So You Got Your First Payment… Party, Panic, or No Problem?

You just received your first payment - holy ****, congratulations!! Someone out there believes in you, believes in your product or service, and paid you to make their life better. That’s a heck of a feeling. You celebrate a little (or a lot, no judgement here) and then, as you come down from the high, questions and panic takes over. What do I do with this? Should I have a full accounting system prepped and ready? Do I need to take into account taxes or any other items out of this payment?

First off, take a deep breath. You have worked your butt off to get to this point and should celebrate the moment. Appreciate your journey, look back on all the work you have done so far, and bring that energy you just felt from your first payment into every single day of your work journey moving forward.

Now, let’s get into some of my suggestions for what to do with that first golden payment.

Before you get used to seeing that beautiful number, my first suggestion is to do a rough calculation of what you’ll owe in taxes. This number will largely differ based on what country, province, state, or even maybe city that you are in, so make sure to do a quick Google to figure out that percentage. Most of the time, taxes are based off your annual income, so dream big of what you hope that number will be if you get your dream number of clients, and grab that tax rate. My best recommendation if you’re not sure is to always always always ballpark high instead of low. If you’re debating between say 20% or 24%, do 24%. Now take your amount that you earned and multiply that by your percentage that you Googled. That is your tax owing. Say you’ve got a $1,000 payment and we’re using that 24% tax rate, you would owe $240. That $240 is no longer yours to play with. Stick that $240 in a new bank account (earning interest!!) and don’t touch it again until tax time. You’ll be grateful to have that buffer so that there are no surprises when the time comes to pay taxes.

My second suggestion is to record it. Anywhere, anyhow, doesn’t need to be in a big fancy accounting software. I, for example, am using an Excel sheet. You just need to know three things. Who paid you, when did payment hit your account, and how much. That’s it, three columns and you’ve got your own income recording set up for success.

My third suggestion goes hand in hand with suggestion two and that is to make sure you have some kind of paper trail available. Knowing who paid you, when they paid, and how much is great, but going that step further and having either an invoice that you can generate and show as paid, or even a confirmation email to confirm receipt of payment will be so handy if you ever need to show proof of income.

And that’s it! You don’t need to have everything figured out in the beginning. Just three simple steps: separate, record, and recognize. And yes, having a little party to celebrate this occasion is definitely warranted.