Today we are talking about some basics of money management and as a startup entrepreneur or a relatively new entrepreneur, you’re like, “Well, I’m not necessarily making money yet.” Or maybe I’m just making enough to kind of bootstrap my way through my business. So I’m not really quite sure about management.
One of the things I want to talk to you about is some of these really good habits and tips to start getting into right away. The earlier you can get started implementing these best money management tips in your business, the better off you will be setting up yourself for the future.
And so I’m a big fan of paying yourself first. Whether you’re looking at it from a business perspective this past month inside our membership, we’ve been talking about Mike McCollough, what’s his Profit First.
First, I do the profit first system. I have clients and colleagues who do the profit first system as well. And just to give you a really quick light overview I’m going to run through some of the tips. You should check out the book. It’s fabulous, but the idea is that you take a percentage of your money every two weeks and put away your profit.
Most business accounting strategies, it’s income minus expenses, and whatever’s left over, if there’s anything leftover there may not be anything left over, is what would be considered your profit.
How Profit First Helps with Business Money Management
First, I want to make it clear that Profit First works differently. You actually take a percentage of profit first and you want to make sure that your expenses are being covered by a smaller percentage of the money that you bring in. Plus you also put aside money for taxes. That’s kind of like the super simple version of profit first, but the thing that’s really important about it is that concept of paying yourself first. This truly goes against what normal accounting tells you to do but it truly works.
Even if you’re not an entrepreneur and you’re just popping over to watch me, the same thing goes true in terms of how you use your paycheck. You bring your money and put your money into your retirement, to put your money into places that’s taking care of you first in our world.
It’s a great example of what we talk about often here at Love then Lead. We get to love me first.
Well, this is the financial equivalent of having that type of integrity. I love me first. I put my money away. First look, some people say you shouldn’t put away money for your kid’s college until you’ve taken care of your own retirement. You first… then them. This is because they could always get scholarships or pay their way through college or other things like that.
The idea is that you’re doing that before you’re using the habit of spending everything that’s in your bank accounts.
Some of us will look at our bank accounts and go, “Oh, well, I got a couple of hundred bucks left. I’m going to go ahead and do this, this, this, and this.” Instead of taking the habits of having your money go where you tell it to go.
Tell Your Money Where to Work
Sometimes our best friend money, she needs a little help. She needs some directions. We gotta help her get to where we want her to go so that we’re all flowing beautifully together. So again, the first tip that I want to share with you guys is I love me first.
So profit first. Pay you first. Whatever it looks like. And then the idea is that you make that a habit, a regular recurrent habit. If you have to set yourself a coffee date with money, just like you go see your business bestie or your real besties and get a mani-pedi. Then take your friend Money out and go have some fun. Set a regular date to get clear on the numbers when your finances are in intense integrity and you at least have a clear plan picture of where everything is and where everything is supposed to go.
That can really help you create what you’re looking to create in the future. If you want to have a net worth and reach the million dollar mark, or if you want to save money to buy a house or to buy an office building or to have investments that help keep building you starting that habit from the very beginning of your business is a great key to really have it set.
I wish I had started it with the beginning of my business guys, you know how imperfect I am, but at least I’m doing it now. I’ve been investing for a long time. I do have a high net worth. I’m really, I’m doing a great job, but, as far as my cash flow management, this is a habit that I’ve been doing and sharing.
Setting Up Profit First Accounts
Part of running your profit first system correctly is creating multiple accounts for your different fund areas.
I do the profit first system, therefore, I have multiple accounts. I send the money where it needs to go. And I make sure that my expenses are in that percentage that I determined. Now, the other reason that this is really helpful is if you’re just getting started and you’re setting your prices low, you’ll start to understand, how much money you need to cover your monthly expenses in the business.
Know Your Numbers
For example, if you have one coaching client at $300 a month. Let’s say your email service provider to keep building your clients is $30 a month. That’s 10%. So, you know, you have 10% expenses, you know, you have more expenses cause you have to pay your phone bill or all of the other things that let you run your business.
Then if you’re looking at 50% of your expenses, then you’re only taking in $150 for yourself of what you want to put aside. Some for taxes, some for profits. So it helps you determine the profitability of your business. It also shows that your business can be profitable right away. So it’s also helpful to have a really good start building these regular habits, to see how your money is playing, where she’s going, where she’s spending her time. So that you can make those choices. If you’re ready to.
Let’s say you want to create a shop to start selling your quilts or your vegetables or your something. And you want to house it on your own website. Let’s also assume it’s going to cost $350 in software services to integrate everything with my email service provider.
If I amortize that over the year, then you can start to see, “I need how many clients to cover all those expenses. And I need how many clients to get myself profits so that I can live off of the profits.”
So these are the kinds of money gains that you want to be thinking about as you’re setting up your business.
What if I’ve Already Started My Business?
If you’ve already got your business moving, really looking at how to keep your profit margins larger, which is what we want and keeping your expenses down, or at least at the rate that you want so that you can also look at, “Oh, look, I have a big profit margin. Now it’s time to bring on a team member.”
It lets you look at your financial systems and determine these things with data to back up your decision.
Some of the other recommendations are, if you’re looking to hire a VA. Let’s see, you want to hire a VA at $300 a month is a really good number. So I’m just going to say that for $300 a month and you say, “Okay, well I need to set aside that much time, that percentage of my income to get to 300 a month. I want to do it for three months so I know I can give them a 90 day trial.”
The key here is that you can’t be in the world of denial when it comes to your money. You absolutely have to be doing it face to face to be happily making it a habit to talk to your money on a regular basis.
Because what happens when you say, “Oh, I want to create more income.” Especially if you want to be in a high vibration, high energy way of manifesting, having financial integrity, having the know-how of who you owe, where you owe, if you owe and how much is coming in.
When you say, “You know what, I don’t really know how I’m going to do this, but I’m going to manifest $10,000 or I’m going to manifest $3,000 in the next four days.” If your financial integrity is in right integrity, if you know what’s going on and all your agreements are clear then things will flow. That’s setting a foundation and clearing a space for money to say, “Oh, well, we’re in good terms.”
You’re basically saying, “Hey money. We have a great relationship. We’re honest with each other. We’re not hiding anything from each other.” And that gives that relationship, energy and flow. Then you can say, “Yes, absolutely because you have integrity.”
If you’ve let money down and you haven’t had a really good responsible relationship with her, when you ask her to show up randomly to come, hang out, she’s going to be, “Yeah, well, last time you did this, this didn’t work.”
So again, I’m always telling my folks to really look at our relationship with money as if she’s a human being. It’s energy and relationship is to be treated like a real life relationship.
It’s the energy that flows between the existence of two. So when you’re looking at creating great money management habits, having that sense of integrity makes it so that anything’s possible. When you want to create with money to say, “Hey, I’m ready to level up to do this next thing. And I don’t know how we’re going to do this, but I know that our intentions are good. We’ve created a nice clearing. We’ve created the habits to make sure that when we get a big windfall of money, we know exactly where to direct. We’ve got the directions on where we want to send her so she can help us the best, make the biggest impact and create the world that we’re looking for.”
Quick Tips Recap
So those are my money management tips, and I am not a financial advisor.
I am not a money management person, but I do have lots of personal experience. I’m an individual person who runs a business. Who’s done really well with handling my money in the last few years. So I have a high net worth. I have cash flow in my business. I have the revenue I’m covering my expenses, paying all my bills and paying myself my profit first.
Life is good. And it’s only gonna get better.
Every time I create these steps and create these habits, things just level and level. These are just some helpful practical things that you can do to pay yourself first. Create some great financial habits, a regular date with your friend money and make sure that all of your money relationship stuff is in integrity.
We’ve cleaned up the past with her and you’ve got everything set. You know where things are and that you’re not like, “Wait, what’s going on with my money here.” You’re not hiding. That’s the best. Here’s the one thing that will keep you from growing.