The holidays are here! And with this festive, candy-laden season comes one big problem: We all completely lose our minds! As business owners and team leaders, we lose focus. There's one exciting distraction after another, all wrapped up in bright paper and shiny bows. By the end of the month, your numbers have all slipped into a gloomy rut and you're beginning to second guess the expensive gift you got your spouse.
What's more, if you're like most of us during the holidays, you've totally forgotten that one large gift you owe to a special someone: Uncle Sam.
That's right. I hate to be the bearer of bad news, but it's that time again. Tax season is just around the corner, and as of January 1, 2016, a chunk of whatever is in your bank account will officially belong to the U.S. government. It happens like clockwork, but with all of the holiday distractions, it is easy to forget. Today, I'm challenging you to take a minute and think it through.
Let's compare two dentists -- David and John. Each doctor has a wife, two kids, and a dog. It's December, and both are equally excited to celebrate the holidays at home. Each one sits down at his home computer to do one more check of his business accounts, and both notice that they have exactly $50,000 in their accounts. So far, they're the same, right?
But there is one difference. John has his eyes on April 15th. Tax day. David, unfortunately, is busy focusing on how pleased he is to see $50,000 in his checking account.
John also understands a bit more about the tax code than David, and he knows that it would be wise to move some of that money out of his account and allocate it toward an investment. He knows that come January1, the government will own 35% of it.
Let's check that math. 35% of $50,000 is $17,500. And $17,500 is a pretty big "gift"-- even for someone as patriotic as John. So, with these facts in mind, John makes a tax-advantageous decision.
Jay Geier is the president and founder of the Scheduling Institute.John decides to invest the money before January 1 rolls around. He pays his January and February rent early, and then decides to invest in some professional development for his team. After doing some research, he signs up for staff training for all of 2016 -- a solid $20,000 investment. Because John knows his stuff, he made this large investment before the end of the calendar year. That means this chunk of money stayed in John's practice -- and in his control -- and escaped the clutches of the IRS.
Well, it's a happy new year for John! He is starting 2016 with his rent already paid and with an investment in team training that could potentially bring in an extra $200,000 to his practice in just one year! On top of all that, he doesn't have to pay that horrifying $17,500 to the government. Talk about a good move!
Let's fast-forward. Using what he's learned from his business investment, John is able to boost the practice -- both production and revenue -- creating a huge return on investment and monetizing the strategies he's learned. If he succeeds in raking in an additional $200,000 in 2016 -- which is a reasonable goal -- and there's a 20% annual increase on the $200,000, then by 2018, the original $20,000 investment could make him almost three quarters of a million dollars. Let me repeat that: Making one high-return investment before the end of the calendar year earned this guy almost $750,000 extra bucks.
We'll leave John for a minute and check in on David. It's January 1, 2016. The $50,000 in his checking account is all still there -- and it's now 50,000 taxable dollars. On April 15 -- same as always -- David will send a $17,500 check to the IRS. And that's that. No investment. No personal development. No practice growth. 2016 comes and goes, and David's financial outlook remains exactly the same.
Folks, here's the deal. It's very late in December. I want you to know one thing: You have a choice! Taxes are required, but you can either give 35% of your entire earnings to the government next year, or you can use that same money to invest in yourself and your team and grow your business. You have a decision to make: Do nothing and kiss that 35% goodbye on April 15, or keep control of where your money goes and move it to grow your business.
Jay Geier is the president and founder of the Scheduling Institute. Take the institute's free 5 Star Challenge.
The comments in this article are not meant to be taken as financial or tax advice, but are for illustration only. The author and DrBicuspid.com recommend that you always consult with your financial planner before making any significant changes in your financial or tax situation.
The comments and observations expressed herein do not necessarily reflect the opinions of DrBicuspid.com, nor should they be construed as an endorsement or admonishment of any particular idea, vendor, or organization.
