The Importance of Being Earning: part 2

 

Following on from this post, I’ve received my first paid invoice to my limited company as part of my new job as an engineering contractor for work carried out for 3 weeks October. Happy days!

More importantly, it means that I can 1) repay my expenses 2) pay a salary and 3) pay dividends! Which means some much needed money coming into the Gentleman’s Family Finances bank account.

Hours x Rate = Pay

There’s a big mindset change for me now in this position. I get paid for the hours I put into work (productive hours I should add) and at the end of the month, I add up the hours and multiply that by my rate to get my total for the month.

In October worked 121.5 hours over 3 weeks (short month and started on the 7th of October) and that meant that I was paid more (gross) than I’d ever been paid before in a month (notwithstanding bonuses/extra payments). And that was only for 14 days work as one day I was looking after the Master (and a bit sick myself) and didn’t get paid for that one.

  • Come in late – don’t get paid
  • Day off sick – don’t get paid
  • On holiday – don’t get paid.

Being only paid for what you do is a bit of a strange concept when you have an annual salary paid monthly. All your focus might be on the end of year bonus/performance review – here, the focus is on getting your hours done – end of story.

Work is just a Four Letter Word

My work is stimulating and varied. Not too many meetings but enough engagement with others to keep me happy and I like the technical aspects of the work too. It is however a bit more precarious than I would have thought. I was told at interview that it would be 40-50 hours a week but “flexible” (probably meaning I would be stretched instead of the work). So, I’ve been trying to come in early and leave to get home by 6 clocking 9.5 hours (less 30 mins for lunch) a day. Add on a 133 mile round trip and you have long days – long dark drives and not much energy for much else – evenings are tiring. This is a classic case of Your Money or Your Life, – it’s a Faustian Pact if you will. But think of what I get in return – lots of money!

Maiden Dividend

With the money that is left over after expenses are paid out and set-up/overheads costs are covered and remembering the tax man, there is a small amount left over to pay out as a dividend to the shareholders. This will mean a tax liability for the future but some cash for us right now – which will be useful for some investments that I want to make.

This money is welcome as we’ve been low on money coming into the GFF coffers recently.

Lifestyle Creep

So, my life is miserable and I work a lot to make lots of money. So, now that I’m rolling in it what will GFF splurge on? If truth be told – NOTHING. I have never really seen getting paid as an excuse to loosen the purse strings and I’ve also always been awash with cash from investing in P2P investments (lots of money in/out every month), just having money doesn’t mean I spend it.

I am however thinking that anything which can make life more convenient is a good thing. Like the tumble dryer – how did we live without it? I’ve even thought of getting a cleaner – which is defintely not frugal. I’ll not say too much about that in case the frugal FI mafia call me out for not keeping true to the FIRE orthodoxy.

Thinking that since if I wasn’t doing this job I would maybe not be working – how has that changed now that we have more money coming in? Mmm… I’m not sure. Certainly if I had more time, then I would opt less for convenience and more for economy. On big spending things like travel (which isn’t cheap), I am not sure. We certainly booked the skiing holiday back months ago when we knew that my old job was most likely going to change – but since we both enjoy skiing so much, I think that we would have buckled our boots and tightened our belts to save the money.

It might make you wonder what’s the point of working and earning if you are not going to spend it? That’s the difference between a Savers Mindset and a Spenders Mindset.

Beware the tax man

The amount I invoiced and was paid is not 100% the shareholders of the company yet. I have expenses to pay and then there’s the tax as well. A great rule of thumb is that you should retain 30% of your turnover for tax/NI. I’m going to ignore that and only use 30% of my turnover less expenses – and I’m responsible enough to manage this properly.

If you fail to save any money and spend it all, then lose your job , you could end up with a huge tax bill and no way to pay it off! This happens more often than you’d think.

A return to earning ways

I don’t feel elated from getting paid but I do feel that this is going to be a good move for us. The kids are happy in nursery (thankfully) and I can live with the commute and long(ish) hours. The big boost in family income will only help us towards FI (even if our spending does go up a bit – mostly due to nursery costs). But in the mean time, I’m just focused on getting into a nice family rhythm of work/play and not thinking about spending/pay.

Thanks, GFF

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