Meet Erin Davis

Erin [00:00:04] I agree with how it can feel like oxygen, because I can imagine myself, once I am in the space where- and maybe doing this budget rework and moving my money differently will help me feel like I have that breathing room, because right now it does not feel that way. 

Linzy [00:00:30] Welcome to the Money Skills for Therapists Podcast, where we answer this question: how can therapists and health practitioners go from money shame and confusion, to feeling calm and confident about their finances and get money really working for them in both their private practice and their lives? I’m your host, Linzy Bonham, therapist turned money coach and creator of the course Money Skills for Therapists. Hello and welcome back to the podcast. So today on the podcast – I’m really excited – we’re doing something for the first time, which is we have a coaching episode to share with you, which is with one of our listeners. So previously on the coaching episodes on the Money Skills for Therapists podcast, I have brought on current students or past students of Money Skills for Therapists. So they’re always folks that I’ve known to some extent, already from being in the course or sometimes that I’ve known really, really well. But this is the first time that we are bringing on a guest who’s a listener of the podcast. Our guest today is Erin Davis. She’s in private practice specializing in anxiety and OCD in a small town in North Carolina. She has got a podcast about OCD called Bossing Up Overcoming OCD, which she shares she got a sponsorship for in only three sessions. And in our conversation today, we talked about figuring out how to both make your money serve you and this question of whether or not she should raise her fee. So Erin shares that she’s in a small town in North Carolina, where her fee is already kind of at the high end of what folks tend to charge. So there’s this concern about raising her fee, but she has all these stressors of a credit card debt to pay down, building a home, she’s got three young boys who are in sports. And basically, how does she make the money work? What does she need to do? So today in our conversation, we dig into that question. We end up really looking at her numbers in a tangible way and coming up with a really clear path forward for how her money can serve her. Here’s my conversation with Erin Davis. So Erin, welcome to the podcast. 

Erin [00:02:35] Thank you, Linzy, for having me. I’m so excited to be here. 

Linzy [00:02:38] Yeah, I’m really excited to have you here. We were just talking off mic about how previously for coaching episodes on the podcast, I’ve always had students or grads. So like folks I’ve already known to some extent. This is our first time recording a coaching episode for the podcast with a listener, so we have not met before now, which is exciting. 

Erin [00:02:58] Right? And I have been following you for quite some time, and I listened to your private practice summit back in the fall. Oh yeah, that was fantastic. And I got linked up with other coaches and mentors there. And Aisha Shabazz is my business coach. 

Linzy [00:03:16] Oh, nice. Yeah. She’s been on the podcast before. 

Erin [00:03:17] Yes and I went back and actually relistened to that episode. I love both of you guys. 

Linzy [00:03:23] Wonderful. Well, I’m very excited to have you here. To dig in to your question for today. So, Erin, what do you want to focus our time on today together? 

Erin [00:03:32] Yes. Well, again, thank you for letting me come on the show because it’s been quite a ride for me in my journey. And where I am now, I think it is going to be very helpful to kind of get your expertise in the financial coaching. So my story started several years ago. I was in private practice for the first time. Now, I’ve been- I’ve had my graduate degree since 2011, but about 2 or 3 years ago was when I stepped out and did private practice on my own, and that was a very eye opening experience, and I burned myself out. Worked too much. I was not a good boss to myself, but the money was there, right? And then my husband and I decided, let’s get a change of pace in our life and let’s move back home to family in North Carolina. And that’s been a great move. Now, with that experience I had with private practice, I thought, I can’t work myself to this extent anymore and decided to take a salary job with a nonprofit, and it was wonderful. It was one of the best experiences I’ve had with an agency. Now, with that being said too, not everything lasts forever. And the contract went away. And there I was with a job loss in my mid-30s. I’m the sole breadwinner for my family. 

Linzy [00:05:00] Yes. Gotcha. Yep. 

Erin [00:05:01] Yes. And I’ve got three boys are really fell into, kind of a pit and a little bit of a crisis and thinking, what do I do next? Because I enjoy counseling. I love the field. And. But a lot of time, investment and energy into this work. And I was scared to go back into private practice because of the way it went before. So I decided that I would go into private practice, but I would be more mindful and intentional with my choices. Yes. Great, yes. So I feel like I have done a great job in honoring my values and my family needs this time around. But the complication that I have run into is our small town in North Carolina. It’s not one to really be known for paying premium therapy rates. So that creates a challenge. And just to put it in perspective, our county – countywide, all of the children are on free meals. 

Linzy [00:06:09] Okay. Yeah. So you’re not in a high income area by any means? 

Erin [00:06:13] Exactly. Okay. Especially compared to where we were living before. My current rate. It does meet my needs. If I don’t have any other additional expenses or what I’m facing right now, which is the credit card debt from the job loss, because I mean that really threw our plans, because being in a salary position, you expect that it’s going to be a safe job. Yes. Now I mean we have our personal emergency savings and that’s fine. But I think one of the other lessons I’ve learned is to have a business savings. 

Linzy [00:06:49] Yes, absolutely. I completely agree with you. Yeah. Having that business buffer is great. And so that sounds like a good learning, you know, that’s come out of this that you can incorporate into your practice moving forward. It sounds like this would be one of the goals is having that buffer in your practice this time around. 

Erin [00:07:04] Yes. And it seems like – and maybe that was something that I heard from your, one of your webinars was. Well, and I love your idea of profit first. And so I’m struggling with this balance of paying myself. Plus covering our family expenses plus aggressively paying down debt because it’s very uncomfortable to carry debt. 

Linzy [00:07:30] Yes. Okay. Yeah. So. Yeah. Because what I’m hearing is there’s multiple jobs that’s needing to come out of this money, which is not as much money as you used to make because you used to live somewhere where it was a higher income area. 

Erin [00:07:41] Yes. 

Linzy [00:07:42] Now your fee is 135. 

Erin [00:07:44] Correct. 

Linzy [00:07:45] So your fee is 135. And you have these different priorities of like paying down the debt, supporting your family, living. Yeah. What are other goals that, you know, you’re trying to meet with this money? 

Erin [00:07:55] We are building a home. We do have money set aside for that. But still, it would be nice to be able to provide more improvements because we’ve got goals of like, you know, we can do this step for now and then maybe in a few years we’ll add this other addition or this. 

Linzy [00:08:13] Right. 

Erin [00:08:14] I would really like to be able to contribute. Oh, like a pool, for example. 

Linzy [00:08:18] Yes. 

Erin [00:08:19] Okay. You know. Yeah. And I know that’s first world problems, but I’ve got three boys and they would love a pool. 

Linzy [00:08:25] Absolutely. 

Erin [00:08:26] Adults by the time I can. 

Linzy [00:08:28] Yeah I know. Yeah. It’s like that. And this is one of the things about having kids. And I see this too, is it’s like you’re at a stage of your career where you’re often still building and you’re paying down debt, but it’s like, this is your kid’s childhood now, right? They’re not gonna appreciate the pool so much when they’re 25. And you’re like, well, but we paid down all the debt and now we have a pool. Come over. And they’re gonna be like, mom, I’m an adult. I’ve got a life. A pool for a seven year old is Paradise. 

Erin [00:08:49] Exactly. Yeah. Okay. 

Linzy [00:08:50] Okay, good. Okay. So with these different jobs that your money has to do, I’m hearing there’s the debt paydown. And there’s emotional weight around that debt. 

Erin [00:08:58] Absolutely. 

Linzy [00:08:59] There’s just your regular living supporting your family. Are you still the sole breadwinner of your family? 

Erin [00:09:04] Yes. Okay. My husband is primarily building the house like his full time project. 

Linzy [00:09:10] Right. So his job for your family is to build this house, which I’m sure is saving you a lot of money because contractors are very expensive. Yeah. So. Yeah, but that means that kind of his contribution to the family right now is in his labor and skills. He’s not bringing money in that you can turn into something else. 

Erin [00:09:24] Sort of. I will preface that and say that he is a veteran. And so we do. 

Linzy [00:09:30] Okay. 

Erin [00:09:30] There’s military benefit. 

Linzy [00:09:32] Great. Okay. So there is some income coming in for him. 

Erin [00:09:34] Yes. 

Linzy [00:09:35] Right. Okay. And then this ongoing project of building a home, you would like it to be more than, right now, the budget would allow. Like it’d be nice to add those things now. 

Erin [00:09:44] Right, right. Yes. All of my boys are in competitive sports. And so every time you turn around, they need a new bat or a uniform. 

Linzy [00:09:52] 100%, yes. My joke with my son. I have one son. And my joke, we’re Canadian, is that I just don’t want him to know that hockey exists. Like, I just want it to, like, never be on his radar. Because if he discovers hockey and if he’s good at hockey, that’s all my life and my weekends and my money for the next, like, 15 years. Yeah. So yes, it can be a big outlay. And similarly to what we’re talking about before though, like this is their one and only childhood, it sounds like this is something that’s important to you, right. Is having them have these experiences. So this is an important expense for your family right. Okay. So let’s zoom out then on numbers. And you had mentioned profit first. And I love that you mentioned that because I think that’s actually going to be a. A really good tool for us to use, to give you perspective, because what I’m hearing is there’s these competing priorities. All these things are important in their own way, right? There’s an emotional weight around the debt, which is going to have its own kind of urgency to wanting to get rid of that. But there’s only so much money coming in. Right. And you are the income earner for your family with your husband’s veteran benefits as well. 

Erin [00:10:50] Right, exactly. And I am trying to give myself grace and compassion and patience. We are as new business owners- because essentially I’m revamping this private practice. We all experience some level of expense upfront. So it’s technically like this is another do over because first time in my private practice, it was a slow transition of trading off. Let me do this warm handoff of my private practice slowly and then I’ll leave my group practice. But this time around it wasn’t. I mean, night and day like, oh no, I can’t go to work tomorrow. What am I going to do next?  

Linzy [00:11:31] There’s kind of the the parachute version of entering private practice where you’re leaving something and you have a parachute to ease you down. And then there’s the cliff diving version, which is what you’ve had to do. You got pushed off the cliff. I personally start businesses by jumping off cliffs. That’s how I make myself do things. But you got pushed off a cliff and now here you are. You have to make it work. Okay? Yes. So with your numbers, Erin, do you have some numbers that we could talk about to really ground in what’s happening right now financially? 

Erin [00:11:57] Yes. Beautiful. All right. My private practice fee calculator. And what’s funny is sometimes I’ll really go big with the numbers of like. Yes, this is what I would love to invest in our home improvement. And then I’m like, oh no, that’s going to raise my fee by $40. Like I can’t do that. 

Linzy [00:12:18] Yes. So like you look at what the implications of that would be. And it’s like no, no, no. 

Erin [00:12:21] Yes. And the scary part too, Linzy, is that what if I raise my fee and nobody comes? 

Linzy [00:12:29] Yes. Yeah, absolutely. There’s two ways to think about this. And we’re going to ground in your numbers, because I want to really start to get clear on what your money can be doing for you right now and what it is doing for you right now. Right. And then we can think about what needs to change. There is that question and there’s a couple different philosophies about, you know, fees and premium fees. The one philosophy is like if you build it, they will come, right? Like if you really own your niche and if you’re really clear about the value of what you do, and if you speak directly to your ideal client, you will find those folks even in your county, right? Because you don’t need 4000 clients, you need 15 or 20, right? 

Erin [00:13:03] Yes. 

Linzy [00:13:04] So there is that. There’s that approach, right, of just like really leaning in and owning your niche. And that’s what coaches like Tiffany McLain will teach you to do. Right? Which is just like own it, right. Be bold. You know, lots people are going to say no, but you’re going to figure out who says yes, and you’re going to be able to keep refining your messaging to find those folks who say yes, right, by owning your fee. That’s one philosophy. The other philosophy is kind of like reading the room of like, okay, I don’t live in San Francisco. You know, I live in a small town, North Carolina. You know, there isn’t tech money here. So let’s think about what is reasonable to keep a full caseload. Right. And generally speaking, I mean, my approach to life and money in general, Erin, is like, I think the truth is in the middle there somewhere, right? Of like, you probably can’t charge $500 an hour living where you are. There’s probably only 2 or 3 doctors who could, like, sustain your caseload or be part of your caseload that way. But you might be able to charge more than 135. But part of it is getting us grounded in like, what do you actually need? Right? And what’s even possible with the numbers right now? Because when we have this emotional weight around debt as well, that can make that feel really urgent and important. And sometimes we can over prioritize that because we want it to go away because of like shame and like negative stories or negative memories associated with it. We want to like close that chapter, but that’s not always strategic. So I want to think about that too, as we look at your numbers. Okay. Is like, how does that fit into this equation and how important is it compared to the pool or your kids sports or going out for dinner on Fridays? 

Erin [00:14:31] All of those points are so true, because every time I look at my credit card statement, I think, oh, I can’t wait to get rid of this. And then I go through the negative self-talk of I must not be doing enough. And then, it’s yes, a very frequent debate of what can I do now? The beautiful thing is, I started my own podcast back in December and that topic is on OCD. Aisha Shabazz has been really good with the business coaching and help helping my niche down to be an OCD specialist, and I love working with OCD and with that podcast it was amazing. After only three published episodes I got a sponsorship. 

Linzy [00:15:20] Amazing. So there’s that other stream of income then as well. 

Erin [00:15:23] Yes. With that yeah. Took a huge weight off my shoulders. 

Linzy [00:15:27] Yes. Yes. Beautiful. Yeah. And I think that’s one of those things I love hearing that that is already come for you, Erin, because that’s also something that a lot of therapists, I think fantasize about or talk about, like, what else can I do besides therapy? How else do I bring in money, can I coach? And so that’s really nice that you have that extra stream of income coming in. 

Erin [00:15:45] Yes. It’s like a side hustle that aligns with the work I’m already doing. 

Linzy [00:15:49] Yes, yes. Which is beautiful. Creating that kind of ecosystem is really strategic, right. Because that side hustle is really about what you’re doing. But it’s fun and it’s different. It’s not just therapy, but then it’s also helping folks find you and get into your therapy practice. If they live in North Carolina or wherever you’re licensed. 

Erin [00:16:05] Right? 

Linzy [00:16:05] Yeah. So what I want to do together now is look at your numbers from a zoomed out perspective. Right. Because when we have all these competing priorities and all these obligations around our money, it can be really easy to get kind of caught in the weeds and overwhelmed by what we put where. What we’re going to do together now is I’m going to walk us through a profit first calculator. So this is something I often do with folks inside Money Skills for Therapists during their one on one. Actually, often this is a conversation I have with folks, is looking at your numbers and zooming out together to see, okay, with the numbers as they are right now, what is possible? Like where are the obligations and where are the possibilities? So I’m going to share my screen with you, and we’re going to look at your numbers through this lens. And this tool I will share with you after. So you will have it. 

Erin [00:16:48] Thank you. 

Linzy [00:16:49] You’re welcome. So this is your calculator and we’re going to play with it. And what this is doing here, Erin, is it’s letting us zoom out on your numbers. So I’m going to zoom in first so you can see them better. Zoom in so we can zoom out. There we go. So this is a calculator that helps you see, based on how you set your profit first percentages, based on the big picture priorities that you set for your money, what that money would look like on a monthly basis. So we’re zooming out of the weekly. We’re like getting out of like the good versus the bad weeks, those ups and downs that can be really distracting and confusing and thinking about what is normal, right. What is normal with, you had a great week, but then the next week your kids were sick and you’re off for two days, right? Like just evening those things out. So looking at your year, whether you use Simple Practice or whatever, do you have some numbers that we can look at to figure out what’s average for you? What is a normal month? I’m looking at your your income numbers for your practice. 

Erin [00:17:47] Sure. Right now I would say on average – and things are still building and growing. What I would say about the past three months, my simple practice income has shown $3,000 a month. 

Linzy [00:18:03] Okay, so $3,000 comes in the door in the top. 

Erin [00:18:07] Yes, on average. Now this month might be 4000.  

Linzy [00:18:11] Because you’re still growing. Yes, yes. And to give me a sense of like what is your caseload right now? How many folks a week are you seeing right now? 

Erin [00:18:19] I’m seeing ten a week. And my goal is 15. So I’m very proud of myself. I’m way ahead of my yeah, I thought I wouldn’t be able until a year out. And I’m since I started working with Aisha, really niche down I would say I’m still less than six months. So it’s beautiful. Great. 

Linzy [00:18:39] Yeah. You are on the right road. You see it’s working there. Is that part of the beginning where patience is part of the equation, right, of like it takes a while for people to find you. I’m sure that right now there are 5 or 6 people who have found you and they’re contemplating reaching out, or they’re talking to their partner about whether they have the money for it. But it takes some time, right, for folks to actually, like, get in the door, stay. Yes. So right now then we’re looking at 3000 and that’s with your ten a week. So if you are at 15 a week I would estimate then it’d be about 4500 right. It’d be 50% higher would be what your revenue would become. 

Erin [00:19:14] That sounds about right. 

Linzy [00:19:15] And I’m just saying that number because off the top, I know that 3000 is not going to be able to go very far for you. So. Right. We’re going to look at 3000 quickly. But I think given that you’re in this growth stage, we know that you need to grow. That’s a given. Right. Like we know that for your family’s needs, ten clients a week is not going to be enough. So we know that 15 is where you need to go or want to go and and where you need to go, right. So I want to look at 3000 really quickly just to see your current state. But I think we’ll actually play with that 15 a week because that’s a very realistic goal. And it sounds like you’re well on your way to that goal. 

Erin [00:19:49] Thank you. Yes. And with the clients too. You know, we start out meeting every week. And then as their symptoms improve we go to another week. And so that fluctuates with, you know, income and whatnot. But yeah in doing just a quick calculation, if I saw 15 people at a rate of 135 for four weeks. Yeah, that would be a little bit over 8000. 

Linzy [00:20:12] Oh okay. There you go. So we’re looking at much more then. So 8000. So if we do that math like yeah let’s play with these these possibility numbers. Because that’s really I think where we need to go for you. So 8000 a month would be if you’re seeing for a week totally full, but you don’t work 52 weeks a year. You have vacation, you have three kids. If your kids are anything like my kid, they are sick a lot. They bring home all the germs. Thinking about the big, big picture, let’s zoom out to a whole year right now. How many weeks a year do you want to work and do you actually work? There’s two weeks of of like just statutory holidays. I’ll say that just between like Christmas and MLK day and those days. So thinking about your big picture, how much time do you actually not work because of sick time, holidays and vacation. 

Erin [00:20:57] Or my ideal schedule? I would love to take six weeks off in the year because part of that too is with my boys sports. We go out of town. Yeah. 

Linzy [00:21:08] That travel. Yes. And that’s important. Okay, so if I put – I’m just going to kind of like zoom us out to like if you worked every single day and you saw all the clients you want to see, at your rate, you would be looking at $96,000 a year if you never took a day off. We know that we want you to work 46 weeks a year, because we want you to take six weeks off. So what I’m going to do is I’m just going to do the math to bring that down. So that brings us to 84,000 a year. 84,923 is kind of like your reasonable number. If you’re full when you’re working or you average out to full, because some weeks maybe you see 18 clients, the next week you see 13. If we average out to 15 and you take six weeks off, we’re looking at 84,923 for the year. 

Erin [00:21:50] Yes. And that matches with what I have on this spread. Awesome. 

Linzy [00:21:54] Okay. So you’ve got that projection already. Beautiful. I’m going to break that down now into month. And that’s going to be 7076. So that’s what I’m going to put in the top of your profit first calculator here as your monthly revenue would be 7076. So now we’re just going to do a gut check on these numbers Erin. So for folks who are listening they obviously can’t see you because this is a podcast. But we have a calculator we’re looking at and it’s got the different categories of profit first, which is like profit, taxes, salary, operating expenses, and then we’ve got a big goal category, which is one that I always include, which is not part of core profit first, but I think is core. So we’re going to just look at the percentages and see what they mean for your numbers in this. Okay. So these are the default numbers. And we’re going to start with operating expenses because that is a different kind of number. That’s a number that you don’t pay taxes on. So we treat it a little differently. So right now if you were bringing in $7,076 on average, and we had your expenses at 30%, which is like the standard that Mike Michalowicz suggests, you would be at $2,122 a month to run your practice. How does that number land with you? 

Erin [00:22:59] That sounds very spot on, because that’s essentially where I’m at between paying for, you know, podcasting expenses, coaching, the email newsletter, the EHR, all the things, and rent office, everything adds up so quickly. 

Linzy [00:23:15] Yes it does. Okay. Yeah. Right. So that actually is what you need. So once you get to your cruising altitude that 30% operating expenses is going to cover what you need. So that’s great. You know, I would almost suggest you might want to think about it being a little bit higher. If that’s where you are now. There might be some extra expenses that come when you’re a bit busier. But for now, we’re just going to like be like, okay, we’re just gonna accept that as a gift. 

Erin [00:23:37] But that is true because it would be lovely to hire like a virtual assistant, for example. 

Linzy [00:23:44] Yes. Let’s kind of like bookmark that and look at your other numbers first and then see later if that feels like a priority compared to your paycheck. So right now with these numbers, the way that they are, Erin, your salary at 50% gives you take home cash pay – this is cash going home to you – of about $3,500 a month. So 3538 how does that number land for you? 

Erin [00:24:06] That would be lovely. 

Linzy [00:24:07] Okay, okay. So that’s a happy number. 

Erin [00:24:09] Yes. I mean, our goal is to be living simply. So our goal is to live simply. But at the same time like of course if there is more profit coming in that’s great. But so with this salary, is this also covering personal profit or is this. Do you know what I mean? 

Linzy [00:24:31] Yeah I do, so personal profit. Do you mean like extra money coming in? Like tell me more about that.  

Erin [00:24:39] On my spreadsheet. I have a monthly budget need of about $4,900. 

Linzy [00:24:47] Okay, 4900. And that 4900. Tell me what jobs that 4900 does for your household. 

Erin [00:24:52] Okay. That will cover my business expenses plus personal expenses that I have. Guesstimate it at a minimum. Let’s say. Okay. 

Linzy [00:25:02] So that also covers your business expenses. 

Erin [00:25:04] Yes. 

Linzy [00:25:05] So that that number there actually is going to include these operating expenses then. Is that right. Because that’s the money to run your business. 

Erin [00:25:12] Oh true. 

Linzy [00:25:13] Yeah. Now we’ve separated those things out. And this is one of the nice things about profit first right. Is it’s really clarifying that it’s like 2000 is for your business. This is actually just cash going home. Taxes we’re going to talk about in a minute. So this is just cash paycheck which you could pay yourself $3,500 once a month. You could pay yourself half of that twice a month. Like you get to divvy it out how you want. But this is like a sustainable number once you get to this cruising altitude that we’re talking about. 

Erin [00:25:37] Wonderful. That’s that would absolutely cover my needs and some. 

Linzy [00:25:42] Beautiful because then the other pieces here, Erin, that we always want to look at with profit first is taxes. So the taxes here, this is kind of like a side quest for you. This is some homework I’m going to give you. Is to look at you and your husband’s combined tax rate as a couple, based on what you plan to earn and what he earns from his veterans benefits. Looking at your your city and your state, you can just find online tax calculators that will do this. If you just look up tax calculator, how much will you to owe together? And what you want to look for is your effective tax rate. So that’s your average tax rate that you’re going to owe as a couple. There’s a bit of extra taxes that you will also as a self-employed person. And I have a tool for that. There’s a workshop that I have that I can link in the show notes for this episode, which walks you through how to save for taxes, like looking at your tax rate with your self-employment taxes, because those are an extra 7.5%, and making sure that between you and your husband, you’ve got it covered, right? So that’s kind of an extra side quest that you could do. What we want to make sure is that you’re just covering the amount of taxes that you are going to owe based on you and your husband filing together, because as Americans, the default is that you file jointly and you have a shared income tax rate that you have to pay. 

Erin [00:26:50] Yes. Now his military benefits are tax exempt, which is beautiful. 

Linzy [00:26:55] That is beautiful. 

Erin [00:26:56] But still with the self-employed taxes. Yes. That’s something that has been another learning curve because I can’t afford an accountant anymore like I used to. 

Linzy [00:27:06] Okay, that puts my brain off in all other directions. I do think an accountant is a worthwhile investment. I will say that. So we’re not going to go too deep into that. But I will say like that, that language of like, I can’t afford it. A decent accountant will save you much more than their fees in tax savings. Okay? Right. Because they know the rules. They love the rules. They know the new IRS benefit that’s come out that most of us don’t know about yet. And so I would you know, I’d like to challenge that as maybe a limiting story that you can’t afford an accountant. I think an accountant, any accountant who is decent, is going to make you back their fee in savings. They’re going to find you that you would not find for yourself. Okay. And then, you know you’re compliant. Yes. And it’s all done properly. 

Erin [00:27:46] Yes, I’m definitely open to that. And that’s part of the reason why I’m here today, because I do get tunnel vision with some of these obstacles. 

Linzy [00:27:55] Yes, yes, we all do. We all do. This is why we need other humans in our lives. Okay, so this tax amount then what I will tell you is that the default tax about for profit first is 15%. That’s like a really low number. It’s probably less than you need to say for your tax rate. But that’s because profit first taxes apply to all the money coming in the door. Right. We’re setting aside 15% of all of the 7000 that comes in the door, but you’re actually spending 2000 of that to run your business. Right. So that’s why it’s a lower number. You can look into, once you figure out your tax rate, modifying it to fit into profit first, we just like apply the tax rate to what’s left for you. So you’re going to take your tax rate. Let’s say you figure out your tax rate is 20%. And it might be quite low actually in North Carolina. I’m not sure of North Carolina’s tax situation, but I don’t consider it a high tax state. It doesn’t bring my brain that way. So what you’re going to do is you’re going to take the number that’s left. So you’re actually living off 70% of what comes in the business. You’re going to take the number 70 and multiply that by your tax rate. And that’s what we’re going to put in this profit first box. And since this is recording you can go back and listen to it when your podcast comes out later to guide you in that process to double check your numbers. But this 15% assumes a tax rate of about 20%, income tax about 20%, which for many people covers your needs. Especially since you have kids, you’re going to also qualify for certain benefits from the government, like there’s certain exemptions that we all qualify for. I’m going to just move forward right now, assuming that this 15% is like accurate enough that we can still play with these numbers. 

Erin [00:29:21] Okay. 

Linzy [00:29:21] Beautiful. So that would mean each month that Erin, you’re putting aside just over $1,000 for taxes as part of this equation. And then this top bit here is profit. Are you familiar with that concept from Profit First? 

Erin [00:29:33] Not really. So it’s very helpful to get this one on one feedback. 

Linzy [00:29:38] So the profit first, the concept of profit first is that most businesses the way that Mike Michalowicz puts it is they’re like money eating machines. It’s so easy for us to spend money in our businesses. And I see it for myself too. Like I’m so much faster to like, buy my team lunch out of the business and be like, oh, it was only $77. If I spent $77 on lunch out of my own budget, I’m like, oh, was that worth it? Right. It’s so easy to spend out of the business. And so the concept of profit first is we want to make sure that there’s always profit in the business. There’s extra money. And in a therapy world, you know, profit can be a dirty word, because we’re supposed to be serving people and whatever. But the way that I’ve really started to think about profit over, like, the last few years of working with therapists is profit is is your oxygen. And that’s Julie Herres’s phrase that I learned from Julie Herres, who wrote Profit First for Therapists, which I recommend, that just came out last spring. Profit is your oxygen. That’s that extra money we were talking about in your business, right? That’s the money that’s there if things go sideways, right, that’s that extra. Now, the way that I tend to teach is the profit in profit first, though, as long as you’re saving money in other places and you’re starting to build up some extra operating expense money, you’re building up some extra paycheck money, which is what I teach in Money Skills for Therapists. I teach systems to do that. Then you can actually just take all your profit. It’s going to be your reward money. It’s going to be your extra bonus money. Right. So in your case right now this is a monthly number. So it’s a 350 a month you could take for profit. You take it quarterly to reward yourself for taking risks and running a business. Right. And like doing all these hard things that you’re doing. How does that number land with you? 

Erin [00:31:20] That sounds amazing. 

Linzy [00:31:22] Okay, great. So that I’m seeing all these numbers are making your body happy, which I like. 

Erin [00:31:26] Yes. And I agree with how profit can feel like oxygen because I can imagine myself once I am in the space where am I doing this budget rework and moving my money differently will help me feel like I have that breathing room, because right now it does not feel that way. 

Linzy [00:31:45] Yes, yes. And this is where this perspective helps, right? Like when we zoom out, it’s like, okay, when you get where you want to be, which you’re not very far from that place. All these things are immediately possible, right? But part of it is we need to make the decision to make them happen, right? Because the human tendency is that we are going to either kind of spend blindly or we’re going to hold onto the money not knowing where to put it, or we’re going to put it where there’s pain. But that’s not actually what’s going to make our life better. Right? So this is why we’re we’re doing this big picture work now and zooming out before you’re even in this position of having this money. 

Erin [00:32:19] Yes. And I definitely fall into the category of putting too much money towards my pain. 

Linzy [00:32:24] Yes. Yeah. And we do that. We all do that as humans, right? It’s like your, the feeling lonely or sad. One night you’re scrolling through Instagram, you see something shiny, you buy it because it makes you feel better for literally three minutes. That’s what we do as humans, right? As we try to find the root out of our pain. But that doesn’t actually necessarily give us long term relief or long term joy or connection and the things that actually make life better. What I’m hearing is these numbers are sitting nicely with you. There’s one more piece, though, that’s not on this calculator yet, which is debt. Debt repayment. 

Erin [00:32:53] Right. 

Linzy [00:32:54] So thinking about debt, there’s a couple places here that you have opportunity then to service this debt. We have this profit money which is like 350 a month. And we also have your salary, your street cash coming home, which is about 3500 a month. We’re going to play now. So I’m going to add debt to your bottom line here. I’m going to change this big goals line on our calculator to credit card debt. 

Erin [00:33:15] Yes. 

Linzy [00:33:16] And now we’re just going to be curious about taking money from somewhere else. Because right now this adds up to 100%. Okay. We’re going to reassign some jobs from some of these dollars. So where could you see a number be a little bit lower, so we could put money towards your credit card debt. 

Erin [00:33:29] Well I guess it would have to either come from the profit or the salary category. 

Linzy [00:33:36] And if you think about your paycheck coming home being a little bit less, what number would still be a number that feels like enough? 

Erin [00:33:42] Could we try 45%? 

Linzy [00:33:45] Absolutely. So if we make that salary 45 now it’s 3184. 

Erin [00:33:49] Okay. 

Linzy [00:33:50] Yeah. How does that sit? 

Erin [00:33:52] That still covers me. Beautiful. Okay. 

Linzy [00:33:54] And then if we move that 5% over into credit card debt, then you’re putting 353 a month towards credit card debt. How does that sit with you?  

Erin [00:34:03] Yeah. Right now I’ve really been pouring all the extra into the credit card. 

Linzy [00:34:08] I hear that, I hear that, yeah. 

Erin [00:34:10] Yeah. And my goal is to be debt free by the end of the year. 

Linzy [00:34:14] Okay. So your goal is debt free by the end of the year. That credit card remind me the balance. 

Erin [00:34:18] Mmmmmm. 

Linzy [00:34:20] I know, it’s an icky number. 

Erin [00:34:22] Yeah. Okay. Well, yeah. All the debts, the credit card debt is 20,000.  

Linzy [00:34:28] I did know that number. I had just written that number down, so 20,000. Okay. And that’s a really good number for us to know, because if you want to pay that number, I’m going to do some quick math just on the principle on that number. So just paying down the main amount without considering the fact that there’s interest every month to pay down $20,000 in 12 months, you’d have to put $1,066 a month before any interest has been added. Right. So we’re probably looking we can look at a calculator together if you want, but we’re probably looking more at like 2000 a month. 

Erin [00:35:02] Yeah. So then do I need to reconsider spacing that out more. Because again, like you were saying earlier, my kids are only young once. Yes, exactly. And they can’t. Yes. Like debt does not feel good. But my kids are not going to know the difference if that credit card is paid off or not. 

Linzy [00:35:22] Exactly. 

Erin [00:35:23] What they’re going to see is if I’m present with them, if we’re doing things together and I can’t. It has been such a struggle. The more I really think about it, because sometimes I do try to step away and I think I can’t continue to look at the balance like just transfer the money, pay it, walk away. 

Linzy [00:35:44] Exactly. So we’re going to take a quick look. Now I’ve just done a really quick search for credit card pay down calculator. There’s dozens of these. Most of them are websites that are selling you something. So they’re going to say and at the end debt consolidation or like join our bank. So that’s fine. We can ignore those parts because that’s not what we’re looking for. But this what I find is really helpful, Erin is like, let’s talk about real numbers, right? Like what is the actual cost of debt? Because debt is just an expense, right? It’s money that you took on. You had to cover this unexpected loss of income that happened. Right? You didn’t have just like $50,000 sitting around to cover your life for X amount of time. And so you took on debt. Debt can be part of a strategic way of managing our money. Okay. Right. If we take out those negative stories, if we take out or that I should have or I failed or make it a symbol of this bad time, if we can remove those things, it’s just another financial decision to make alongside all your other financial decisions around where money’s going to serve you best in your life. 

Erin [00:36:44] Right? Right. 

Linzy [00:36:45] So your credit card interest rate, do you have a guess or do you know your interest rate? 

Erin [00:36:50] It’s 18.15. 

Linzy [00:36:52] Yeah, that’s pretty standard okay. And right now, let’s put this down here. Desired months to pay off. This will give us that real number that we were just talking about. 

Erin [00:37:01] Okay. 

Linzy [00:37:01] If you want to pay it off in 12 months. So a year from now, I’m going to calculate you would have to make a monthly payment of 1835. Okay. And the total interest that you would pay is $2,000 for that whole year. Like that’s how much it would cost you to have held that debt for a year. Okay. Right. $2,000 on 20,000. So it’s kind of like each month. Then you’re paying $166 of interest on this pay down plan. Right. So that’s what we’re talking about is like we’re talking about making a plan that, you know, the kind of amount we’re talking about is $166 a month. Let’s just be curious about extending that timeline. Maybe this is not the most important thing in your life. 

Erin [00:37:43] Okay. 

Linzy [00:37:44] What would be another timeline that could sit nicely with you on how long you want to take to pay off this card? 

Erin [00:37:51] Can we try two years and do 24 months? 

Linzy [00:37:54] 24 months? Let’s do it. So now you’re looking at a payment of $1,000 a month, and you’re paying about double the interest. So your interest per month is 398 for that whole two years. If I divide that out by 24, you’re still paying 166 a month in interest. You’re just paying it for longer. 

Erin [00:38:12] Right? Well, I’m going to be making more money. Yeah, hopefully the longer I do this. 

Linzy [00:38:18] You are. Yep. So if we think about this like we are talking about $166 of interest a month that it’s costing you to hold this debt on average, that money, that number is going to get smaller and smaller as the debt goes down. But I’m just kind of averaging it. Right. So if we think about that, that over the whole life of your 24 months of credit card debt, it’s 166 a month. How heavy is the number 166 a month compared to the other things in your life? 

Erin [00:38:44] When you break it down like that, it doesn’t feel so heavy because that essentially is only one session a month. One hour. 

Linzy [00:38:52] 100%. So like one hour and like, I don’t know, maybe 20 minutes of your time using your expertise is covering the expense of carrying this debt. 

Erin [00:39:02] Wow. 

Linzy [00:39:03] What do you notice about that? 

Erin [00:39:05] I just feel a huge weight lifted off because I have just been so caught up in. I’ve got to get rid of this. I’ve got to get rid of this. And then to think, what am I doing? Like, it’s. Yes, I want to pay more than just the interest, pay down on the principle. But I just have other important things in my life that are a priority besides credit card interest. 

Linzy [00:39:27] Exactly. So, you know, if we think about this now, coming back to your profit first calculator, now you can put this in perspective with your other numbers, right, of like what is that timeline? I will I will share with you that I have debt associated with a backyard cottage, we built a cottage that’s our second business. So we built a cottage in our backyard. We rent to students. We’ve created like beautiful, safe housing in our community where housing is low. That is a big investment. When you’re talking about building earlier, like your husband building the house. The other thing comes to mind to me is there’s it’s always way more money than you think. Oh, it’s construction, right. So there was a big cost overages. And those cost overages mean that on top of the mortgage that we took out planning to, there’s an extra $35,000 of debt on a line of credit, right. That could cause me a lot of pain if I want to be like, oh, you know, like we weren’t told about the contractor, about that sewage. And this is the extra, like, money that it cost because people made mistakes. Like that could be really loaded money for me. Right? If I lean into that side of the story. But if I look at the other side of the story that it’s like we built this beautiful thing, right? It’s doing exactly what we want it to do. We have two wonderful students who are so conscientious and kind, who have a beautiful place to live. They literally are occupying a part of our backyard that we didn’t use. And now it’s productive, beautiful housing, you know, where they’re living out their their years as university students. When I talk about it like that and I think about like, okay, you know, at this rate we’re paying it down in four years. There’s no pain there. I actually feel really like my body feels light and excited by us doing that. That’s wonderful. Right. So it’s a different it’s it’s the same number. It’s still like going to take time to pay it down. It’s still costing me money. But I’m leaning into the other side of the story. So you know, as I’m, you know, we’re thinking about your debt, it’s like, yeah, what side of the story do you want to lean into? And what is important compared to paying down this debt. 

Erin [00:41:18] Right. Yeah. And what’s important is my family and using this money for my family, not just over focusing on the business credit card interest. 100%. 

Linzy [00:41:32] Yes. So when we look at this, then you know your profit first numbers. This is where now that we can put that in perspective, the debt right now with this 5% towards debt, it’d be 353 a month. So it’d be longer than that two year pay down period. This probably would put you more like a four year pay down period. 

Erin [00:41:48] Okay. 

Linzy [00:41:48] Is there anywhere else in here that you would want to see where you see wiggle that you’d like to see money go to the credit card instead? Or did these numbers feel good enough? 

Erin [00:41:59] I feel like right now where I am right now, currently in my life, the numbers work and perhaps I can be flexible. And once the home is built and we’re solid on all of the projects, then I can shift again. 

Linzy [00:42:17] Yes. Yes. Okay. So these numbers work for where you are. And they work for your current priorities in this specific chapter of life that you’re in. While your boys are young and you’re building this home for your family. 

Erin [00:42:30] Right? Right. And it will be gone one day. I don’t need to rush into it or force it at the expense of investing in my family. 

Linzy [00:42:42] Absolutely. Absolutely. So, Erin, what are you taking away from this conversation today? 

Erin [00:42:48] I feel so much better. Linzy. 

Linzy [00:42:52] Good. 

Erin [00:42:52] I sincerely appreciate this opportunity to talk to you, because you don’t get this kind of advice or expertise or perspective. It’s one of also my takeaways is that my credit card debt and interest is not the end of the world. I really need to, again, just like my values based practice, I really need to lean into my values and have my money match those values. 

Linzy [00:43:19] Absolutely. Yeah, and what I’m seeing, too, with your numbers, is you’re on track to get to a great place, even without changing your fee. Right. So this is your fee as it is. Right. And we started with that as part of the conversation is like you’re in a smaller place. Yeah. What is that emotion you’re showing on your face right now? 

Erin [00:43:35] Wow. That is incredible. I love I love that I don’t have to change my fee and that it is truly going to work for me. 

Linzy [00:43:45] Yes. Like the way that these numbers look right now, you just keep doing what you’re doing. Get up to this 15 a week, have that podcast help folks find you. We didn’t count your sponsorship money in these numbers either. 

Erin [00:43:58] That’s true. 

Linzy [00:43:58] So there’s a little extra there. So I’m going to give you this calculator. You can keep playing with it. Keep being curious. Add those sponsorship numbers see what’s possible. But what I’m seeing is like keep doing what you’re doing. You’re on a great track. 

Erin [00:44:09] This is wonderful, Linzy I really appreciate this. 

Linzy [00:44:12] Thank you so much, Erin, for coming on the podcast. I’m so grateful to Erin and to all of the therapists who come onto this podcast for coaching, for sharing their stories and their numbers. It’s so vulnerable. And I said that to Erin at the beginning of our recording. It’s such a vulnerable thing to do, to come on a podcast and talk about not only your personal anxieties and fears and where you are in your business, but your actual numbers. And so I’m so grateful to Erin for coming on and sharing her numbers fully, so we could actually really dig in and understand what’s happening. And in her case, see that she’s actually going to be fine. She’s in a good position and she just needs to keep doing exactly what she’s doing. And that piece about the debt. I’m really grateful that that came up today, because I was actually just thinking about it this morning before I recorded with Erin. Of conversations that I have with students inside Money Skills for Therapists about debt, and the stories and meanings that we attach to debt, and how much charge that can create around debt, and how that can make it feel so financially urgent when it isn’t necessarily going to actually be your top priority based on what else is happening in your life. So with Erin having her, her three boys and the age that they are and building a home and like basically, you know, managing their childhoods, creating a childhood for them, that in the end is actually more important to her than paying down that credit card debt and having clarity around that. In this case, it like, set her free. You know, like her, her body language at the end was so excited and relieved. And so it’s really important for all of us to think about debt. And how important is paying down that debt compared to the other things in your life? It’s one of many priorities. It is not the most important thing. 

If you want to get more from me, you can follow me on Instagram at Money Nuts and Bolts. And I want to share about that workshop that I mentioned to Erin, which is the taxes workshop. It’s called Setting Enough Aside for taxes in five Easy Steps in this free workshop. You learn the real steps to make sure that your taxes are totally taken care of. You’re going to learn what mistakes to avoid when setting aside taxes for your private practice. And you’re going to learn how to use a simple and pretty tool that will tell you exactly how much to put aside to cover your own taxes each year. So I’m going to put a link to that workshop in the show notes. It’s a video and a tool to walk you through that process to get clear on your own taxes, making sure that you are setting enough aside that it’s never going to be a problem for you. Thank you so much for listening today.