.

At the same time, I truly appreciate what I have right now. I’m grateful for my job and the people I work with and the cool stuff I still get to do there knowing that I’m making a difference every now and then.

I’d love to hear from others what persistence means to you. Please write!

“Drag your thoughts away from your troubles… by the ears, by the heels, or any other way you can manage it.” ~Mark Twain

Isn’t it amazing how much we know that worry is a useless waste of our time and how much of our time we spend in worry anyway? Waz up wit dat??

I’m going to lay it all out on the line just to show you how ridiculous it all is.

What I’m worrying about today…

That I’m no longer respected at work. (antidote: what other people think of me is none of my business)

That I’m not going to leave my job when I wanted to. (antidote: I’ll leave my job when it’s time and I’ll know it when it comes)

That I’ll never make any money online. (antidote: I’ll keep doing the things that I need to do to create an online business and the money will follow… or not)

That I’ll die before I do all the things I want to. (antidote: You never get it done, so enjoy the moment!)

That I’ll die before I retire. (… well, let’s hope this doesn’t happen, huh?)

That I’ll never lose this weight that I recently gained. (antidote: give myself a break, already! and… what other people think of me is none of my business)

That I’ll lose my cat. (well, I will one of these days, but I sure love having her around now, so enjoy every precious moment)

Ok, phew, got all that off my poor, worried chest! The amazing thing is that we all do this. Day in day out. When I get ahold of myself and realize that I’m making all this up in my head, I get a few moments or even a day or two of relief.

This is what separates us from other animals. We have the capability to think and reason. What a curse upon us.

“If you can’t sleep, then get up and do something instead of lying there worrying. It’s the worry that gets you, not the lack of sleep.” ~Dale Carnegie

I love this quote. It gives me permission to turn on the light and read or do anything to get my mind off of my worries. Sometimes simply telling myself that there’s nothing I can do about whatever I’m worrying about right now will actually stop the thoughts and allow me to relax into sleep.

Fear is the killer. It causes anxiety attacks and it keeps us from living in the moment.

“As a rule, what is out of sight disturbs men’s minds more seriously than what they see.” ~Julius Caesar

Judging by these quotes, we’ve been worrying for a very long time. Maybe President Obama should create a Ministry of Worry, especially in these trying times.

Everyone asks this question. It’s in books on how to find your passion, it’s on websites about finding your passion, and it’s probably in the back of most everyone’s minds.

But do we really take the question seriously? Or do we take it too seriously? It’s like our life is hanging in the balance waiting for the right answer. That’s enough to scare anyone into not knowing the answer.

At what cost, though? I’ll venture to say, it’s at the cost of our very lives!

Life is now. Always has been and always will be. Has been and will be were now and will be now. So why all the anxiety?

I know why for me. I’ve gotten caught up in the definitions. I’ve gotten caught up in “doing it right.” And I’ve gotten caught up in being the perfect employee. Let’s face it, who are we trying to impress?

Why am I writing this? I’m writing it because life is now and I’m sorry to report that I’ve squandered so much time not being present. Not just thinking about what I’m going to have for dinner but thinking about what am I going to be doing in 5 years?

I used to hate that that question even existed as such a big deal for goal setting. I think it’s such a huge disservice to even ask it. Sure, maybe there’s merit to having some idea about where you want your life to be, but I think it can kill our spirits. It’s as though we have to align ourselves with some corporate business plan.

In the meantime, here we are, flesh and blood, alive, not truly living.

So, what do you love to do? Do you even have a clue? For me, I don’t fully know. Let’s see, I love to eat, I love to walk on the beach, I love to spend time with my cat, I love to build computer systems, I love to sit in coffee shops and play on my computer, and sometimes I even love to play my guitar when I’m not worried about playing like Jimi Hendrix… Wow, maybe I know more about myself than I thought.

And I love to keep learning new things. And I love having a good night’s sleep. That’s the beauty of being alive, now. It doesn’t matter how old we are, it matters how alive we are.