Listen to The Recording Below!
Introduction: Nick D Introduces Ryan Lee
Hey everyone, Nick D here. Today, I have the pleasure of introducing a phenomenal individual, Ryan Lee. Ryan is someone who has revolutionized the way we look at personal finances, especially for business owners. He's not just a financial strategist but a mentor, a coach, and a beacon for those looking to gain financial freedom. Ryan, welcome!
Ryan Lee Introduces Himself
What's up, everyone? Thanks, Nick, for that amazing introduction. It's a pleasure to be here with you all. My name is Ryan Lee, and I'm excited to share my journey and insights with you today. For those who don't know me, I've spent years helping individuals and business owners, especially those in the martial arts community, take control of their finances, reduce their taxes, and achieve financial freedom.
Nick D's Backstory and Connection with Ryan Lee
Before diving into Ryan's insights, let me share a bit about how we met and why I'm so passionate about what he does. It all started back in April when my good friend Randy Garner, who is also on Ryan's board, invited me to get baptized. Randy is one of those rare individuals who, when he asks you to do something, you just say yes because you know it's going to be an incredible experience. Little did I know, this journey would lead me to Ryan Lee.
Randy, Dave Norton, and Peter Skaggs, who used to work out together until Randy moved to Texas, were the ones who initially introduced me to Ryan. When I went to get baptized, Randy mentioned a party he was organizing for me and my wife, Nicole. I had no idea what to expect, but I trusted Randy. The party turned out to be at Ryan's house, and it was an unforgettable experience. We ended up working out in Ryan's basement, and I felt an immediate connection with him. It was as if we were long-lost brothers.
Ryan had been receiving pictures of me from Randy for months without knowing who I was. When we finally met, it all made sense. Ryan's hospitality and the brotherhood we formed that day are things I cherish deeply. His kindness and the way he welcomed us into his home were beyond anything I had experienced. This bond we created is a testament to the power of community and the incredible individuals who are part of it.
Ryan Lee's Journey: From Struggles to Financial Freedom
I grew up in a really good home, but it was a strict environment. This rigidity led me to rebel in my teenage years, dropping out of high school and moving out. I found myself at the bottom of a dark hole and realized I had two choices: sink or swim. I chose to swim. I got my GED, went back to college, and worked hard to turn my life around.
When I graduated from college, I thought I'd hit the jackpot, expecting a high-paying job. But reality hit hard when I saw my first paycheck, which was far less than I had anticipated due to taxes and other deductions. This realization was a wake-up call, and I knew I had to strategize better.
I climbed the corporate ladder, but it was a means to an end. Over time, I traded my health, family time, and spirituality for career advancement, believing that money would eventually buy back my life. This dangerous mindset almost imploded on me. My turning point came in 2008 during the financial crisis when my investments plummeted. This, coupled with my son's emergency heart surgery, made me rethink my priorities.
I started reading extensively, beginning with "Rich Dad Poor Dad" by Robert Kiyosaki, which shifted my perception of money and wealth. This led me to "Creating Wealth" by Robert Allen, which provided a practical playbook for financial success. These books set me on a path to financial freedom, and within four years, I walked away from my corporate job, financially free.
Building Cashflow Tactics
My journey inspired me to co-found Cashflow Tactics, a business dedicated to helping individuals achieve financial freedom in 10 years or less. We focus on personal financial strategy, implementation, reducing taxes, building cash flow systems, and achieving measurable financial freedom. Our approach is not based on wishful thinking but on solid, mathematical principles.
Taxes and Finances for Martial Arts Business Owners
Now, let's dive into some taxes and finances for martial arts business owners.
Understanding the Tax Code
The tax code is a powerful tool for business owners. It's designed to incentivize certain behaviors, and as a martial arts business owner, you can leverage this to your advantage. The key is to shift from a reactive to a proactive tax strategy. Here are some strategies to consider:
Home Office Deduction: If you run your business from home, you can deduct a portion of your home expenses, such as mortgage interest, utilities, and repairs. This reduces your taxable income significantly. Many martial arts instructors, especially those running small gyms, often overlook this powerful deduction. Ensure that you calculate the percentage of your home used exclusively for business purposes to maximize this benefit.
Augusta Rule: You can rent your home to your business for up to 14 days a year and deduct the rental income. This is a powerful strategy to lower your taxes while keeping the money within your control. For instance, if you host training sessions, seminars, or special events at your home, you can take advantage of this rule. Documenting these events properly is crucial to substantiate the deductions.
Hiring Family Members: If your children help out in your business, you can pay them a salary. This salary is deductible, reducing your business income, and if it's below the standard deduction, your children won't owe taxes on it. Involving your children not only provides tax benefits but also instills a strong work ethic and business understanding in them.
Real Estate Professional Status: Investing in real estate can provide substantial tax benefits. As a real estate professional, you can offset your active income with real estate losses, reducing your overall tax burden. This strategy involves meeting certain criteria, including spending more than half of your working hours and at least 750 hours annually in real estate activities. This status allows you to apply rental losses against other income.
Active vs. Passive Income Tax Rates
As a business owner, it's crucial to distinguish between active and passive income. Active income, the money you earn directly from your business, is subject to higher taxes. Setting a target tax rate for your active income (e.g., 20%) and using strategies to maintain it can save you significant amounts.
Passive income, on the other hand, should be aimed at a 0% tax rate. Investing in assets that generate passive income, like real estate, and leveraging tax advantages can help you achieve this. For example, rental properties, dividend stocks, and peer-to-peer lending platforms can provide steady passive income streams.
Creating a Financial Freedom Game Plan
The cornerstone of achieving financial freedom is having a customized game plan. Here's how you can create one:
Increase Financial Intelligence: Understand the rules of money and how to use them to your advantage. This involves continuous learning and staying updated with financial strategies. Reading books like "The Millionaire Next Door" and "Think and Grow Rich" can provide valuable insights.
Tax Strategy: Develop a comprehensive tax strategy that includes proactive planning and regular reviews to ensure you're taking full advantage of available deductions and credits. Consider working with a tax strategist who understands the unique needs of martial arts business owners.
Investment Strategy: Focus on investments that align with your financial goals. Real estate is a powerful tool, but it's essential to diversify and invest in assets that provide both growth and stability. Look into index funds, REITs (Real Estate Investment Trusts), and even small business ventures.
Cashflow Management: Monitor and manage your cash flow diligently. This involves budgeting, forecasting, and ensuring you have a healthy balance between income and expenses. Tools like QuickBooks and Mint can help you track your finances effectively.
Advanced Tax Strategies for Martial Arts Business Owners
Let's delve deeper into some advanced tax strategies that can further optimize your financial position:
Section 179 Deduction: This allows you to deduct the full cost of qualifying equipment and software purchased or financed during the tax year. For a martial arts gym, this could include new training mats, fitness equipment, and even computers used for business operations.
Qualified Business Income (QBI) Deduction: Under the Tax Cuts and Jobs Act, many small business owners can deduct up to 20% of their qualified business income. This deduction can significantly reduce your taxable income, provided your total taxable income falls below certain thresholds.
Retirement Plans: Setting up a retirement plan, such as a SEP IRA, SIMPLE IRA, or Solo 401(k), allows you to save for the future while reducing your current taxable income. These plans offer high contribution limits and are relatively easy to establish and maintain.
Health Savings Account (HSA): If you have a high-deductible health plan, contributing to an HSA can provide a triple tax advantage: contributions are tax-deductible, earnings grow tax-free, and withdrawals for qualified medical expenses are tax-free.
Cost Segregation Studies: If you own your gym's building, a cost segregation study can accelerate depreciation deductions. This strategy involves identifying building components that can be depreciated over shorter periods, thus increasing your depreciation expense and reducing taxable income.
The Power of Community and Networking
One of the most underrated investments is building a strong community. Surround yourself with like-minded individuals who can elevate your vision and provide support. Networking with other business owners, attending workshops, and joining mastermind groups can offer valuable insights and opportunities.
For martial arts business owners, this can mean joining local business associations, participating in martial arts federations, or attending industry conferences. These connections can lead to partnerships, joint ventures, and new customer referrals.
Leveraging Technology for Financial Efficiency
In today's digital age, leveraging technology is crucial for financial efficiency and growth. Here are some tools and strategies to consider:
Accounting Software: Tools like QuickBooks, Xero, and FreshBooks can automate your bookkeeping, making it easier to track income, expenses, and profitability.
Financial Planning Apps: Personal finance apps like Mint, YNAB (You Need A Budget), and Personal Capital can help you budget, save, and invest more effectively.
Customer Relationship Management (CRM) Systems: CRMs like HubSpot, Zoho, and Salesforce can streamline your customer interactions, improve retention rates, and enhance sales processes.
Online Marketing Tools: Utilizing platforms like Google Analytics, SEMrush, and Ahrefs can optimize your online presence, improve SEO, and drive more traffic to your website.
Automated Billing and Payment Solutions: Implementing systems like Square, Stripe, and PayPal can simplify billing, ensure timely payments, and enhance cash flow management.
Adapting to Economic Changes
The financial landscape is always evolving, and it's crucial to stay adaptable. Here are some tips for navigating economic changes:
Stay Informed: Regularly read financial news, follow industry trends, and participate in relevant forums. Subscriptions to publications like The Wall Street Journal, Bloomberg, and industry-specific magazines can keep you updated.
Diversify Income Streams: Don't rely solely on your martial arts business. Consider additional revenue streams like online courses, merchandise sales, and affiliate marketing.
Emergency Fund: Maintain an emergency fund with at least three to six months' worth of expenses. This provides a safety net during economic downturns or unexpected business challenges.
Continuous Learning: Invest in your education through courses, certifications, and seminars. Platforms like Coursera, Udemy, and Khan Academy offer valuable resources.
Seek Professional Advice: Work with a financial advisor or consultant who understands your industry and can provide tailored advice.
Conclusion: Take Control of Your Financial Future
Achieving financial freedom as a martial arts business owner requires a proactive approach to taxes and finances. By understanding the tax code, leveraging deductions, creating a comprehensive game plan, and embracing community support, you can transform your financial future.
Remember, financial freedom is not just about making money; it's about keeping and growing your wealth strategically. Take control of your finances today and pave the way for a prosperous future.
If you have any questions or need personalized advice, feel free to reach out to me at Ryan at cashflowtactics.com. Let's work together to achieve your financial goals and build a life of abundance.
Nick D's Endorsement
Having experienced Ryan's wisdom and strategies firsthand, I can vouch for the incredible impact they can have on your life and business. Ryan's approach is not just about saving money but about creating a sustainable and prosperous financial future. Don't miss this opportunity to transform your financial journey. Reach out to Ryan and start your path to financial freedom today.
FAQ Section
1. How can martial arts business owners benefit from the home office deduction?
Martial arts business owners who operate from home can benefit significantly from the home office deduction. This allows you to deduct a portion of your home expenses, such as mortgage interest, utilities, and repairs, based on the percentage of your home used exclusively for business purposes. Ensure you keep accurate records and calculate the dedicated space to maximize this deduction.
2. What is the Augusta Rule, and how can it be used to lower taxes?
The Augusta Rule allows you to rent your home to your business for up to 14 days a year and deduct the rental income. For example, if you host training sessions, seminars, or special events at your home, you can take advantage of this rule. Proper documentation of these events is crucial to substantiate the deductions.
3. How can hiring family members help reduce taxes for a martial arts business owner?
Hiring your children to help with your business allows you to pay them a salary, which is deductible from your business income. If their earnings are below the standard deduction threshold, they won’t owe taxes on it. This strategy not only provides tax benefits but also instills a strong work ethic and business understanding in your children.
4. What are the criteria for achieving real estate professional status and its tax benefits?
To qualify as a real estate professional, you must spend more than half of your working hours and at least 750 hours annually in real estate activities. This status allows you to offset your active income with real estate losses, significantly reducing your overall tax burden. This is particularly beneficial if you have substantial real estate investments.
5. What is the difference between active and passive income tax rates?
Active income, earned directly from your business activities, is subject to higher tax rates. A strategic approach involves setting a target tax rate for your active income (e.g., 20%) and using deductions and credits to maintain it. Passive income, earned from investments like real estate, should be targeted at a 0% tax rate. Properly structured investments can achieve this through tax advantages.
6. What are some advanced tax strategies that martial arts business owners can use?
Some advanced tax strategies include:
Section 179 Deduction: Deducting the full cost of qualifying equipment and software purchased during the tax year.
Qualified Business Income (QBI) Deduction: Deducting up to 20% of your qualified business income under the Tax Cuts and Jobs Act.
Retirement Plans: Setting up plans like SEP IRA, SIMPLE IRA, or Solo 401(k) to save for the future while reducing current taxable income.
Health Savings Account (HSA): Offering a triple tax advantage if you have a high-deductible health plan.
Cost Segregation Studies: Accelerating depreciation deductions for building components in your gym, thus reducing taxable income.
7. How can technology be leveraged for financial efficiency in a martial arts business?
Technology can streamline financial management and improve efficiency through:
Accounting Software: QuickBooks, Xero, and FreshBooks automate bookkeeping.
Financial Planning Apps: Mint, YNAB, and Personal Capital help with budgeting and saving.
CRM Systems: HubSpot, Zoho, and Salesforce enhance customer interactions and retention.
Online Marketing Tools: Google Analytics, SEMrush, and Ahrefs optimize online presence and SEO.
Automated Billing Solutions: Square, Stripe, and PayPal simplify billing and ensure timely payments.
8. What should martial arts business owners do to adapt to economic changes?
Adapting to economic changes involves:
Staying Informed: Regularly reading financial news and industry trends.
Diversifying Income Streams: Adding revenue streams like online courses, merchandise sales, and affiliate marketing.
Maintaining an Emergency Fund: Keeping three to six months of expenses saved.
Continuous Learning: Investing in courses and certifications.
Seeking Professional Advice: Working with a financial advisor who understands your industry.
These questions and answers provide a comprehensive educational FAQ section that addresses common concerns and offers valuable insights for martial arts business owners.
