An owner-operator's No. 1 challenge today is keeping more of their hard-earned money. We’d like to tackle this problem by listing four key steps that help owner-operators hold onto the revenue they generate.
Before looking at your expenses, you will need to understand them fully. Look at your expenses over the past 60 to 90 days. If you have an ATBS Profit and Loss Statement, this tool will serve as your expense road map. If you don’t have an ATBS Profit and Loss Statement, you will need to calculate every expense in your business and personal life. Once you have a strong sense of the money coming in and going out the door, you can get started planning how to lower your expenses and increase your profit.
Step 1: Personal Expense Allocation
Your first expense strategy is to identify the total funds you have each month after you’ve paid your trucking expenses. A typical owner-operator will have gross revenue in the range of $14,500 a month and truck expenses of $9,250 per month, leaving a net income of $5,250 a month.
Owner-operators should allocate approximately 60% of their net income for all personal expenses. If you exceed 60%, then you might need to review your list of personal expenses and cut back.
Step 2: Cover Taxes and Retirement – Then Have Fun
The next step is to divide the remaining 40% of your net income into three areas including; 25% for Tax Estimates,10% for Retirement, and 5% for Fun and Unexpected Expenses. If you have the discipline, remain committed to saving as much as possible by maximizing the retirement bucket whenever possible. It is remarkable how quickly you can reach retirement goals by putting away as much money as you can early in life.
Step 3: Tend Your Financial Garden
Understanding your expenses is not an annual task; it’s a task that should be addressed every month if possible. We’ve compiled a list of the biggest expense areas that are opportunities for an owner-operator to consider:
1. Credit Card Debt. If you have credit card debt, consider paying it as soon as possible. Credit Cards are good cash management tools but they are typically one of the worst ways to rack up debt because of high interest rates. A monthly credit card bill includes information on how long it will take you to pay off your balance if you only make minimum payments. It also tells you how much you would need to pay each month in order to pay off your balance in three years.
2. Extra Cars. Does your family have more than one car? If there are extra or unused cars and trucks in your driveway, consider selling them immediately especially if you are making a payment; not only will you save on car payments but you will save on car insurance, taxes, and gas purchases.
3. Luxury Expenses. One of the “low-hanging fruits” in your financial garden is the “Entertainment and Food” expense. Decide to eat at home more often and find entertainment that does not cost a lot. You’d be surprised to find that most public museums, zoos, and art houses offer “free days” throughout the year.
4. Unnecessary Expenses. Review your housing expenses and look for unnecessary expenditures such as cable TV, home phone, and Starbucks coffees. Consider calling the competition to ensure you are getting the best rate possible.
5. Comparison Tools. Be vigilant with your Smartphone bill and your insurance bills. It’s no cost to inquire and some sites make comparing fast, and easy.
Step 4: Fuel Expenses
Owner-operators face high fuel expenses and we’ve compiled some ways to save money on fuel:
Slow down
Find the “sweet spot” of your engine
Be smart with braking
Minimize idling
Use your carrier's fuel network
Take advantage of fuel-saving cards and app
Owner-operators live with the day-to-day challenge of rising costs. This means today’s owner-operators need to continually focus on ways to be smart with their money. From expenses at home to fuel expenses on the road, each expense is an opportunity to either save money or waste money. At ATBS we hope you take the time to consider ways to save money.