How I Became a Millionaire as an Independent Consultant

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How I Became a Millionaire as an Independent Consultant

Recently I logged into my retirement accounts and was surprised (and pleased!) to see that I had crossed the million-dollar mark. I don’t consider myself rich. In fact, money is usually tight at the end of the month. Yet my bank account says I’m a millionaire.

How did I do this? How can other self-employed consultants become wealthy too? Reflecting on my years as an independent consultant, I’ve boiled it down to five keys to success. (Sidebar: People define success differently. To me, having a million bucks in retirement savings is only one part of my total wealth. I also have a comfortable home, I’m healthy, and I have terrific relationships with family and friends. But I digress.)

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Setting Up a Foundation for Consulting Success

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Setting Up a Foundation for Consulting Success

This article covers two sides of the same coin for independent consultants: how to set up your business for success and what expenses to track to pay less tax. They're interrelated. Let’s tackle the tax question first.

What do I need to keep track of so I pay less tax?

Here’s a short list of the most important things and some tips to make it easier.

  1. Have a dedicated credit card that you use only for business expenses. Use this card for anything you can think of related to your business, such as parking, tolls, cell phone, internet, office supplies, etc. Even if you work from home, what would you normally buy if you were in an actual office? These business expenses will be deducted from your gross earnings to lower your taxable income. If you can, pay your health insurance with this same card since it too will be tax deductible.

Tip: Download the credit card's year-end summary so you have a spending breakdown by category. Or you can download the transactions into a tool like Quicken each month and categorize the expenses there. (You’ll have to break them out by category on your tax return.)

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Self-Employed? Lower Your Tax Bill!

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Self-Employed? Lower Your Tax Bill!

Tax season is probably the most important time for independent consultants to think like business owners. This especially means being smart about how we handle our money. Our motivation is simple: pay as little tax as possible, ideally without triggering an audit. We all should be asking ourselves (and our accountants) this question:

As a business owner, what can I do to lower my tax bill? 

The answer is to maximize your tax deductions for this year and take steps to reap tax saving benefits every year. This article touches on the first and explores the second in depth.

For the Near Term: Take Standard Business Owner Deductions

You don’t have to have a legal business structure like an LLC or S-corp to take advantage of standard business-owner tax deductions. Sole proprietors qualify for deductions too, even if you only consult part time.

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