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The new year is the best time to look ahead and reflect on ways to transform old, destructive habits of past into more beneficial and healthy habits of new. This is the time when people start thinking about how they will stick to their new year resolutions for 2020, whether it be hitting the gym more or learning a new skill.
If the goal is to form a better relationship with the almighty dollar, REVOLT has launched an entertaining new series titled “Maconomics,” starring Wharton Business School graduate and MC Ro$$ Mac, to help jumpstart the journey toward financial literacy.
From budgeting, starting your own business and taxes, in 2020, we are making it cool to know how to handle your money responsibly and Ro$$ Mac is here to break it down.
Here are five takeaways from the debut episode of “Maconomics,” so you can make more and work less in 2020.
1. The harsh truth about most Americans finances
It’s true, most Americans live paycheck to paycheck. Despite all the Instagram flexing with the flashy cars and designer threads giving off the illusion of otherwise, 80 percent of the population actually depend on their paychecks to survive.
“Sixty percent of us have less than $1,000 in our savings and the average adult got over $30,000 in debt,” Mac enlightens.
Understanding the pressure social media places on its users to keep up with everyone else, mixed with the savings to debt ratio, it’s easy to see how one could end up living like this. Keeping up the Joneses is out in 2020, and keeping up with yourself is in.
2. Everybody needs a budget
The way to come from out of the vicious paycheck to paycheck cycle is to budget and everybody — no matter how much money you have — needs a budget. A good one will include basic necessities such as rent, utilities, groceries and health insurance; as well a money allocated for having fun, and some more set aside for a rainy day.
3. Use 50-30-20 rule
Though there are plenty of software programs and apps available to help budget, an easy way to start budgeting is by taking your net income — what’s left after taxes — and implementing the fundamental 50-30-20 plan, according to Mac.
Fifty percent of your net income should be allocated toward necessities such as rent or mortgage, car note, insurance, utilities and food. Thirty percent should go toward your “flex account,” which is the money aside to cop the latest sneaker drop or even Coachella tickets, if you want. The other 20 percent should go into a savings account, preferably one that pays interest, or toward paying down debt.
The 50-30-20 plan is good place to start a budding relationship with your money because it’s simple and allows you to see where your money is going.
4. Why you need an LLC
Right now, we are in the age of the hustle and mostly everyone works more than one gig. Whether it be working through the ranks of freelance graphic design in the morning and driving Lyft at night, or running an Instagram boutique while working as a bottle girl in the evening, there are ways to make your money really work for you and the answer is by starting an LLC.
LLC stands for limited liability corporation and depending on what state you do business in, the cost to starting one can range anywhere between $40 and $800.
“What we are doing now by starting an LLC is your lowering your taxable income,” Mac says. “So, when you hear people say let me claim your kids on my taxes; this is similar, but now your able to claim your business.”
5. How to pay less taxes
The way to pay less taxes while increasing the money going into the 50-30-20 budget, is by running what is tax deductible through an LLC. Where you do business, how you do business, and how you get around while doing your business can all be used as a tax deduction when filing your taxes in April.
Some things that are tax deductible while conducting business are gas mileage and travel costs, equipment such as a MacBook or printer, business cards, website maintenance, office supplies, cellular phone bills, Lyft rides and even your own home if a portion of it is used as the office area.
The result in taking advantage of these tax deductible items is a nice increase on your tax refund or a decrease in the amount of money owed to Uncle Sam.