As a business owner, I know you’re not immune to the sleepless nights wondering when the next sale is going to come through. I’ve been there, more times than I’d like to count. Even when things are good, there’s always that little voice in the back of my head wondering. What if business slows down? What if my car breaks down? What if my computer takes a dump? (And that last one has come true more times than I’d like to count!)
I’m definitely no expert when it comes to managing my finances, but there are a few things I’ve done to make sure that I’m doing okay. My business brings in my household’s only income, and I have a kid to feed and clothe (and put through college, starting in 2020). So sometimes I feel that pinch and that nagging voice more than I should.
I truly had the scarcity mindset.
There was never enough money, even when there really was enough. Because when there was enough, tomorrow there wouldn’t be. It’s not a healthy place to live. And I still live there some days. But I was able to take some steps to help me develop a healthier mindset with money. It’s taken me a long time, but here’s what I’ve done to move my business forward while feeling more at ease with my bank account.
- Separate business and personal finances. This is one of the best things I’ve done for my business and my personal budget. When the checks come in from clients, it’s easy to spend when it’s all in one account. But when I opened my business account, right around when I went full time in my business, there was no more co-mingling of money. I had to have a reason to pay myself. And if not, the money stayed in my business account. Of course, it helped that I have a sister who’s a CPA.
- Keep 3 months of expenses in my savings account. If you own a business, your income isn’t going to be consistent. Ever. I’ve tracked my sales every month for the last three years and while I can make an educated guess at which months will be my slow months, there’s always the unexpected fluke. I’ll have a banner month when I’m least expecting it or sales will take a dive on last year’s biggest month. Having at least three months of expenses in my personal savings account and three months of payroll in my business savings account keeps me emotionally on track when things don’t go quite as planned. Sure, I still stress about money. But I know that the mortgage is going to get paid and I’ll be able to put food on the table, even with an unexpected slow month.
- Set up regular payroll. I converted my business to an S Corp in 2014, and it was a huge game-changer for me. Prior to that, I’d scramble at tax time, trying to save for the huge tax bill I’d inevitably have. (Do I need to remind you that I suck at managing finances?) Once Write Solutions became an S Corp, I set up payroll through my accountant (yes, my sister the CPA at Lang Accounting Services). Twice a month, a direct deposit goes into my personal checking account from my business checking account. Not only did I get to tell her how much I wanted to get paid, but my taxes are now taken care of—monthly. It’s heaven, not having to worry about a huge tax bill every year. In fact, 2016 is the first year I’ve paid my taxes on time since I can remember.
- Set up a budget. Oh, the dreaded budget. It’s so restrictive, telling me how much I get to spend of my hard-earned money. I know. I’ve been there. Okay, still there most days. But having a budget in place gives me a much-needed reality check when it comes to my spending. My friend Kelsa at Fiscal Fitness Phoenix helped me put together a budget that helps me forecast the income in business so I can plan for things like car repairs, vacations and clothing my daughter (who grows like a weed!). Not only that, but I can plan for things like paying off my student loans and saving up for a new car before my 10-year-old Honda is 6 feet under (fingers crossed).
- Keep my head up. Because income fluctuates when you’re in business for yourself, it can be difficult to stay positive in the slow months. But if you keep yourself busy (something I’ll talk about later this month) in your own business, you’ll keep a positive attitude and some forward momentum going.
Of course, it helps when I practice what I preach, right? Just like “eating healthy,” I’m about 80 percent on, 90 percent of the time. We all have slip-ups and don’t always follow through. I am not as religious about sticking to my budget as I should be, especially in banner months. But taking these steps to set myself up for success has done wonders for my mindset and helped me grow my business beyond what I thought possible this year!
Note that I am not an accountant or a financial planner. This post is for informational purposes and is not meant to provide financial advice to anyone.
