Percentage of Profit for Wants?

[cieddss]

Generally, how how much percentage of my profit should I spend on my wants/ hobbies? Did MD talk about this? (Although I have a vague memory that 10% is good). I’m in my 20’s. Thank you!

 

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[Kid]

Since you asked - 10%. But remember that some founders that sold their companies for millions did it on "ramen diet"

 

[JAJT]

Zero.

Business profit isn't personal income.

This is an important distinction.

Business profit is the amount of money left after expenses. There's gross profit and net profit and honestly the entire "profit" discussion exceeds the purposes of this post but no matter how you slice it - it's a measurement of how much money is left after various expenses.

Personal income, on the other hand, is money that the business is paying you in the form of salary. Salary is a business expense. It is just another thing the business is paying for, regardless of whether or not the business has 1, 100, 1000 or more employees.

What you are REALLY asking is "how much should my business pay me in salary", and that is quite a different question.

The answer is honestly a personal one - there is no correct answer.

- Some people take every spare cent from their businesses and are perfectly happy with that.
- Others don't take a single penny from their businesses for years and years, instead choosing to reinvest every dollar in profit back into the business.
- And everything in between.

It comes down to what your goals/plans for the business are, your personal situation, the business health, whether you are trying to grow the business aggressively or not at all, etc...

The only universal truth that applies to every situation is this - every dollar you take from your business as personal income is a dollar that the business is not using for business purposes.