QUESTION: Brittany follows Dave on Twitter, and she has a small business question. She asks how to determine her profits as the owner and only employee of a small business. Dave gives her the simple answer, along with a little extra advice.
ANSWER: Your income minus your outgo is profit. What you take in minus your expenses equals profit. Period. This is regardless of how many employees you have or how big your business is. It’s that simple. What you take in minus your expenses — your revenues minus expenses — is profit. That’s a basic, Accounting 101 definition of profit.
You also need a separate checking account for your business. That’s the way to tell what’s going on. When you co-mingle it with grocery money and things like that, you can’t keep up with what’s happening with your business.
QUESTION: Dan in Tampa, FL, has a lot going on. He and his wife are on Baby Step 2, and he’s in graduate school while working full-time. They’re trying to cash flow his education from this point forward after previously taking out student loans. Their household income is $90,000 a year, and they have a car payment, so Dan asks Dave if they’re taking the correct approach.
ANSWER: Lay your finances out, and run the idea of what tuition and school are going to cost between now and when you graduate. Your first goal is to do no more harm, meaning that you graduate and finish this degree without taking on any more debt.
I think beyond that, and I don’t know what you’re paying for the school, you should have some money beyond that to work your debt snowball. Don’t beef up the payments on your debt so heavily that you use up the money that you need for tuition. Getting though school will slow down your debt snowball somewhat. So don’t get so excited and gazelle intense about paying off your debts that you pay down so heavily on the car that you turn around and have to borrow for tuition.
First goal is to finish school without any additional debt. The second goal is to throw whatever else you can scrape up at the debt. Yeah, I’d definitely do that. It’ll work for you. Congratulations! That’s really neat. Very good idea.
QUESTION: Tim and his fiancée are planning on a honeymoon cruise. He wants to know if it would be a good idea to purchase travel medical insurance. Dave approaches this one cautiously, but gives Tim and his bride-to-be sound advice.
ANSWER: I don’t know why your regular health insurance wouldn’t cover you, except that you might be out of the country for part of the trip. Find out what your normal medical health insurance covers, as far as out of network and those kinds of things.
Most of the time, for instance if you’re doing a Caribbean cruise, most of the out-of-network stuff will work there — but double-check on that. I have never bought travel medical insurance, and we’ve gone on two cruises this year.
Normally, I would say travel medical insurance falls into the gimmick category. But if you’re concerned about it, the best thing to do is check with your current coverage, see what you’ve got, and compare that to what you think might be your risk.