The Creator Money Mistakes Holding You Back

Speaker A00:00:00

You're losing money from mistakes you don't even know you're making. I'm a creator. A creator on fire. Hi, I'm Ralph Estep Jr. And I've done this for 30 years. I'm known as the content creators accountant.In this video, we're going to learn the three mistakes you're making. But bigger than that, I'm going to share the systems to fix this starting today. So now let's talk about mistakes.Mistake number one, my income isn't real yet. I've heard that so many times working with content creators. And on its face, this mistake seems harmless. But it's expensive.Because when you think it's not real, you treat it casually. You spend it too fast, you don't track it, and you certainly don't set aside tax money. But here's the truth. Your money doesn't care how it arrives.If it hits your account, guess what? It's real income. And the problem with creators is we don't have one paycheck. We've got what I like to call a payout map.Here's what real looks like for creators. You've got payout platforms like YouTube, TikTok, AdSense, affiliates.You've got sponsors and brand deals, subscriptions and memberships, tips and donations. And then put on top of that, digital products. Hear me right now, if you're not tracking these by stream, you're guessing. And guessing creates chaos.I'll never forget, I work with a YouTuber. This YouTuber was making $3,500 a month, but it came in pieces.Like $1200 came from AdSense every month, $900 from sponsors, another 800 from affiliate income. That's a whole nother discussion with just random spikes. It was kind of like a roller coaster ride.And they kept saying to me as we were doing our consultation call, Ralph, my income's just not stable yet. And I could tell that because they treated like bonus money. They were getting money in and it was time to buy new gear.And listen, I love to buy new gear, I get it. But it was a bonus money. Just like they would add more subscriptions.I've talked about subscriptions on here, what I call the death by a thousand cuts. But when you've got money flowing in like that, you don't think about those. Because we can all find these, can't we? Just more spending in general.But here's the problem. Tax season hit and then the panic hit. Why? Because they had zero visibility. They had nothing set aside. They have any clean numbers?Let's put some numbers to paper here. Go back to that example.If you average $3,500 a month, and I'm going to do the math for you, that's $42,000 a year, that's a pretty decent amount of income coming in. And if you don't set aside taxes, you're going to get hit with a bill and a bill is going to feel like betrayal. Wasn't expecting it.But here's the thing, it's not betrayal, it's just Matthew didn't see coming. So here's a core point as we move into this mistake. Stability doesn't come first.I was on a show the other day, somebody said to me, Ralph, as a content creator, when do I need to build my money systems? I said, the day before you start content creating. And he was kind of taken back by that. But you've got to build that structure first.If you say, wait, this isn't real yet, I haven't grown to this yet, you're going to get yourself in trouble. You need that visibility from the front. So that's the first mistake. Let's look at mistake number two, which leads me right into where we were going.I hear this one all the time, Ralph, I'll build systems when I make more. You might have said that yourself. You might be thinking, Ralph, that's exactly where I am right at this moment.But this one's dangerous too, because what I have found, and I've been doing this for a while, not just working with content creators, with business people in general. 30 years. More money doesn't reduce chaos. A lot of people think, well, if I make more money, I'll build a system, everything will work out.But here's the truth. More money multiplies problems. I've seen this so many times because here's what more money really means. More income means you got more tools.Oh, I've got a fancy camera now, got a nice studio set up, I've got some subscriptions. More income might mean more contractors.Maybe you've got a team of people working for you now or you're outsourcing to VAs or some sort of digital assistance. More income means more write offs. Guess what? We got more to track because you've got more money going out the door. More receipts.Again, we've talked about that on the show before. More income, more expenses, more receipts.If you're going to diversify, as we talked about a minute ago, you're going to have more platforms, you're going to have the tiktoks and the Patreons and the Instagrams and all those other things. And guess what? As your income grows, your tax exposure grows as well.And if you don't have systems now from the beginning, that growth is going to feel like anxiety every single day. But I don't want to just leave you there. I want to give you a simple way to beat this mistake. Right now.Right here is where it's really what I call the three account creator setup. And it's super simple. Listen, you don't have to have a master's degree in accounting like I have. Just real simple.You need one account where all of your income goes to, no matter the platform, whatever the platform is, if it's coaching, digital products, AdSense platform income, it all goes to one account. That's the first thing. Second thing, you have a separate account for taxes. As soon as that money comes in. We've talked about this on the show before.You move that income, that tax piece out, and then you're left with one account for your operating expenses. Not your personal account, not this other account, one operating expense account. Now that sounds simple, doesn't it?But here's the uncomfortable part. Most creators do that, but they still mess it up. Why? Because the system isn't just account. See, that's the thing.I kind of misled you a little bit there, didn't I? I said, well, it's so simple. Just set up three accounts. That's the basis of it. That's the foundation.When you build a house, you start with a strong foundation. So start there. But here's the other part of that that a lot of people miss. It's the rules. You gotta have rules.Because those rules, of course, though they depend on your reality on the ground. I can't give you here's the reality for. Here's the rules for everybody. Because it depends on what state you operate on.It depends on what kind of entity are you. Are you a sole proprietorship, Are you an llc? Are you an S corporation? And honestly, it depends on your income type as well.Those rules need to be built once the foundation is settled. Consider this. If you had a brand deal pay you personally, that's different than it being paid to your business.There's something wrong with that system there. If you pay a contractor through PayPal that needs a process, is your PayPal connected to your business or it's connected to your personal stuff?Gear purchases have timing rules. There are IRS requirements about when you can write those things off. Home office has rules. We talked about that. On the show a couple weeks ago.There are certain things you have to meet, and if you didn't, if you missed that show, I encourage you to go check it out. But there's certain rules with that. Mileage has rules.If you want to take a deduction for automobile mileage, and this is why that I'll do it later, turns into chaos. Because here's the problem.If you're waiting for later, the rules that needed to apply all along when you were making those purchases, when you were tracking that mileage, when you were looking at that home office, doing it later means you got to go back and try to figure it out. Well, that's chaos. I remember I worked with a podcaster, had a great month. I'm talking about a really good month. Two brand deals.He was a coach, he had a coaching officer, and guess what? He had an affiliate spike. You know, affiliates are interesting type of income, but he had an affiliate spike.So he had money hitting Stripe, he had money hitting PayPal, and then that client paid him by ACH. And I remember him saying to me, he said, Ralph, I'm finally making it. But then he said something that just struck me.He said, I have no idea what to do now. He really didn't. He had no idea because he learned a valuable lesson.Yes, he got to success, but that success created complexity because now all of a sudden, yes, he had more income, he had more complexity, but he didn't have any peace because he hadn't built that system. And here's what he realized. See, all along, he thought it was going to be motivation. They didn't need motivation.What he needed was someone to say, here's the system you need to put in place. Here's the rules, here's the order. Here's what matters first. See, because that's the difference we're talking about today.It's a difference between growth and overwhelm. Which leads me to another core point. Systems aren't a reward for your success. Systems are what makes success survivable.If you don't have systems created, and I'm speaking to you right now, if you don't have systems created from the start, you're not going to be successful in the long term. That's some tough love. But it's true. I've seen it for 30 years in my career. The people who are successful have systems.You got to build those systems. Let's move on to mistake number three. This is probably the most sinister of them all. It's what I call the whopper of Mistakes.And that's the belief that other creators have it figured out. They got it all figured in. Maybe you're thinking that right now. I look at these other people, Ralph, they got it all figured out.The problem is that mistake quietly drains you because you're living in this comparison which creates panic. And when you live in panic, I deal with money decisions every day.When you live in panic, most people make bad money decisions because they're operating from a place of fear. They're operating from a place of no visibility, they're operating from a place of not knowing what's going on.And then they get into that comparison trap and they see other creators who are upgrading. Maybe they're checking out other shows and a wow, look at the background that guy has. Or look at the set this lady has.They're upgrading stuff, they're hiring editors, they're traveling, they're posting their wins all over social media. And listen, that's great. I encourage creators when they have those wins. But if we're on the other side of that, we're assuming something.We're assuming, oh, they figured it out, they're ahead of us. And if they figured it out and they're ahead of us, they have those wins. Where are we? We're behind. And it's so easy to feel that way.Listen, I've been doing content creation work for a couple years now. This is a reality for me all the time. I'll see somebody out there and I'm like, oh, they're killing it. And it makes me think, well, I'm behind.But here's the problem that social media doesn't show you. They don't tell you that this person's got a tax debt.They don't tell you that the IRS or the state taxing authorities are coming after this person because guess what? They never built the system Ralph talked about to set aside that money.Social media doesn't tell you that they've got credit card debt at the wazoo and they can't even meet the minimum payments. Well, sure, they've got fancy gear, they've got attractive sets, they've got editors and assistants, and they're blowing it up all over the place.But man, they're not making any good financial decisions. Social media doesn't tell you that they're missing their quarterly tax estimates that they're going to get themselves in trouble.Social media doesn't tell them or tell you that they've got messy books that are a mess. If they ever get audited, they're going to be in trouble. They don't have any idea what's really going on with their business.They can't answer the simple questions like you and I talk about, how did you make out last month? Not what you made, but what you actually were able to keep. And social media doesn't tell you they haven't reconciled their books in two years.See, it looks good from the outside. You're like, oh, they're killing it, Ralph. They're making it. They're doing it. But really, are they? Because here's the problem, here's the truth.Most creators who look ahead, and this is what we're going to lean into for a minute here, most of the creators who look ahead have just one thing that you don't have, and that's what I call a monthly close. So this is a big practical takeaway right now. And it's a boring phrase, but it's a powerful phrase because here's the secret.I really want to spend a minute talking about this monthly close. A monthly close is super important if you're going to build a system for success.And it looks like that when you do a monthly close, number one thing you're going to do is you're going to match your payouts to your deposits. We've talked about this on the show before. What the platform says that you made is not necessarily what hits your bank account.So we got to start there. We got to match your payouts to your deposits. Second thing we've got to do as part of this monthly close is.Is we've got to reconcile our accounts, We've got to track things, We've got to make sure things are done correctly. Make sure that what the bank says you have is what you say you have. Because there are mistakes made on these platforms.Things don't get posted correctly. As part of your monthly close, you got to categorize expenses. You got to go make sure you're putting things into the proper buckets.We talked about that on the show before. If you've got one big bucket of miscellaneous expenses, how do you know what's working? How do you know what's being impactful?How do you know what's being efficient? Here's another thing. As part of your monthly close, track those open brand invoices.If you're invoicing brands for your show, for your content, are they paying you? You'd be shocked how many content creators I've asked that question. They'll say, well, you know what?I haven't got around to doing my invoices lately, or maybe they have invoiced but they couldn't tell you who owes them money. Still, that's all part of that, that money monthly close, you got to update your tax set aside because maybe you are killing it.Maybe the income is going up, maybe it's rocket shipping and what you thought you were setting aside isn't going to be enough. And you finally got to do that review, that profit snapshot every month. That monthly close is super important.Now I know we've got a little bit into the accounting ease of this, but listen, as a content creator, you've got to do these things or dare you hire somebody. And I'll talk to you a little bit in a minute about how you can actually hire me or somebody else to do that for you.But if you don't do these things, you're operating blind. And that's really where you're operating. You're operating blind.And the problem is when you operate blind, at least me, your brain fills in the gaps with fear because you constantly live in this fear of, well, what if I make a mistake? What if I haven't measured this right? What if I didn't set enough aside for taxes? What if people don't pay me? What if I don't have receipts for this?What if I get audit? We can go down a whole list of what ifs. So here's my core point right now. You don't need to catch up, you just need visibility.So those are the three main mistakes that I see content creators making. They don't even know they're making. So here's the path forward.Because listen, I could give you the mistakes and I could just stop right there and say, well, if you want to fix them, call me. But I'm going to actually tell you how to create a path forward. First step, make your payout map.Like I said, with content creators you don't have the luxury of a weekly or a bi weekly paycheck. You've got income streams coming from 15 different directions every single day.So number one thing, write down every stream flowcharted if you have to. I got money coming from here. I got money coming from here. I've got money coming from here. You get the idea.Every single platform, every place that money lands, you got to stop the guessing. So understand your payout map because you've got to start there to understand where the money's coming from.Now, as a pro tip, make sure those monies are coming out of the platforms and going to that single business account which Leads me to the second step. Separate your money today. If you do nothing else today, separate your money. Stop mixing business and personal.You probably think, Ralph, that's all you ever talk about. But this is the main issue I see with content creators. Have that one business checking account, have that one business credit card.Stop mixing this stuff together. Because this one move changes every single thing you're doing. So separate that money. Step number three, create that tax set aside rule.And on payout day, pick a day that works for you. I like a weekly rhythm to this. Pick whatever day works for you. Move that money immediately.You might be saying, wait a minute Ralph, I only made $100 this week. I don't care, even if it's small, make that money. Move. You might be saying right now, okay, Ralph, that's great.I hear what you're saying, but how much do I even move? I'm going to take two minutes and tell you about that. The real truth of this, your set aside percentage. And that's what we're really talking about.It's not rocket science, it's a set aside percentage. It depends on your situation, depends on your income level, it depends on what state you operate in.Like I talked about earlier, it depends on your entity and it depends on how many write offs you have. And this is what gets so many creators in trouble. Because they guess.And when you guess, it gets expensive because a lot of times you under guess and then you don't have enough. And then don't forget to do that monthly close, once a month, pick a day, put it on the calendar. That is a meeting you do not miss.Match those deposits, categorize those expenses, track those invoices and update that tax set aside. And if I'm going to be honest with you, this is where most creators quit. And it's not because it's impossible, but it's a lot, isn't it? It's a lot.While you're still creating, you're still thinking about the creative side of this. So I'm going to share a better solution in just a few minutes. But this is truly where a lot of creators give up.So if you do one thing only today, separate your business money today. Get that business account, that business card, because that's the foundation now. I promise you, I'll talk to you about how to get this right.If you want help getting this situation right. If you feel overwhelmed by what we talked about today, I have a life ramp for you. You can find that at content creators accountant.com Help me.I'll put it in the show notes. But I'm going to give it to you one more time. It's content creators accountant.com/help me what that is.It's a free call with me, 15 minutes, absolutely no cost to you. We'll do a zoom session and I'll look at your exact situation because everybody's situation is different.Like I talked about, there are some general rules here, but everybody's situation is different. And we'll build that payout map.I'll show you how to track those accounts, how to build those accounts, and how to really look honestly at your tax exposure. And then I'm going to give you something that you need right now.I'm going to tell you what you need to fix first so you can stop feeling behind and actually start feeling in control. And I'm even going to share a program that I use with many creators to handle all of this on your behalf. You might be saying Ralph.Oh, I like the idea of that. Why don't you book a call with me? You can do that at content creators accountant.com HelpMe Again. I'll put that in the show notes.I'm Ralph Estep Jr. I'm the content Creators accountant and I'll see you next time on the show.