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Question About Passive Lifestyle Model

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Jockomofino

Contributor
Jan 22, 2018
25
38
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55
Durham, NC
This is something I've wondered about for a while but never got around to asking. As it is becoming pertinent now, I want to ask it. And if I am violating some board rules here, mod please remove.

In TMF, @MJ DeMarco says that the revenues from your business should be split this way:
- 40% for taxes
- 40% to fund your money system
- 20% to pay for your lifestyle

My question is, where does the money for business overhead/expenses come from? Or is this the breakdown AFTER overhead has been deducted?

Thanks.
 

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ericaung

Contributor
Read Millionaire Fastlane
I've Read UNSCRIPTED
Oct 6, 2018
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115
This is something I've wondered about for a while but never got around to asking. As it is becoming pertinent now, I want to ask it. And if I am violating some board rules here, mod please remove.

In TMF, @MJ DeMarco says that the revenues from your business should be split this way:
- 40% for taxes
- 40% to fund your money system
- 20% to pay for your lifestyle

My question is, where does the money for business overhead/expenses come from? Or is this the breakdown AFTER overhead has been deducted?

Thanks.
bump
 

Johnny boy

Legendary Contributor
EPIC CONTRIBUTOR
Speedway Pass
May 9, 2017
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Washington State
All industries and business models have different profit/revenue ratios. A small services company may have a 100k revenue with 50k profit. A SAAS might have 100k revenue and 95k profit. An Amazon/Shopify drop-shipping company usually has something like 100k revenue and zero profit :rofl:

It's gotta be based off of profit, the actual income that you get to do something with. The money left over.

200k revenue, 100k expenses, 100k profit. Save 40k for taxes, 40k for 'your money system' (i just reinvest), and then live off of 20k.
 

Cameraman

Contributor
I've Read Rat-Race Escape!
Sep 25, 2021
27
61
18
UK
This is something I've wondered about for a while but never got around to asking. As it is becoming pertinent now, I want to ask it. And if I am violating some board rules here, mod please remove.

In TMF, @MJ DeMarco says that the revenues from your business should be split this way:
- 40% for taxes
- 40% to fund your money system
- 20% to pay for your lifestyle

My question is, where does the money for business overhead/expenses come from? Or is this the breakdown AFTER overhead has been deducted?

Thanks.
It's a while since I read TFM but I'm sure that it will be based on drawings you make from the business. At least that's what I've always done. The priority is usually to feed the growing business until you reach the level where it makes sense to make drawings. Either you're earning more than the business needs or you need to reduce your risk and build up your money system.

When you do draw money, split it like the suggestion and you won't go wrong. If you have money left over after paying your tax bill you can add it to your money system.

I use only a 30% rate for putting tax aside but that's fine in the UK for the amount I need to draw from my business. I've done this for years and know that it covers the tax I owe on drawings.
 

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