SHOW TRANSCRIPT

This transcript is automatically generated by Descript.  Any errors or omissions are unintentional.

Ralph Estep Jr.: [00:00:00] tax evasion is a crime. They will come out. The IRS guys with the gold badges and guns will come and get you, but tax avoidance is fine. It’s okay to avoid taxes. In fact, there’s Supreme court decisions that says it is your absolute right to avoid taxes.

You just can’t evade them. Absolutely.

Jeff Sieh: Hello folks. Welcome to Social Media News Live. I’m Jeff Sieh and you’re not. And this is the show that keeps you up to date on what’s happening in the world of social media and so much more. And you know, have you ever found yourself wondering how to take control of your finances as a creator?

Maybe you’re looking for ways to keep more of what you earn and avoid unexpected tax headaches. Or maybe you’re trying to figure out how to turn your creative passion into financially stable business. Well, if any of those sounds familiar, you’re in the right place. This week, we’re diving into the world of creative finances with Ralph Estep Jr.,

who knows the ins and outs of managing money. Taxes and business structures. And he’s here to share practical advice, [00:01:00] smart strategies, and the financial must know every creator should have on their radar. So sit back, clear schedule, clear mind, and get ready for this week’s episode of Social Media News Live.

Ralph, my friend, how are you doing today?

Ralph Estep Jr.: I am doing fantastic and I’m glad to hear that I’m not Jeff Sieh.

Jeff Sieh: That’s right. You know, everybody talks to me about that line and it’s totally stolen from Chevy Chase back in the Saturday Night Live because he would always do the weekend update with that and it always would crack me up, yeah. So, if you, if you don’t know who Ralph is, he is a financial expert and entrepreneur with over 30 years of experience helping individuals and small businesses all Owners navigate their complex financial challenges from a Christian perspective.

As the principal of Saggio Management Group, he specializes in tax preparation, financial management, and technology integration to help businesses streamline operations, increase profitability, and avoid costly pitfalls. So once again, Ralph, this one is going to be exciting. So thank you so much for being on the show today.[00:02:00]

Ralph Estep Jr.: Oh, you’re welcome. I’ve been doing accounting since I was eight. So, um, you know, I’ve been doing it professionally for over 30 years, but I started when I was eight. That’s a story for another day, but been doing it for a long time, Jeff. So I appreciate you having me on the show.

Jeff Sieh: Yeah. So Ralph kind of got my radar because, he, you know, we’ve had Dave Jackson on, I believe it was the week before he is in there a lot of times with me on the Saturday morning things. And we were talking about podcasting, but Ralph does a daily podcast. And one of the things I. People who know me know this.

I hate financial stuff. I just, it drives, I don’t understand it. But Ralph’s emails and his show and the content he puts out, I see it in my inbox and I’m like, Oh man, I’m asking that question. Oh man, he’s saying exactly what I need to hear. So that’s what got Ralph on my radar because he, His, his, uh, content is very poignant and it really, really helps and it’s easy to understand.

He teaches it in a way that I think is easy to understand. So, Ralph, kudos to you for your, your, that’s a [00:03:00] lot of work, a daily show, great content. So, congratulations on all that you’ve been doing. It’s really been great.

Ralph Estep Jr.: Thank you, Jeff. It’s intentional for me because this is what I consider my mission field. That’s why I’ve kind of married two worlds together because you can’t really separate someone’s faith from their finances. And that doesn’t mean you have to be the same faith as me. It just means that that really gives you that character.

That, that bottom line character, which I think is so important, especially in the world we’re living in today. There’s so much of a, a problem with people’s character. But if, if I can ground that and I can use that as the basis for why you want to make good financial decisions and it just, it just works.

And, and yeah, the daily thing, dude, I had no concept of what I was getting in when I did that, but yeah. It’s been fun. I really enjoyed it. I put about two hours a day into the show because I’m trying to reach people. I look at it as my mission field, but thank you, Jeff. I appreciate what you said,

Jeff Sieh: Yeah. And by the way, Ralph is, uh, you know, once again, this show is sponsored by our friends over at Ecamm. You can find out more about them at ecamm. com forward slash Jeff. You can intercode [00:04:00] Jeff15 to save 15 percent on your first purchase. But Ralph uses it for his daily show too. You can see he’s already got, he’s getting his professional set up.

He is taking things to the next level. So, we appreciate Ecamm for sponsoring the show today. But I want to dive right in really quickly, Ralph, to, Some stuff that, you know, creators a lot of time don’t think about. At least I didn’t when I first started. and we’re going to dive into the weeds today because I know you can explain things really, really well.

And a lot of accountants, and I’ll just kind of go into this blanket statement when I say a lot of accountants, but I have found when I’ve asked questions before of different tax professionals and people who do, you know, financial planning and all that stuff, when I mention that the creator or an influencer, they kind of go, You know, it’s like, well, it’s kind of a gray area and they kind of, they don’t have any hard and fast things that they’re saying.

So that’s why I wouldn’t have you on the show, because I know you’ll give us honest advice. And if you don’t know something, you’ll just say, I don’t know. But, as coming from a creator or influencer, kind of [00:05:00] business, what are some of the key tax obligations that we as creators need to be aware of, especially concerning like self employment taxes and, and all that kind of stuff?

Ralph Estep Jr.: but let’s start with the basics. I mean, the bottom line, if someone is paying you, if someone is paying you for content or they’re paying you for clicks, or they’re paying you any kind of affiliate income, you have an obligation to report that income because if not, guess what? That’s what put Al Capone in jail.

It wasn’t a racketeering, it was the taxes. So you’ve got an obligation to report that income. You got an obligation to make sure you’re, you’re doing all those things because that’s a lot of times people don’t think about that. And I meet a lot of people in the creator community and they say, well, you know, I just earned a couple of bucks from my Amazon affiliate or I earned a couple of bucks from some YouTubes that I posted or something along those lines and they don’t realize that you have an obligation.

Now. Jeff, this is starting to become more pronounced because a lot of these companies are now [00:06:00] sending out 1099 forms and I don’t want to bother everybody with the burden. I just did a show about this the other day, but at 1099, here’s the thing you need to understand that 1099 goes to you and it goes to the IRS.

So the IRS is going to be looking for that. So, you’ve got to make sure you’re keeping track of your income and expenses and we’ll dive into that a little deeper. But you specifically talked about self employment tax and this is a thing that surprises a lot of content creators. They figure, well, I’m just going to have to pay federal tax and if you live in a state, now I know you’re in Texas, so there’s no state income tax, but I’m in Delaware.

We have a state income tax. I think there’s about nine states that don’t have state income taxes, but you’re going to pay at least federal and if you live in a state where there’s state tax, pay state tax. But this is the dirty little secret nobody mentions. There’s also what’s called self employment tax, so let me give you a real simple how that works.

When you work for somebody else. You’ll see on your pay stub, you’ll see federal tax, and then you’ll probably see something that says FICA or Social Security, and you’ll see something that says Medicare or Med. Well, when you work for somebody else, they match. You pay half, [00:07:00] they pay half. Well, guess what?

When you work for yourself, you gotta pay both halves. And that’s another 15. 2 percent on top of whatever you’re paying in federal tax. So think about it. Let’s say, you’re working for yourself. You’re in the 22 percent federal tax bracket. Now I’m going to add another 15 percent and if you’ve got a state tax, you’re getting close to 45 percent of your tax.

I’ve got some great strategies on how to cut that self employment tax down. It’s one of the things I do with a lot of content creators and other business people, but a lot of people don’t realize it. Every net, now I’m talking about net income. I want to be very careful what I say there. It’s not the gross.

It’s not what came in the door. It’s the net. So this is why it’s so very critical to make sure you’re capturing all that information. My grandfather used to say this all the time. What gets measured gets done. Well, you’ve got to measure this. And that’s the thing I noticed with a lot of content creators because having been in this, in this industry a little while now, a lot of people flock to me like, Oh, Ralph seems to know what he’s talking about.

Well, I hope so. I’ve been doing it for a long time, but I’ll say to them, Hey, have you kept track of this? Well, you know, I didn’t [00:08:00] really keep track of that. I’ve just, this thing just kind of blew up on me all at once. So the key GEP. Big takeaway here. Number one, big takeaway, keep track of everything. Keep track of every single expense.

Every single dollar comes in a door because worst case scenario. You’re going to meet with somebody like me and they’re going to say, you know, Jeff, we can’t really deduct your trip to Tahiti. I’m sorry. It sounds good, but we can’t do it. But Hey, that microphone you bought, that internet service, that AI content creating tool that you bought, all of those things might be your trip to podcast movement or something like that could very well be deductible.

Jeff Sieh: Okay, so what’s the best way for creators to handle that income reporting from those various sources, like let’s say brand partnerships, you know, affiliate marketing like Amazon, which you just mentioned, and like some ad revenue that they get, you know, or, you know, for sponsorships or whatever, what’s the best way to, to, I guess, capture that information and then report it?

Is it, you just make a line in QuickBooks, what’s, how do you suggest creators track that?[00:09:00]

Ralph Estep Jr.: So I’m going to make it real simple, have a separate bank account and all of that income goes into that bank account. I don’t really care where it’s coming from. It’s not, it doesn’t matter to the IRS, where the money came from, whether it came from affiliates, whether it came from money you earned from Ecamm or from merchandise you’re selling, it doesn’t really matter.

But if I look at your bank statement and this is what I do with my clients, I say, okay, All these deposits are sales, correct? Now, unless you’re putting money in to subsidize the account, that’s the easiest way to do it, Jeff. And just say, Hey, whatever comes in the door, that’s sales. And just drop that into an account by itself.

That way it’s really simple to track.

Jeff Sieh: Gotcha. So I’m going to, this is, I think we’ve kind of chatted about this offline a little bit, but one of the things, and I know a lot of the people who watch this show, I mean, we’ve had Billy Thorpe on, he’s a big Amazon influencer and a lot of times we’ll get either sent stuff to review and then we, you know, make the review.

They can pay us for the review. Sometimes they don’t pay for [00:10:00] the review, but then we put it to Amazon and we get affiliate income from that when people buy it. If we buy that product ourselves, is that, can we write that off? Or is that considered, is it fair use? I mean, do we have to use it so much? Cause I’ve seen these formulas, like if you use it like 70 percent of the time, then you can, but if you don’t, you, you know, all this stuff.

So what’s the best thought on this, Ralph?

Ralph Estep Jr.: So I think if you’re buying something to use, to demonstrate on your program, let me give you an example of this. One of my good friends does A podcast called Practical Prepping and he buys tools and practical prepping gear that he uses to talk about on his show. And he asked me this a couple of weeks ago.

He said, Ralph, he said, what can I deduct? I said, his name is Mark. I said, Mark, if you’re going to be using that as a demo on the show, then I think that’s absolutely legitimate as a business write off. Absolutely. Now, if you’re going to say, well, you know, I’m going to go buy a new Tesla. Because I’m going to show how I can drive around in a Tesla.

I think you’re going to get yourself in trouble. Jeff, here’s one of my other big takeaways. Since I was a young chap starting this [00:11:00] at eight, eight years old, my grandmother was a big influence to me. And I used to say to people when I was first starting my practice, if I can prove it to my grandmother, I’m probably in good shape because most people don’t lie to their grandmom, right?

You know, unless you’re just a scoundrel and I don’t deal with scoundrels, but you understand what I’m saying. So. If you’re being reasonable, I think that’s the key, you know, because put yourself in the shoes of that IRS auditor. If that IRS auditor and you, you’re not going to get audited, but if you, I call it the unlucky winner of the audit, of the audit lottery, if you are the unlucky winner of that, This IRS agent is just trying to do their job.

People get so scared of the IRS. If you’re doing the right thing, you’ve got your receipts, you’ve got your documentation, and you can prove it to the IRS. Let’s use a camera, for example, right? Let’s say you do a daily video show like I do, and I happen to be staring at an Insta360 camera right now. Well, if that company sent me that camera, and I’m going to use it on my show, then absolutely, I think that’s a tax deductible expense.[00:12:00]

If it’s something that’s not going to be used in any way, shape or form in the content creation, I think you’re going to get yourself in trouble.

Jeff Sieh: So what about, let’s, and this has happened before and I know Billy does the same thing is a lot of times they’ll send us something that, you know, we do a review on, we might get paid for it. We’re going to put up on Amazon. We’re going to get affiliate money. We’re reporting that in, you know, if you’re smart, yeah.

I’m reporting all that influencer money that I get from Amazon, like it’s, it goes right into the bank account, it’s tied in directly, it comes in as income, but what if I take that, you know, let’s say they send me some tweezers, and I review the tweezers, and then I sell the tweezers on eBay or whatever, that I’m assuming you also have to report as income as well, don’t try to hide it and like do a garage sale and get all this stuff away, you’d still have to report all that as income, correct?

Ralph Estep Jr.: And absolutely. Because if you got something for free and you turn around and sell it, you’ve got to report that income. Absolutely. Absolutely. Yeah. And that’s the thing, Jeff, is people try to play games, right? And it’s, it’s little nickel and dime stuff. And it’s like, do you [00:13:00] realize how much audit jeopardy you’re putting yourself into to For something that’s so small and minuscule, it just doesn’t make any sense at the end of the day.

Jeff Sieh: I agree. So that’s great to hear because I know that has been, I mean, there’s so many things floating out there around the interwebs and that’s why I love having Ralph having somebody that you can ask who can tell it to you straight, I think is, is great. So we’re going to be pulling up his, his askralph.

com. That’s where you can find Ralph. If you’re listening to this on the podcast. he responds to his emails. He’s got a great newsletter. He’s written many books. So ask Ralph. com, make sure you guys go there, check him out, check out his daily show. Cause I’m, I’m serious. He covers so many great questions, that I just am like, Oh my gosh, I got to save that one.

I got to save that one. Cause it’s so good. So ask Ralph. com. Don’t forget to go sign up and leave him a rating review. Cause that really does help him out. So you kind of mentioned, you know, The, you know, self employment taxes, we talked about that. But let’s talk about quarterly tax payments. Because I know I hear a lot of my influencer friends.

Now I’m [00:14:00] a S Corp, so I’m a little bit different. But a lot of the folks who have like LLCs or something, they go, Oh, I got to pay my quarterly taxes. Oh my gosh, it’s tax season. So can you explain the importance of making those quarterly tax payments? And what happens if you miss those? Like. Because a lot of people are like, I’ll just do it later, kind of a thing.

I know a lot of creators talk that way. So what would you tell them?

Ralph Estep Jr.: First thing I would say, S Corporation is a fantastic structure. we can talk about that later if you want, but that’s a great way to help reduce your overall tax burden. But when you’re talking about estimated taxes, think about it in these terms. When you work for somebody else and you got a paycheck weekly or biweekly or monthly, they withheld taxes because the IRS is a pay as you go type of system.

They want their money when you earn it. So somebody like me, you come in and sit down with me and I say, okay, Jeff, it looks like your income is going to be X. So therefore you’re going to 000 in tax. Well, I’m going to say to you, Hey Jeff, here’s what I want you to do. I want you to pay that [00:15:00] quarterly, a thousand dollars a pop.

That way the IRS can’t say, well, you know, I, I waited to the end of the year to pay because they want their money when you earn it, a lot of people get hung up on these due dates and the due dates actually don’t have anything to do with the quarters. They’re actually April 15th, June 15th. October 15th, and then, January 15th of the following year.

Here’s my big takeaway though, Jeff. If you’re at least paying them around those dates. I think you’re fine. The point is to make a habit of it. The point is to pay those things. Because if you don’t, two things are going to happen. Thing number one is when somebody does your taxes at the end of the year and you didn’t make estimated tax payments, the IRS will actually charge you what’s called an underpayment penalty and they will penalize you.

States do this too. The penalties vary depending upon how much income that you’re reporting. So as you’re like, I’ve got, I’ll give you a great example. I get this one client, he’s an attorney and he hates the IRS. He hates them with a passion. And he says, Ralph, I will never pay those rascals a [00:16:00] dime in estimated taxes.

And I said, okay, I’m not going to use his name. I said, okay, that’s fine. But here’s what you need to understand. I am going to send you a letter from my file that says when I do your taxes next year, you’re going to get hit with a penalty. And he says, that’s fine. I’ll pay the penalty. I’ll pay their blood money.

But if you want to stay out of the penalty zone, kind of like a hockey game, right? You want to stay out of the penalty zone. You make these quarterly payments. The second side of that, Is a financial benefit to you. It helps you, you know, manage your finances in a way that you don’t get to like, here’s, here’s a nightmare scenario.

This happens all the time during tax season, especially with somebody I haven’t worked with before. They’ll come in, I’ll do their taxes and I’ll say, Hey Jeff, guess what? You owe 25, 000. And they fall over and hit the floor

Jeff Sieh: Right.

Ralph Estep Jr.: because they, first of all, they had no idea what they were doing. Which is okay.

That’s fine. Everybody has issues. But then I say to him, okay, well, have you paid as you go along? And no, I didn’t pay anything. So that’s the other side of that. There’s the compliance side and then there’s the cash management or the cashflow side, both of which are important, but that’s really the [00:17:00] key to making those estimated tax payments.

Jeff Sieh: So Ralph, let’s say, you know, if I, I’m paying estimated tax payments and we’ve got it set up, I’ve come to you. Let’s say my car breaks down and my kid has to pay tuition because they, you know, we got to pay another bill. What if I can’t afford that tax estimate that I’m supposed to put in?

What happens?

Ralph Estep Jr.: So again, I would just say to you, if you can’t afford it, then two things are probably going on. Number one, maybe your business isn’t performing at the level that you expected it to. So your income is down. So you’re probably not going to owe that much anyway. If, by chance, you’re just making bad decisions about needs versus wants, and we can talk about that later, if you can’t afford to pay, you can’t afford to pay.

You know, the Bible says you can’t get blood from a stone, right?

Jeff Sieh: Right.

Ralph Estep Jr.: If you find that you have, look, everything, things happen in people’s lives, right, Jeff? You know, we have that car repair we weren’t expecting. We have that leaky roof we weren’t expecting. Just try to make it up in the next quarter or try to make it up a couple of weeks later.

Again, the [00:18:00] idea is have that momentum that sometime before the end of the year. You’ve got that money paid in because if you overpay it, you’re going to get the money back. So one of the things that I tell clients when I work with a client, here’s, here’s what Ralph tries to do. Ralph tries to get them within 500 of owing or getting a refund.

That’s kind of what I call the sweet spot. So I’m going to look at, and this is the other thing a lot of people don’t understand, Jeff, and this is the one thing I’m preaching my business about all the time. Tax preparation is great, but it’s not where the value is. I can put, I can make your numbers look great.

I can put, I can dot the I’s, I can cross the T’s, but where the real value in accounting is in tax planning. So one of the things that you should be doing is spend some money, meet with somebody like me a couple of times a year. Don’t just wait till the end of the year because when people come in and meet with me after the fact, if there’s not a lot I can do, yeah, I can make the numbers look great.

I can keep them in compliance, but if they come and see me in October, they’re And I know what’s going on. Maybe I can tell them, Hey, go buy some equipment before the end of the year. Pre pay some expenses before the end of the year. Because it’s, [00:19:00] it’s, it’s, it’s some place like a shell game, right? It’s like, I want to get as much expense in the current year.

And I want to get as least a little income in the, in the current year. But you know, there’s things that we can do to help do that. But so many people just don’t want to spend the money to go work with somebody. They say, Oh, well, I’ll just go to H& R Block at the end of the year, or I’ll get online. I’m, I just did, I recorded a show the other day about why you want to pick an account and not an online service.

But anyway, there’s a lot of AI tools out there to claim to be like me, but nobody’s as good as me. And that sounds very arrogant, but the truth is. I guess you’re trying to build it Jeff because I’ve been doing this for a while and there’s very little that people bring to me and I go, I’ve never seen anything like, I have seen a few.

I gotta be honest. Like I’ve seen some stuff. I’m like, where did this come from? But anyway, big picture, tax planning is where it’s at Jeff because if you are planning, if you are making wise decisions, then the truth is by the time you get to tax time, you should be zeroed in on what that’s going to look like.

Jeff Sieh: That’s good. And, and, and I know, cause I’m coming from the creator mindset and a lot of time, and you know, this Ralph, like. You’re spending so much [00:20:00] time creating content, building stuff. The last thing you want to do is, wake up in the middle of the night in a cold sweat, because you’re worried about the IRS is coming to break down your door and take all your money.

So that’s why it’s good once again, to have somebody like Ralph that you can turn to ask the questions. And we talked about this a little bit before the show is like find somebody like Ralph, who doesn’t. Make you feel stupid and you can ask questions too. I’ve been on both sides of the spectrum where I’ve had really great people who’ve given me great advice and then people who I just, it was like, I felt like an idiot going in and talking to them, you know, they like to lure it over you.

They even sat higher than you in the room to look down on you. And I was like, what’s going on? You work for me anyway. Um,

Ralph Estep Jr.: make a very good point. Can I just add

something to

Jeff Sieh: sure,

Ralph Estep Jr.: One of the biggest compliments I ever got from a client is when they said, Ralph. You make it simple. I don’t have the capacity to understand what you’re saying, but Ralph, you, you make it so that I understand it. And I work with people who are plumbers.

I work with people who are HVAC. I work with [00:21:00] content creators. I work with all kinds of people and, and I’m able to explain it in a way that, that, that they can understand. And the other thing I’m going to throw at you, here’s another thing you didn’t mention this. But you got to trust the person you’re working with because the truth is, Jeff, I said this to somebody today, my relationship with my clients is sometimes more intimate than the relationship they have with their wife, because I’ve got to know it all.

I’ve got to really understand it. So you want to work with somebody you trust. You got to work with somebody. I say this, you know, come in, I’ll put my arm around you. Because it’s a team effort. And if you’ve got somebody that’s talking down to you, that is arrogant, doesn’t understand, doesn’t explain to you what’s going on, run the other direction because that’s a bad plan for you.

Jeff Sieh: And one of the things is it’s okay to say that I don’t know stuff. Tax stuff is confusing, right? Like, I don’t know, I don’t want to know all the rules and the regulations. I, when I first was able to pay somebody to do my taxes for me, I was like, ah, it felt, you know, it’s just like, I don’t know. I don’t have to worry about that.

I don’t have to try to figure out [00:22:00] TurboTax or whatever to try to do it. Now I like AI tools because it helps me categorize stuff to make it the end of the year when I turn the reports easier, but I still need an accountant to go through that and double check and make sure I’ve got all my, like you said, you know, the T’s crossed and I’s dotted.

And one thing I didn’t, we didn’t say at the beginning of the show, which you probably need to, is like, this is just general financial advice. I am not a financial, advisor or have anything you should know by looking at me. I know nothing about this stuff. Ralph does, but he doesn’t work for you. We’re just kind of giving you general advice, best practices.

once again, you need to consult your own, you know, your own tax professional, your own accountant, go to talk to Ralph, but this is just general stuff. So I think we covered our bases there

Ralph Estep Jr.: Yeah, Jeff, because everybody’s situation is different. There’s no cookie cutter. There’s no boilerplate approach. I’m glad you mentioned that because a lot of people say, well, Ralph said to do this. No, Ralph said here’s an idea. Go talk to somebody in your area. Schedule a conference call with me, book a call with me, but a great, great way to see that Jeff.

Good point.

Jeff Sieh: so one of [00:23:00] the things we kind of talked to the kind of the bummer the Debbie Downer kind of stuff at the beginning here, but I want to know like what are some common overlooked tax deductions that creators can take advantage of to reduce that taxable income that you know we all want to do at the end of the year.

Right,

Ralph Estep Jr.: creators are working from their own home. So you’ve got to really focus in on what is that exclusively you space in your home? What are the expenses? You know, maybe you’ve got an internet connection that you’ve. You’ve got more robust because you’re doing live streaming or you need to be able to download things quickly.

Any kind of conferences you’re doing, you know, Dave Jackson, I’m a member of the school podcast and he said to me one time, he said, Ralph, if I go attend other training sessions and I go meet with other people, can I deduct it? Absolutely. You’re building your craft and a lot of people overlook that home office deduction.

They overlook those travel expenses. They overlook that training or those, those tutorial things that they’re subscribing to. They overlook that internet. Maybe it’s a cell phone plan. Anytime, here’s the [00:24:00] bottom line, Jeff, if you can prove that somehow there’s a connection to the work that you’re doing, now you gotta be really careful with the home office stuff because this has got a lot of people in trouble because the IRS, and I don’t want to get too more in the weeds, but the IRS has a very strict test.

It has to be used exclusively for business. So I tell you a funny story about this, Jeff. So I had a client a few years back. She was going to do her own taxes. She got audited. She came to me after the fact and she goes, I’m in real trouble. I said, well, what happened? She says, well, I claimed a home office deduction.

And she said, I got a letter from the IRS and I was going to show them. I told them you can come out here and look at my home office. So the IRS agent knocks at the door. Now the IRS doesn’t just show up at your door just to put that, you don’t just do that. She was, he was invited, comes into the house, walks up the stairs, looks in his bedroom and sees a couch and says, well, and see kids toys in the corner to the client, well, wait a minute, does your kid come in here and play?

Well, yeah, of course. This is our playroom also. Ding, ding, ding. You just lost the audit lottery because the IRS [00:25:00] was very clear exclusively used for business. So content creators be careful. You know, you’re not going to make an argument that says, you know, I have a 2000 square foot house and I use 1900 square feet for the podcast because, you know, I film here and I film in front of the refrigerator and I do editing over here.

Be very cautious about that. But if you’ve got space that’s exclusively used for business. Then you’re good to go with that. So keep track of that and it doesn’t have to be complicated. Then what you’re basically going to do, you’re going to keep track of all your utilities, keep track of any repairs and maintenance.

And it’s a real simple equation. Like I said, 2000 square feet. Let’s say, say you have a 10 by 10 office, right? So you’ve got a hundred square feet you’re using for the quote business and your house is 2000 square feet. Where are you going to take a percentage of that? And then you can deduct each of those things.

Now. Why is that important? Because the goal is to try to get that taxable income down as low as possible because we’re paying federal state and that sneaky self employment tax. So if we can reduce those things by getting these expenses that a lot of people overlook, then [00:26:00] that is the goal. Because here’s the deal.

I mentioned about Al Capone at the beginning. You need to understand this tax evasion is a crime. They will come out. The IRS guys with the gold badges and guns will come and get you, but tax avoidance is fine. It’s okay to avoid taxes. In fact, there’s Supreme court decisions that says it is your absolute right to avoid taxes.

You just can’t evade them. Absolutely.

Jeff Sieh: That’s a good distinction, Ralph. Thank you for that. Cause we do not want to have people come after us you know, while we’re filming our shows, that would be bad. one of the things that I was going to ask you when you were talking about this is like, for me, this is a portable building that I finished out in my backyard, so I can deduct a hundred percent of this for business because I use it.

Exclusively for business. I mean, I come in here and I may watch something on my computer, but it’s not like I spend time in here, but it’s, it’s, it’s, it’s where I film my show. It’s where I work all the time. Every day I have a 22nd commute. So I’m okay to deduct that is what you’re saying.

Ralph Estep Jr.: Like I have a farm, I [00:27:00] have a 30 acre, a black Angus cow farm. And like, if I don’t have enough to do, then I’m also raising black Angus cows. Well, about two years ago, I built an office here on the property so I could have my office right here on the property. And yeah, that’s a business expense. It’s a separate building.

Now I have a particular, I’m sitting in my new studio. Now I have a particular space within the business that I’m using exclusively for this. Yeah. And if you watch TV occasionally. That’s not a big deal because I could just make an argument that you’re learning more content. You’re looking for more content for your show.

But if you have like a bunk bed in there for your, your kids or your grandkids, that’s a different story. But no, Jeff, you’re, you’re totally fine with what you’re doing. I don’t see any issue with that at all.

Jeff Sieh: So let’s get, cause I love this. I love not trying, like we’re trying to not evade, we’re trying to avoid. So, one of the questions that I have, like, so my daughter. Separate apartment, one of the benefits that I give her as she works for me, I, you know, I paycheck, I take out money from, from her for the federal stuff.

but I also pay for her internet because she uses it for me most of the time [00:28:00] and I use that as a perk that I, I pay for internet. She sends me an internet bill, I pay for it. Is that a correct deduction that I can take as a business expense because my employee is using that?

Ralph Estep Jr.: Absolutely. And the other thing I would say to that, the other thing, a lot of people mess up, and this is called commingling. And what I mean there is they have a personal account and they have a business account, but they mix the stuff all together. So one of the things I mentioned at the beginning is having that separate bank account.

Just make sure Jeff in that particular case that your business is paying that directly that way There’s no kind of question of well, sometimes I pay for this with a personal card Sometimes I give her cash if the business is paying for it That’s the cleanest way to do it and I think I absolutely agree with you I don’t see that as being an issue whatsoever because she could person she could certainly make the the point of look I need high speed internet because I’m doing I’m doing content.

I’m helping dad with the work that he does and all that sort of thing So absolutely, I think that’s a no brainer

Jeff Sieh: Okay, cool. Yeah, I think, I mean, it did pass the grandma sniff test, like you said, so I thought it was a [00:29:00] good, a good one to use. One of the things that I, I know a lot of content creators, because when we started creating content, it, you know, we don’t just create it for, for me, Longview, Texas. I’m not just creating videos for Longview, Texas.

I’m doing it for the world to see or whatever, whoever wants to see it. So, how does like multi state tax complexities affect creators working with like brands? Like, I’m working with Ecamm. They’re in New Hampshire. I’m here in Texas. Are there any compliance issues that we need to be watching out for or things that as creators that because we’re doing it nationally, not just locally and a lot, I feel like a lot of the laws sometimes feel like they’re just like for old school brick and mortar.

And now we have this huge creator economy and things are kind of. So what do you suggest for people who have to collect taxes? you know, a lot of times sales tax doesn’t happen if you’re doing a consulting gig, but what are, what are your thoughts on the multi state kind of, field that a lot of creators have to deal with?

Ralph Estep Jr.: And this is a huge issue. Ever since the Wayfair [00:30:00] decision, the Supreme Court decided that states are entitled to collect sales taxes or taxes if you do, uh, work in those other states. Here’s the big, here’s the big distinction is do you, I’m using a very fancy technical term called nexus and nexus basically means do you have a presence in that state?

Use me for example, you and I right now having this, this meeting, you’re in Texas, I’m in Delaware. I’m not traveling to Texas. I’m not sitting in Texas. I don’t have an office in Texas. I’m not delivering products to Texas. So as far as Texas is concerned, I don’t have to file a tax return in Texas. That said, I’m Think about if you’re a creator, let’s say you’re going to different spots to film videos or you’re going somewhere to film content.

Well, then you might have that nexus. You know, one of the best examples I can give you is NFL football players. A lot of people don’t know this, but when these NFL football players go in play in other States, they technically have to file taxes in those other States. A lot of people don’t know that

Jeff Sieh: I [00:31:00] didn’t know that.

Ralph Estep Jr.: because they actually have, it’s, it’s called the physical presence test.

If you have a physical, now I got to be honest with you, this is a very big gray area and states are looking for ways to raise revenue. So they’re trying, trying to figure out, it’s kind of like the Amazon

Jeff Sieh: Right. Right. I remember that. Hmm.

Ralph Estep Jr.: it really is that because like in Delaware, we don’t have a sales tax. So if Amazon delivers something to me in Delaware, they don’t have to collect sales tax.

But if I send something to my son who lives in Texas, they collect sales tax on that purchase because Texas has a sales tax. So if you’re a creator, if you’re sitting in your place of creation, I don’t think you have any compliance issues with other states whatsoever. But If you’re one of those people that goes out on a site to film videos or you’re doing some kind of on site thing that that’s going to show that you have a physical presence, I think you might have some compliance issues there.

Now, if you’re selling products, you definitely have an issue. So if you, let’s just say Jeff, that you decide I’m going to sell a [00:32:00] product as part of my, my content creation. You know, not software because again, that’s a whole nother gray area because that, that lives somewhere in cyberspace, but physical stuff.

If you’re sending physical stuff to that, or if you’ve got an office in that other states, you definitely have presence in that state. And that’s when you have to allocate your income between those multiple states.

Jeff Sieh: Right.

And I know,

Ralph Estep Jr.: clear answer. It’s just, it’s not a simple answer because for the most part, I could probably say with some confidence that 90, 95 percent of content creators will never have this issue because they’re generating content that goes out in the inter, you know, internet and all that kind of stuff.

There’s no, there’s no physical presence, but if you’re out doing stuff like on particular sites, then you could have that physical presence.

Jeff Sieh: so let’s say I was a content creator and one of my jobs that I do is I go out and set up Ecamm for people and their studios across the country, right? Like I go to Delaware, I go to Texas. That’s where things can get a little bit tricky is what you’re saying, because I’m going there physically setting [00:33:00] up something.

Depending on the laws, I may have to charge sales tax is what you’re saying.

Ralph Estep Jr.: Well, yes, and that gets complicated too, because one could argue it was de minimis, meaning you were there six hours, or you were there eight hours. I don’t really think the state’s going to say, no, we’re going to go chase after Jeff because we saw he was in Minnesota for six minutes today. No, they’re not going to do that.

But if you are there for a week, or two weeks, or something like that, Jeff, Or you’re, if you’re selling products that they, that are left there once you leave, I think you might have an issue with sales tax or it might have an issue with that physical presence. Now, a lot of people, and again, this is an area of, of huge discussion because even online retailers, there are some, if you do less than 200 sales in that state, or there’s percentages you can use, It is a, is a huge issue and that’s why I have a few clients that are online retailers.

I tell them, get in, get on one of these sites like Shopify or one of those because this, this sales tax compliance could be a whole nother job for you. Like you, you, it’s a big [00:34:00] deal. But again, every state has their own little nuanced rules, but for the most part, it’s If you’re not spending a great deal of time in that other state, I really don’t think you’re going to run into an issue.

Jeff Sieh: One of the questions when you’re talking, I was thinking about like, for a lot of the creators, we sell digital products, right? We sell a course, we sell consulting, we sell whatever. And I know like platforms like Thinkific now are actually, they have the algorithms for, for you and they’ll take, if for some reason you sell one in Europe and you have to pay VAT or whatever it is that they take care of it for you.

Is that what you would suggest for creators who are selling like a lot of digital products that they make sure that they have a system in place that does that for them automatically?

Ralph Estep Jr.: I think that’s a great way to handle it because if not, you, you need a tax department for this, Jeff. I mean, you literally have to have a tax department. Oh, because it’s not just the states. It’s the cities, like going to New York City, now you got, you got New York City tax, you got state tax, like Tennessee is a great [00:35:00] example of this.

Tennessee doesn’t have a state income tax, but some of the big cities like Nashville and all that, they actually have city income taxes or city sales taxes. Now I want to be honest with you, most people view a digital product as delivery from where it’s created. So, but, but here’s the problem with that.

Think about this. Like a lot of us use server farms. Maybe that server farm’s located in Utah or that server farm’s located somewhere else. Do you have a physical presence? There’s gonna be a lot of litigation in this area. States are looking at this like, as this economy gets more into this virtual field, like this whole covid thing brought that out big time.

’cause all of a sudden people are working from home. And the state’s like, well, you know, the, the argument was that I don’t work in that state anymore. I’m working from home. Now I live in Texas or I live in Florida, but the, the, where their business is located was still withholding state tax. So again, it depends.

And that’s one of David Jackson’s great thing about, about podcasting. It depends. And this is where you’ve got to meet with somebody that can understand [00:36:00] your specific issues, because I can’t say with a hundred percent certainty, do this, do that. I can tell you generally. I feel very confident in saying generally, I don’t think most content creators are going to have an issue in this area.

Jeff Sieh: gotcha. But once again, make sure so you can sleep well at night that you have somebody like Ralph in your corner that you can go to and ask these questions, send them an email, get a response. I mean, it’s so, once again, that is what I think we’re going to take away from this conversation. It’s like, find somebody, somebody you like, that you trust, that you can work with and, you know, get this stuff straight so you don’t have to worry about the stress later on.

on this next section, I want to kind of, break it down and talk a little bit more of kind of like the financial management and some business structuring, because, you and I have talked about this a little bit before, but like, what point should a creator consider transitioning from a sole proprietorship to maybe an LLC or an S Corp?

Like, what are the things that, are the benefits of doing that? You kind of mentioned some reducing some tax, you know, burden doing it that way. [00:37:00] So, When should a sole proprietor go and like, like, listen, man, this year I’m going to do an LLC or this year I’m going to do an S corp. What are your, what do you tell clients in those situations?

Ralph Estep Jr.: So here’s, I get this question almost three times a day, not just in the creative thing, but it’s true. I think it comes down to like, what are you expecting? You know, it’s that idea plan with the end in mind. If from a tax perspective, my view is that once you’re showing positive net income of around eight to 10, 000, then that entity is going to pay for itself.

Because they’re structured like that. I work with, with multi member LLCs or subchapter S corporations. That’s really the sweet spot. When you look at what it’s going to cost you to have that, to have an extra tax return done. So I can put a number on that. It’s about eight to 10, 000 in net income. Now what I can’t put a number on, and I’m not an attorney.

I don’t play one on TV. I don’t play one on this show, but liability protection. And a lot of people don’t think about that in the content thing, but I [00:38:00] think this one is huge. And I think a lot of content creators are missing out that they could get sued for libel. They could get sued for all kinds of things.

Well, if you’re operating as a sole proprietor, again, this is not legal advice. This is common sense advice. If you’re operating as a sole proprietor, there is no distinction between your stuff and the business stuff. So Jeff, let’s just use you an example. Let’s say someone sues you and you don’t have that S corporation.

They can take all of your personal assets, anything that you own, any retirement. Again, I’m not an attorney, so don’t listen to me as far as an attorney side. Creating some entity, it’s not going to cost you that much to set it up in the beginning. Make sure it’s done correctly because a lot of people think they set up these on themselves and they don’t.

They’re about what they’re worth is zero, but they set them up themselves. So they think they got something like I’ve had so many clients saying, Hey, I got an EIN number. I’ve got an entity. No, you got an EIN number, but that’s a whole nother discussion. But Jeff, I think there’s really two components to that.

There’s the tax side of that. And I said like the breakeven. It’s around 10, eight to 10, 000, but the [00:39:00] liability, I can’t put a number on that because you get sued one time and you lose everything you’ve worked so hard for. And think about content creators. A lot of people, this is a hobby. This is something they’re doing to, to make a little, I call it the side hustle, a little extra money.

Well, you don’t want your side hustle to turn and taking away your house or, or liquidating all your assets, or you’re having a fire sale because some knuckle head is suing you because you use a bad word and they, they took offense to it or something like that. So Jeff. It, it’s really two components to that.

There’s the, there’s the financial tax side and the liability side.

Jeff Sieh: And we think that, oh, that’s just a hypothetical. No, I’ve had friends that have had those, what are those attorneys that are, you know, ambulance chasers or whatever, go after them because they’re a, there was a big farm and they, they sold products online and they went after them and just doing these lawsuits because they just wanted them to settle.

And it, they did eventually settle, but it cost them 50 grand. Right. You know, just to, and they did nothing wrong, except [00:40:00] they had to get rid of this lawsuit. And so that kind of stuff, what you’re saying, Ralph, I think is

Ralph Estep Jr.: Oh yeah. And there’s this perception that if you’re a content creator, you must have made it. You must be making money big time on YouTube and TikTok. So there’s this, this is, there’s this thought out there that this person must have something. And these, these snake, I’ll call them snakes or snakes in the grass, my grandmother.

These attorneys, they’re out looking for that man. They are just like out for blood and vengeance. And you’re right, Jeff. You could win. Like I had an attorney one time, I had a client sue me because I don’t remember what it was. It was a silly thing. But my attorney said, you’re going to pay me more to represent you.

You’ll win in the end, but you’re going to lose financially. So that’s why it’s so important to have that entity set up. And I’m going to say, Jeff, you didn’t ask me this, but I’m going to be blunt. I think you got to set up the entity right away. I think that’s just a smart thing to do. If you’re planning on doing this to make money.

If you’re doing it for fun, you’re doing it as a sideline, you don’t have any intention to make it money. This is like your, your weekend thing. Maybe you don’t need that entity, but if your goal is, Hey, [00:41:00] this is at some point going to replace income or be my full time job, I think you set that up at the beginning.

You know, start with that strong foundation. I mentioned this to clients all the time. Get a good accountant, get a good attorney, get a good insurance person and make sure you’ve got that building because you know, you live in a house, right Jeff? One of the most important components of your house is the foundation. And if you have a weak foundation, the rain comes and washes out the house. So you want to start with that strong foundation and it’s a crazy metaphor, but it’s true.

Jeff Sieh: It’s

Ralph Estep Jr.: You know, it’s like when we were kids, we had the nursery around and it came and blew the house down. Right? Well, you got to have a strong house, but one of the best ways that content creators can do that is start off with the end in mind and build that infrastructure.

And it might be overkill at first, Hey, listen, I’m talking into a road pod, Mike. When I first started and I had five listeners. I could have used my iPhone to record my audio, but I bought equipment because I saw that at the end, this would be what I needed to have. The cameras, all the technology stuff.

Think about it. How many content creators are [00:42:00] spending thousands of dollars a year on stuff to make their content, but yet they don’t want to spend a grand or 1, 500 to set up that entity the right way and really protect themselves.

Jeff Sieh: And it’s, and Ralph Scarley, because I know a lot of contigrators, we move in those circles, a lot of them are still sole proprietorships. And I, not that I was smart, because I wasn’t. I’ve done a lot of stupid things. But when I started, I, when I first started this company, I had three partners with me.

And so it was just made us, it made sense for us. to protect ourselves. Cause it wasn’t so much about like, you know, I was thinking ahead. I just didn’t want somebody to take my house. That was it. Like I, what you had said earlier was, you know, the protection. That’s the only reason I did it, because I knew I could screw up really easily and I didn’t want it to all go away.

So if you’re a content creator and you’re still a sole proprietorship, You know, talk to somebody. Talk to Ralph, whatever. It’s not that hard to get to an LLC, and it’s not that even that hard to [00:43:00] get to an S Corp. So, talk to them. Protect yourself, because, you know, with the way the world’s going, you never know what’s going to happen.

In fact, that farm I was talking about before, It was because it was something about, it was, compliance on their website. Like they didn’t have like text readers on their images and they went after them to sue and it was 50, 000 at the end of it. Like that’s nuts. So

Ralph Estep Jr.: And they’re nuisance lawsuits. They’re nuisance lawsuits, but attorneys making money. You’re spending money because you’re hiring an attorney. It’s like a divorce. The only person that makes money and makes out in a divorce are the attorneys.

It’s the same thing here. So, and listen, I just want to make clear about something.

Having an entity isn’t going to necessarily keep you out of hot water, but it’s a hurdle. It’s what we call this, this corporate veil. It creates a separation between the business and you personally. It’s just like a fence, right? If somebody wants to hop the fence, they’re going to hop the fence. I remember as a kid, my ball went into somebody’s yard.

Guess what we did? We hopped the fence. Not me, because I was too fat. I was the fat kid. Somebody else is going to hop the fence. [00:44:00] Not me. But you understand what I’m saying, Jeff, is it’s at least an obstacle.

Jeff Sieh: To me, it was like insurance. Like you had mentioned it, you know, before. It’s just to me, it was just, just like you have, you have to have liability insurance for your car. To me, having a business, it was just liability. Like it just covered my butt in case something bad happened or I did something stupid.

Ralph Estep Jr.: And people don’t, it’s another one you should mention is insurance. People don’t realize how cheap insurance is. Insurance is not expensive.

Jeff Sieh: right.

Ralph Estep Jr.: But it’s that peace of mind. It’s that I put my head, one of the things I said when I went into practice for myself, I want to put my head on the pillow at night and I don’t want to worry about that knock at a door.

I don’t worry about what ifs. So again, I think we probably belabored this a little bit, Jeff, but if you’re listening to this and you don’t have an entity set up, Find someone who can help you set that up, make sure they do it right, but do it. It is a investment in yourself and it will pay dividends for the rest of your career.

Jeff Sieh: Yes. So if you haven’t taken one thing away from this, here is, go out and set up your, uh, your entity for your, for your business because you deserve it. So [00:45:00] let’s go back to something you said earlier One of the things that you see a lot, and I actually did this not well when I first started, but how creators can kind of implement some ideas for separate personal and business finances.

What’s the best way to keep those clean? I mean, it’s really easy now. With everything being electronic, I can pull up my phone and I can see it’s categorized what I spent stuff on. So it makes it easier than when back in the day when we were having receipts and trying like, where did this Walmart receipt go?

Was that business or not? Now we can kind of have a little bit more, uh, kind of an easy, easier way of tracking that, but what are some other ways that we can keep it separate between business and personal?

Ralph Estep Jr.: I think the big thing to do is have separate accounts. Have a separate bank account for the business. Have a separate credit card for the business. Here’s one a lot of people don’t think about, have a separate amazon.com account because a lot of people buy a lot of stuff on Amazon. What’s real easy to co mingle that stuff.

You know, your, wife might need toilet paper for refilling and [00:46:00] you need some content creation gear. Well, if you have separate accounts, it’s much easier to delineate those things. Just try to keep them separate. I think it’s a song. Got to keep them separated. Right? That’s what we need to do though.

And it’s not that hard. And you’re going to laugh about this, Jeff. I got one client, he’s a plumber, right? And he does not understand this difference. Right? So finally came in one day and I said, all right, you’ve got a business checking account and you’ve got a personal checking account. Ralph, he says, I even got debit cards for both of them.

I said, give them to me. And I wrote B in big black marker on his business. I said, this is your B card. If you’re spending business, use your B card. And I said, this one is your P card. This is your personal account. Now he still manages to foul it up because, Oh, I forgot the B card you understand what I’m saying, Jeff, but to keep those things separate because here’s the benefit.

If you are ever audited, I can say to the IRS agent, Hey, subpoena the client’s records, subpoena their business checking account, subpoena their personal checking account, subpoena their personal credit cards [00:47:00] and their business credit cards. And if you’re doing it right, the IRS agent goes, This one’s got their stuff together, nothing to see here, moving right along.

But if you don’t do that, and I’ve seen this play out, Jeff, IRS agent comes in and says, Oh, well you have all these Amazon charges. Let’s open up your Amazon account. Oh, so you bought curtains today. I don’t think that was for your business. Oh, you bought this, you bought that. But if you have it separated.

It just, it will take away that nightmare scenario of that audit, because like I said, it’s like pulling a slot machine, dude. If you land on all sevens across, you’re in trouble, but keep it separate. It’s not complicated. Keep it simple, stupid. Like, you know, that’s one of the things that keep it simple, keep it separate.

Jeff Sieh: and it’s easier now than ever to do that with these tools. Yeah, so it’s, it’s, it’s not like, oh, you know, I don’t know, I think I only write checks to my barber and I don’t do that very much anyway. So, I think it’s a lot easier now to do all that. One

other

Ralph Estep Jr.: like we’re carrying around stone tablets with chisels and we’re like, okay, this is a business. I better [00:48:00] chisel out the receipt for this one. You’re right. It’s

Jeff Sieh: even teach balance and checkbooks anymore in school?

Because I mean, I

Ralph Estep Jr.: Oh, you know, it’s funny you say that. Like I, I used to run a credit union right in my, in my prior life and um, I, it’s a funny story.

Members would come in and they’d say, I would say to them, your account’s overdrawn. They said, I can’t be overdrawn. I still have checks.

Jeff Sieh: Yeah,

Ralph Estep Jr.: Nobody balances their checking account anymore. They log into their app and they go, Oh, the bank says I have 200. Guess what? I’ve got 200.

Jeff Sieh: right. It’s so much easier. So no,

that’s what, so we’ve talked a lot about, you know, going, and finding somebody like if you need to set up an entity, if you, you know, need help and not waiting until the end of the year. So how can collaborating with a CPA familiar with the creator economy enhance a creator’s financial health and compliance?

Like what are, when it’s, when a creator goes to a CPA, like what should they be looking for?

Ralph Estep Jr.: You want to look for somebody that understands your industry. Like one of the cool things, and you’re going to laugh about this one, Jeff, now, cause I do this content creation until a couple of days [00:49:00] ago. I basically, people come into my office. I had a teleprompter here and a road pod mic here. And they’re looking at me like, Ralph, are you running a radio station or a TV station?

Are you an accountant? You want to find somebody that understands the industry you’re in. You know, I’m a public accountant in Dell. We have CPAs and public accountants just went on little nuanced things, but you want to find somebody, not just the credentials. Credentials are important. I just did a show about this.

You know, reviews and ratings are important, but find somebody that understands your industry because every industry is nuanced. Like, for example, like I don’t do a lot of foreign tax returns. It’s not something I have any interest in, but now I do a lot more content creators because content creators go, Oh, he’s got a daily show.

He understands what I’m going through. He’s He, he knows how to talk the jargon. So you want to find somebody that lives in your world because those are the people that are going to have better ideas and they’re going to understand when you come in there and say, well, I just wrote, bought a, a, a, a Rodecaster or such and such, and they’re Oh, I know what that is.

You know, that, that’s a, that’s equipment that they’re going to use. Or, you know, I subscribed to beautiful AI or I use [00:50:00] Captivate or I use Ecamm. We’re going to know what that is. And there’s a lot of accountants that have, have niched down now to the point of where they’re working with particular types of clients.

And I think that’s, that’s a legitimate question to ask when you reach out to a potential professional and say, Hey, do you understand rental properties? Do you understand accounting for, I don’t know what it is, multi state stuff? There’s a dozen things. used to be just, Oh, I’m going to go see the local accountant.

He’s going to handle it. But, you know, the thing is with zoom, it’s really opened up a lot of doors too, because I have clients all over the world. I mean, I had a, I had a conference call this morning with somebody in Uzbekistan. I mean, I don’t even know where that is, but like I’m doing a zoom call with them, but, but because it’s open up, because they know that I have the credibility that this is what I do.

They’re a content creator. They, they were starting to do stuff in that realm. So they wanted to work with me, but Jeff, that is crucial. You know, understand their credentials, work with somebody that has a credential, work with somebody that has a license, you know, not somebody that does H& R block. They take a three week tax course and say, Hey, you’re approved.

Now, bad plan, right? So, and make [00:51:00] sure you look at their ratings and reviews just like you would do anything else. You know, it amazes me how many people go to professionals but never verify their license.

Jeff Sieh: Oh, yeah.

Ralph Estep Jr.: It’s a huge thing in most States, like the Delaware has a board of accountancy. Like you can go, you can go look me up.

And it’ll say, you know, Ralph has been in practice for X number of years. He’s had no disciplinary actions. That’s important too. But, but I think to understand what their nuances, what they understand, what they work in is crucial because you don’t want to go to somebody that doesn’t understand your industry.

It’s not going to be a good fit. They’re not going to be able to help you.

Jeff Sieh: Yeah. I agree. Very important. So, Ralph mentioned a couple times, I want to do another big shout out to our friends over at Ecamm. You can find out more about them at ecamm. com forward slash Jeff. Save 15 percent on your first purchase by using code JEFF15. Thank you for those folks over there for sponsoring the show.

They have a great community. And I know Ralph uses their product as well. as we move on to our final section, I want to talk about some You know, the last, you know, entrepreneurs have, you know, we [00:52:00] don’t really think maybe five years if we’re lucky, but I would love to know what your thoughts are on like, when we talk about long term planning, like what percentage of income should creators start allocating towards like Reinvestment in their business versus personal income and savings. So, cause, for me, and I’m kind of weird, but I, I will invest a lot in my business and like not so much the other way, which is not right either. Is there like a, a formula that you give your clients? What, what are your thoughts on, you know, what should they invest in business versus personal income and savings?

Ralph Estep Jr.: So the first thing I’m going to say as a Christian guy, I have a little different approach to this. I actually believe you to start by paying yourself first. And I would be putting at least 20 percent away for retirement. And a lot of people say, Ralph, like, how do I do that? Just make it work. That’s what I would say.

Pay yourself first by, you know, meeting your needs, meeting your wants, but then put money into that Retirement, that long term strategy, because the thing is a lot of [00:53:00] people don’t understand this. A lot of content creators definitely miss the mark on this because they’re working for themselves. They’re robbing Peter to pay Paul.

They’re just barely squeaking by. Well, they don’t have that traditional nine to five job with the 401k or, or some kind of benefit plan. So, and the next thing you know, they turn 35, then they turn 45 and then they turn 50 and they’re like, Oh, I don’t put anything away for retirement. So Jeff, I would say, first thing to do is plow money into that.

I would say, try to target 15 or 20 percent to put away for later. As far as reinvesting your business, if you want your business to grow, you’re going to have to put money back into it. And, you know, if you think you’re going to come to the business, you’re going to spend every dollar you make, you’re going to be out of business pretty quick.

Because the truth is technology changes, you’ve got to make those reinvestments in your business. But I just have a little different approach. Like, I’m a believer that you should be a tither. I believe that you should, let me just say this right now, it’s like, I’m a believer that what you have isn’t yours.

And that’s sort of a, that’s a, a contrary to the world, but this is just who Ralph is and you need to [00:54:00] understand if you’re going to work with me what I’m talking about. What I mean by that is you have an obligation to steward what you’ve been given. God has granted you certain things. He’s given you success.

Yes, you’ve worked for it. And one of the things I heard the other day is really funny. The Bible talks about, it talks about that God doesn’t, you know, that the birds figure out where to eat because God provides for them. But here’s the thing. They have to leave the nest. Well, you’ve got to do the same thing.

God is expecting you to steward your resources and that’s what you’re talking about when you mentioned longterm planning, which ties into exactly what I’m talking about this. You’ve got to be thinking about what am I going to do when I turn 60 when I turn 65 and that’s not really what you were talking about right then, but it’s all part of that.

It’s having that intentional spending plan from the very start. Pay yourself first. But yeah, you got to reinvest in your business. You know, if you think, Hey, there’s, there’s 2, 000 in my chain account bonus, we’re going on vacation this week. Well, first of all, have you put aside anything for taxes? Have you put anything aside because your debts are going through the roof because you put everything on credit cards?

And that’s [00:55:00] the problem. And see, that’s what I see a lot of people in this side hustle or the gig economy. They don’t think about that. And then listen, I started late myself. I just turned 52 in September and my wife had been on me for 10 years. She’s like, when are we going to start saving for retirement?

When are we going to save for retirement? And I said, ah, yeah, it’s for old people. I mean, but, but the thing is like, and then I have Jeff, but I have other clients that started at 20, 25. Like my son’s in the Coast Guard. He’s 27. Right. And this boy has more money saved than I do. Because he’s a frugal dude to begin with, like he doesn’t spend like, I had to send his wife a heating blanket because he won’t turn the heat on in the house. And I was like, my poor daughter in law, I was like, you know, here’s a heating blanket. But anyway, that said, he started off early. And I think if you can build that momentum, and I’m not saying save hundreds of thousands of dollars, but if it’s 10 bucks a week. Or 20 bucks a week. Start there because it builds that momentum.

So that long term strategy has to be, what am I going to invest in myself? What am I going to put back [00:56:00] into the business? Because your business isn’t going to grow if you just think, Hey, if I build it, they’ll come. They’re not going to come. You’re going to have to do things to grow. I’ve learned that in the podcasting thing.

Like I started my podcast really back in earnest in November and like the first couple months, I’m like, Hey, I got a great content. People are going to flock to me. Well, guess what? They didn’t. And I had to start paying for advertising. I had to pay for equipment. I had to pay to, you know, to get myself out there and get involved in trade organizations and all that kind of stuff.

That’s all part of what you’re talking about. It’s that long term investment in your future. And at some point you would hope that that would pay dividends, but Jeff, the big picture. Don’t spend every dollar you’re making, plan for the future.

Jeff Sieh: That’s so good, Ralph. One of the, you mentioned 401ks, and you know, a lot of times creators, if you’re doing it for yourself, um, you don’t have that. Because, you know, and it amazes me, like, when people work for companies, they don’t use the 401ks, because to me it’s just free money. Like, what are you doing?

especially the matching programs, [00:57:00] and I mean,

Ralph Estep Jr.: Jeff, it’s like this, picture this, I’mma, I’mma, I’mma throw this at you cause I, I used this in my show the other day. It’s like you’re walking down the sidewalk, right? And there’s a hundred dollar bill on the sidewalk and you just step over it.

Jeff Sieh: Right.

Ralph Estep Jr.: you’re like, I’m not going to lean over and pick up the hundred dollar bill even though it’s sitting there.

No one’s looking at me like it’s not candid camera, take the hundred and run. But that’s exactly what you’re talking about, Jeff.

Jeff Sieh: Yeah. So is there a way for people who have an LLC or, I know it’s, it’s, you can’t for the, probably self employed, but, what are some options that could we start our own 401k

Ralph Estep Jr.: you could absolutely. It’s called a self employed pension or a SEP plan. And you could basically, and you don’t even have to be incorporated or have an LLC to do this. You could set it up with your broker and you can put up to 25 percent of your net income into that SEP plan. Now it depends on certain circumstances.

There’s caps on that, but yeah, I mean, you could, you can also do a solo 401k. You can do a, an I, Hey, at the very minimum, Jeff, You can put 7, 000 right now into a simple IRA. Hey, [00:58:00] 7, 000 isn’t chump change. And if you put that 7 set seven here, here’s a little thing I heard the other day. If you started age 25 and you put a hundred dollars a month into retirement, by the time you reach 65, you’ll have 150, 000. Start small. Maybe it’s 7, 000. Maybe you can do a simple IRA. All these things are, people don’t realize this. It’s not that complicated. There are places online now that you can go on and set up health savings accounts for yourself. Like I just set one up for myself. And it’s not a big savings thing, but no, there’s no obstacles to that.

Jeff, there’s no, people get, people get confused by that, but you can set those up no matter where you are. And it’s so important to do it because two reasons you’re building retirement and you’re cutting back on a tax burden in the current year. Like I tell people, think about, we talked about the beginning about tax burden, right?

Well, for every dollar you put aside, let’s say you’re in that 30 percent tax bracket, to put aside a dollar, it’s only costing you 70 cents. You got a 30 percent [00:59:00] return on your investment at the start. I don’t know of a single bank account in my town or yours that’s paying a 30 percent interest rate, but that’s the value of that retirement plan.

It, and people just miss that because they’re just chasing after the next dollar. They don’t think about that long term strategy.

Jeff Sieh: So I love all this because I think it’s it’s stuff that I wish I would have heard When I first started and you and I are actually the same age. I didn’t know that but that’s really cool so how important is it? So we talked about you know savings account for our retirement But what about an emergency fund for creators?

Because, you know, create Job is one thing, but like creator stuff, it can be a wild rollercoaster, especially when you’re first getting started, trying to get clients, trying to get content out there. So, emergency fund, what guidelines should you do you suggest for building one and starting one and getting one kind of rolling?

Mm

Ralph Estep Jr.: So this will shock a lot of people, but my overall, my overall plan is to have three to six months worth of income in an emergency fund. You might be [01:00:00] going, Ralph, you’ve lost your mind. Three to six months of income. And I’m not expecting you to start that today, Jeff, but you can start it next week.

Maybe you put 2 a day into it. Maybe you put 5 a day into it. Emergency fund is huge because we talked about this a little while ago. Stuff happens. It happens. You don’t want to be tapping that credit card. You don’t want to be taking money out of, maybe you had a former job and something happened. You got to take money out of your retirement.

That emergency fund is there to help save you. And that’s why I’m such a big, I stress that savings. As part of that savings, part of that’s going to be that liquid emergency fund because here’s the dirty little secret, 67 of the population right now has no retirement savings set aside. Zero. If you talk about the emergency funds, it’s even scarier.

People don’t have 200 in their emergency fund. You know, I remember when my kids were younger, 23 and 27 now, but let’s say they got sick and then you went to the pharmacy and they needed [01:01:00] this antibiotic, it’s 200 bucks. Most people don’t have that in their pocket. So that’s where that emergency fund comes in.

And I think that triggers so much financial hardship, those people that don’t have that emergency fund, because then what do you do? You got to pay for it, right? It’s a need. So you put it on the credit card or you borrow from this one, you do this with that one. And so the emergency, fund I can’t stress that enough.

In fact, I’m going to tell you if you’re a new content creator, I think you should be building your emergency fund before you buy any wants Focus on your needs, buy the needs, but then build that emergency fund. If your side gig or your content creation is bringing you 2,000 a month, buy it now. Then save 12,000 of that before you start spending it.

And like I said, it doesn’t have to happen overnight, but build that momentum. Because what’ll happen, this is just the psychology of people. Once you start to build, you’ll be like, Oh, this account’s growing. And then it’ll, build on itself. But so many people just miss that, Jeff. And trust me, I see this.

I see people in their seventies living [01:02:00] paycheck to paycheck.

They have no savings and it’s a sad thing. It just is.

And it’s going to grow as the, as the population ages. Yeah, absolutely.

Jeff Sieh: what would you suggest? And this is the last question, Ralph, is that, what would they, what should they put that emergency fund in? Cause I’m assuming it needs to be pretty liquid that they can get it out quickly if they need to.

Would it be just a savings account or do you put it in something that gives you a little more interest? What are your thoughts?

Ralph Estep Jr.: No, I think that a savings account is fine. Here’s what I’m going to tell you to do. Put it in a place that’s not easy to get to.

Jeff Sieh: Okay.

Ralph Estep Jr.: You don’t want to have it in a shoebox in the top of your closet. Not a good plan.

Jeff Sieh: right,

Ralph Estep Jr.: And I wouldn’t even put it in the same bank that you deal with. Make it painful to have to go get the money out because you don’t want that emergency fund to be like, Oh, you know what?

I see Shure just released a new microphone. I could really use that microphone and I’ve got the money in my emergency account and I can just transfer it. No, that’s not what the point of the emergency fund is. And I use that as a content creator inside one, right? But the truth of the matter is, make it complicated to go get it.

I don’t really care about the return on it, Jeff, because [01:03:00] this is really liquid money. That’s not what I’m telling you to put your retirement money, but that emergency fund, make it somewhat complicated to get. Like, I wouldn’t have a debit card for it. Like, make it so that you’ve got to get in the car and go to the credit unit.

I’m a big credit union person, or go to the bank, whatever that looks like. Make it complicated. Or here’s another one you could do. Like my, my youngest son, he’s not good at saving money. I’m not telling stories out of school. He gives it to his mom because he knows mom is going to say to him, what are you using this money for?

Now at times she’s like, I’m not going to argue with him. Create those obstacles for yourself, Jeff, because, and again, it doesn’t have to be thousands of dollars overnight. Start small, but grow it. But make it complicated so it’s not that, well, you know, I really do like that Shure mic or, Oh, you know, Rho just came out with the best headphones in the world.

I could really use those. That’s not what your emergency fund is for.

Jeff Sieh: And there’s some cool new apps that like I’ve used, um, before, like Acorns is a great one, I think, because it’ll take, it’ll round up your purchases and put it in a [01:04:00] savings account. And it, for me, there’s even a retirement account it goes into. So I like that because I don’t think about it. It automatically did this, deducts it.

And then I’m surprised when I just, oh yeah, I have an Acorns account and I go log in. I’m like, oh wow, that’s some good money for retirement. That’s cool. So things like that I think are really, really cool.

Ralph Estep Jr.: I did that a few years ago, Jeff, even my own practice, because I wasn’t a good saver. Like I came from a place where my wife is the saver, I’m the spender, man, I’m an impulse buyer. So when I first started my own practice, I said, you know what I’m going to do? I did direct deposit for myself and I just took 50 per pay and I put it in an online bank. And just, it just goes there. I don’t even think about it. The other day, I wouldn’t be saving. I’m like, wow, I got vacation money.

You know, like I was like, this is cool. But again, it’s not easy to get to. It’s a way, if I have a big problem that, that I need to get a quick cash to, then I can go use that. But I make it complicated.

Jeff Sieh: Yeah.

Ralph Estep Jr.: Like they sent me a debit card. I put it in the shredder.

Jeff Sieh: that’s right. They did. Acorn said that too. I threw

it away. Well, Ralph, this has been [01:05:00] amazing. once again, folks, I hope you see and hear how much value Ralph brings to you. If you, if you are a content creator, I would just go ahead and subscribe to his podcast and go to his YouTube channel.

I mean, cause there’s, there’s topics that he says that just, oh yeah, I need to do that. I need to set up an emergency fund. Oh, I need to, he’s talking about a tool that helps me with retirement. I need to do that. So. He has a wealth of information that he puts out for free all the time. He’s got books, so make sure you go to AskRalph.

com to check out Ralph. Ralph, I’m going to let you, have the final say because this has been a fabulous conversation. Thank you for your transparency. Your values from, uh, Christian Financial Stewardship, I think is, is, amazing, and it’s very refreshing to see that. So. The floor is yours, my friend.

Ralph Estep Jr.: Jeff, I’m going to leave with this now. If you’re struggling with your finances, if you’re trying to figure out, Ralph, I’m really good at content creation, but man, this, this financial stuff, it just sends me into a tizzy. Book a call with me. Just go to [01:06:00] askralph. com. At the top of the screen, you’ll see a button that says book a call with Ralph.

Spend a little money. We’ll do a consultation. We’ll sit down. We’ll assess where you are. I’m not a judgment guy. We’re going to put it on paper. We’re going to see where you are. We’re going to set together, put together a plan for your future. And just let me come walk alongside you in this journey, because this is what it works.

We’re all on a journey. I’m no better than you. I’m just going to show you what the, the Lord has given me tools. The Lord has given me some, some things that I know how to work with. Let me be your partner in that. And it all starts by reaching out to me. We’ll set up that initial call. And like I said, it doesn’t matter where you are.

It’s like, you’re sitting right in front of me through zoom. Just go to AskRalph. com and book that call. And again, subscribe to the show. I do daily content. I’m actually writing my third book right now. It’s at the editor. The first book is called Mastering Your Finance. It’s the second book is called the Gospel of Entrepreneurship, where I discuss how to bring Christ into your business and why that’s so important.

And the third book is all about seven biblical principles [01:07:00] to, to stop and break that living paycheck to paycheck cycle. So again, just reach out to me. I’m one of these people that returns calls. I return emails and I would absolutely love to hear you. And I’m going to throw one more thing out there, Jeff.

go to askralphpodcast. com slash live every Tuesday at 1 p. m. Eastern time. You can come and ask your questions for free. Just show up, go right into the chat window, and I 30 years of experience. Absolutely free because I want you to really be successful and I would love to have you as a part of my community.

So again, Jeff, thank you so much for giving me this opportunity.

Jeff Sieh: It’s great. And I, and he does answer those questions because I’ve gone to this live show before and ask him and he does answer them. So once again, thank you guys so much for watching, this, uh, episode and, and go reach out to Ralph because it really is very, very, very, awesome. And it’s opened my eyes from a guy who hates financial stuff.

Ralph has helped me become more confident and given me some answers to some of my burning financial questions. So highly recommend. Thank you, Ralph, so much. Thank you guys for watching. We [01:08:00] appreciate you. We will see you guys next time. Bye everybody.