Greater Than Business Podcast – Episode 015

 

This is episode 15 of the Greater Than Business Podcast. And today we are going to be talking all about how I manage my money in my business and my personal life and more specifically how I use Profit First in order to manage my money in my business and my personal life. So I use the book profit first by Mike Michalowicz, which I will link to in the show notes as my kind of my guide. But being me and being a little obsessive compulsive, I obviously have taken what he uses in the book and then perfected it so that it works best for my life. And the reason why is because I don’t just run a business, I run a household. So on top of being able to run my business in a Profit First method, I also run my household in a savings first method. So what I’ve done is taken all of the points out of Profit First that I love and I’ve made them specific towards savings.

So it’s kind of like Dave Ramsey’s snowball debt payment system. And then he also encourages you to save, even though you’re paying down your debt, he always says that you have to remember to pay yourself and save for yourself as well. So that was not a direct quote by any means, but um, it’s been years since I read his book, but obviously there’s some sort of lesson that he teaches in his book that tells you to basically always remember to save and don’t forget about savings even if you are in the most financial hardship place that you could possibly be in. It’s always important to save as much as you possibly can. So with that being said, I want to kind of backpedal a little bit here and I want to get into the nitty gritty of what Profit First is.

So in episode 14 I touched on money management and how important it is to know your numbers, manage your money, makes sure that your expenses are not exceeding your income and all of that stuff. And I told you to get a good start on reading Profit First if you haven’t already done so. So hopefully you were able to take me up on that offer and actually read the book and you kind of have a little bit of a base foundation for it. If not, there’s still time. You can always pause this episode, go read the book, come back or finish listening to this episode and then go pick up a copy of the book yourself. So as I said, the show notes can be found at GreaterThanBusiness.com/015 and that is exactly where you can find everything that I’m going to list out here.

And also a link to getting a template that I use for my business to manage the money and all of that fun stuff as well as my personal life. So without further ado, I want to get into exactly how I manage my income. So being in an online business, I have fluctuating income amounts, so there’s some months where I could bring in quite a few thousand dollars. And then there’s other months where I’m only bringing in my base income. And then there’s other months where I could bring in a lot of income. So obviously what I want to do is always be conscious of that, that my months can be fluctuating and it’s not going to be an easy thing. Like if I was paid on salary. So what I’ve done is I’ve created two different income flows in my business. So I have my agency income, which is my one-to-one retainers that I work with on a monthly basis and it’s guaranteed income so all of my clients pay me on a retainer.

And from there I always know the absolute minimum amount of money that I’m going to get in a month. And I always keep my client level low so that I can spend a lot of time in detail with each client and I don’t generally have to worry about huge turnover numbers. Now with that being said, I have definitely had numbers or months where my income was drastically higher because I had more clients than what I’m generally used to. But there are some months where it’s generally pretty easy to calculate my income and it doesn’t usually go over my base and what I need. So I have my business agency section set up on my template and basically what that is is any income that I have coming in from my business, I have this, it’s basically kind of a peach colored box that I will fill in and that is the monthly, or sorry, the weekly income that I bring in and I put that there.

And then from there everything is divided up by a percentage. So this makes sure the percentage is calculated to make sure that I cover all of my expenses both personal and business wise as well as making sure that I’m putting a decent chunk aside for profit as well as paying myself and paying taxes. So what I do is I have it situated right now where my base pay goes into these categories. So obviously my first one is profit. My second one is owner’s comp, which is basically what I pay myself and what gets transferred into my personal account, which I will touch on that more later. And then I have my two different tax sub categories. I have my Flow Automation tax, and then my personal tax. So what I do with this is I calculate the taxes roughly that I’m going to be owing and I always calculate higher than what I actually will be paying so that I basically kind of set up a savings account for my business taxes.

Then I’ll have to pay and I also have another category that is my personal tax. So what I do is that number is calculated based on a percentage of what I’m paying myself. So if I pay myself, let’s say $1,000 per week, then I make sure that 15% of that is pulled out before it even gets put into my personal account. So I’m kind of pre paying my taxes, but I’m not prepaying my taxes. I’m basically just putting them all into a huge savings account and making sure that when the tax day comes that I can make sure that obviously I have enough in my account to pay my bills. So, and I obviously do it two different ways because I have my business tax account and then my personal tax account. So I want to make sure that I’m pulling out that number. Same as your employer would do if you had a steady normal job where they take that money and they will obviously pull it out and pay your taxes for you.

And then at the end of the year you should be kind of balanced. So that’s kind of how that personal account works for me. It’s basically I just pull out money there so that I make sure that I don’t accidentally spend it and it goes into a tax holding account. And then from there when I get my tax bill at the end of the year, I just pay it out of there. And then the last account that I have is my operating expense account or OPEX, which is how I word it. So my operating expenses is any expense that I have related to just my business. And because I am Canadian and I get paid in us dollars, there is a way that I separate this. So when I’m paid I am paid in us dollars. And from there I make sure that my operating expenses that are in us dollars are all paid before I divide up my Canadian dollar pay.

So that gets a little bit tricky and hectic and I’m not going to get into that too much. But if you are Canadian and you’re charging in us dollars, please, please, please make sure actually reach out and I can help you out with how I have that set up cause it’s a little bit of a wonky and weird situation that I don’t want to bore all of you with. But um, just let it be known. I can, I can help you set that up so that you are saving a lot of money on exchange rates and making sure that everything makes sense. And um, I’ll give you a couple tips and secrets that I have learned along the way. So that covers my base income, that covers everything that I know I’m going to receive. So every Wednesday when I, I set it up on Wednesdays because it’s the middle of the week, it’s easy for me and that’s also the day that my husband gets paid.

So when we get paid weekly, I will go in and I’ll put in all of my money that I’ve made in the last week and I will disperse it between those accounts. So those accounts, again, our profit owner’s compensation, business tax, personal tax and operating expenses. And then from there I have another way that I divide up my money. So that account is just for my recurring revenue that I always get. Then I have my fluctuate fluctuating revenue that I get from selling courses and selling one off trainings and um, strategy calls and basically anything else that I do on the side. Oh, infusion soft campaigns, that’s another big one. So basically any of those other things that I sell that I don’t necessarily sell one a week. Sometimes I sell quite a few a week. Other weeks I sell nothing. Um, that money is where it gets tricky. So I always make sure that I divide that across different, um, categories I guess you could say.

So, Oh, affiliate income is another one that goes in this pile as well. Sorry about that. So anything that’s a fluctuating and non non expected income, we’ll go in here. And then the way that I divide this up is I divided up for profit and I also divided up for owner’s compensation and then it is divided into those two same tax accounts. So my business tax and then my personal tax and the personal tax is always based on what I pay myself, not what I am putting into the account to begin with. And then I also have it set up to put some in a secondary profit accounts, which I call the vault. So the reason why I have it set up to S basically divide everything this way is this is where I would basically decide how I want to spend this extra money because my first paycheck covers all of my bills and expenses that I need and personal, um, bills.

And this is kind of the fun money. So anything above and beyond that becomes money that I can do stuff with. So obviously I have a huge portion of it going towards profit because that is super important. And then I have, um, not as much go towards owners compensation because I, it basically kind of becomes fun money for our family, but I obviously want to be responsible with it and I don’t want to have a whole lot of it go towards that. And then the other thing that I have a go towards is debt. And when I say debt, I don’t necessarily mean debt debt. What I mean by that is anything where I could possibly need money. So if I want to invest in a $10,000 program, then obviously that I may not want to touch my profit, but that might be something where I have to use a credit card in order to pay for it.

And then I would pay off the credit card from my debt account. So this one’s kind of weird. It probably shouldn’t be called my debt account. It should probably be called like my investments or something along those lines. But it’s anything that I am taking a chance on to better my business, but I don’t want to take the money out of my profit account. So I take it out of my debt account. And then the vault account is kind of like my, do not ever touch money. So that is there for an incredibly rainy day and it is my like absolutely gated money at that. I don’t want to ever, ever, ever, ever, ever touch. So that’s, that’s why I have it separated in two different ones here. So this is kind of a, when I first started this account, I didn’t have any extra flowing income that was coming in and this was kind of my, someday when I get there and I have recurring revenue coming in in a passive way that I don’t necessarily need, this is why I set it up this way.

So it was super exciting for me at the time when I was setting it up because I thought I’d never get to the place in my business where I’d have this moving. And going in a way that I wanted, but I gave myself the ability to think in that way so that someday when it did come to fruition like it has now, it’s made my life a lot easier. So now I know how much fun money I have. I am seeing my profits grow, I’m seeing my vault grow, I also have the ability to pull money out of my debt account and I know that my taxes will always be handled. So it’s, it’s a great place to be when you finally make it to this spot in your business and you will get there. I have total faith in you. So the next step that I have in my Wednesdays when I go through and do this is my personal income.

So I have my husband’s income that comes in every Wednesday. And then I have my, um, agency income that comes in every Wednesday. And then I also have my other income, which is my other side of my business income that comes in. And then I also have other family incomes. So if we get, um, like Christmas presents or something like that where it’s just extra money that comes in, I still count that as money coming in and I disperse it throughout these accounts. So everything all gets added up and then it gets divided between our spending money, our bills, our personal debt and our personal vault. So our spending account is basically anything that we spend money on throughout the week and beyond. Um, so I build up that account as much as I can so that I always kind of know where we stand with spending and what we can afford, what we can’t afford, what we want to spend, what we don’t want to spend.

All of that stuff is basically in that account. And then I have, it’s, I have a portion that covers our bills, so all of our personal bills, so this is kind of like the operating expenses, but on the personal side and all of our bills are auto drafted from one account. So I basically know that as long as I’m putting in the bare minimum into this account, all of our monthly bills are covered. And then I also, depending upon how much extra income I get in a month for my business, then I know that there’s always going to be a cushion in that bills account. Because if I obviously make an extra thousand dollars, then a portion of that thousand dollars is not going to be expected money and it’s not going to be needed. But it will go into the bills account and create a buffer should something happen or our bills go up.

I know that I always have an extra buffer in there. And then obviously when our bills do go up, um, let’s say car insurance goes up, then obviously our car insurance, um, our percentage for our bills would need to be adjusted to make sure that that is reflected in the percentage that I divide everything between. So I hope you’re following with that. Um, as I said, if you have any questions, reach out. I’m more than happy to help explain this all. Um, and then after the bills get taken out, then I have what I call the debt account because obviously I’m still growing a business. I obviously have debt. My debt for my person, like my personal debt is our car, truck home. Um, anything like that, that is a big debt. What I do is I set money aside for that so that when I am able I can put a bigger chunk towards that debt.

So I’m always being conscious of paying down these debts that we incurred before my business was running as smoothly as it is now. And we basically, if we can, we put more money down. So like our mortgage, I think there’s some rule where you can only put a certain percentage on top of what you normally pay onto your mortgage and we obviously haven’t done this yet so I don’t know the full extent of everything that goes along with the mortgage rules and all that fun stuff. But basically what I’m trying to say is that when it comes down to the point of say I want to put an extra $5,000 on our mortgage in a year, I’m going to go into the bank, I’m going to see if it’s allowed first off, and then if it is allowed, I’m going to write them a check from this debt account and then pay it off.

So it ends up working out well that way. Um, and I’m always consciously thinking of, okay, I do have these debts, obviously I have a mortgage and all of this other fun stuff and I don’t want to be heading into my, I think it would be my 50s or 60s with a mortgage still. And no thanks, let’s, let’s not do that. So I’d rather pay that off as quickly as I can. And um, there are some restrictions with that. So obviously I need to make sure that I am being aware of that. But also when I do have extra money, I’d like to set it aside for that purpose. So that is what the data count of is four. And then I have the vault account, which the vault account is basically my master’s savings account for our family and that account I have at a different bank.

So I have kind of a vault and then a vault holds account, which are two different things that are talked about in the Profit First book. But the vault account is basically where I put our savings that I’m allowed to touch. And then once it gets over a certain amount I’ll pull out the extra and I will put that into the vault hold account. And the volt hold account is basically our savings that we never ever, ever, ever, ever, ever touch unless we need to. And that is basically how we can build up our wealth and make sure that we have everything all accounted for. So that pretty much sums up exactly how I separate things. And if you’re interested in learning more about why I do what I do, as I said, I am a completely open book. If you want to email me, my email address is Flow@FlowAutomationInc.com and if you’ve got questions or you’re having trouble or you have that weird situation I have and you operate your business in two different currencies or you want some help with things, by all means shoot me a message.

I am honestly hoping that someday I will be able to produce a training on how I sort out my finances, but I’m not there yet. If you’re listening to this episode a few months down the road and there is a training at the bottom of the shownotes, then obviously I’ve had time to be able to make that because I am so passionate about finances and money and I just love it all and I want to help as many people take control of their business finances as possible. Um, this has always been a little pet project of mine. I love playing with money, I love building spreadsheets. It’s just super, super fun for me and I am by all means willing to help if you’ve got any questions.Then the other thing that I wanted to briefly mention too is that I have created a template that can help you guys to kind of start out with the basics of Profit First in your business.

And you don’t necessarily have to take everything that I say to heart. You don’t have to follow everything. Same as with the book, like obviously profit versus a phenomenal book. Mike Michalowicz has laid it out in such a fantastic way. But after reading it I started thinking, okay, yeah, this doesn’t work for me. And then I realized, well I don’t need to take everything that he said verbatim and put it into play. I can take tidbits, I can take something from this that I think is a good idea and then make it work for me and then take this other part that seemed like a good idea and make it work for me. And that’s essentially what I’ve done. So by all means, you are more than welcome to download the template, see how you think it could fit into your business and then if it does fit into your business, amazing.

And if not, make those tweaks, make those tiny little adjustments that it does make sense for you. For myself, I know I do my accounting every week and that is something that some people can’t keep up with or they don’t to keep up with. They would rather do it monthly, then by all means do it monthly. You don’t have to do it weekly. You could do a daily, which I think that that might be a little overwhelming, but if that’s what you want to do, by all means you do, you whatever works for you is going to be what works for you. Um, I know in Mike’s book, I believe his guidelines are the 10th and the 25th of every month and those are the days when you sit down and do all of your finances, pay your invoices, do all that crazy stuff. For me, Wednesdays work for me, I either pay everyone super early on a Wednesday or I pay them right on time or I, I just know that everything happens on Wednesdays for me.

And then Fridays I actually will sit down and just double check and make sure that everything I did on Wednesday went through and make sure that I didn’t forget something. Make sure that, um, if I have debt on a credit card because I paid for something using a card, then I obviously want to make sure that I don’t miss a payment or pay, forget to pay off a balance. So I go over all of those things and just make sure that I double and triple check everything to make sure I’m not missing anything. Cause it can get really overwhelming, especially with setting up the Profit First method because you do have so many accounts and that can be a little daunting. But as long as you set up a system that works for you, where you can control the money coming in, the money coming out, making sure that you’re monitoring it in a way that makes sense, then you’ve got this, it’ll be so much easier.

So if you take a second, sit down, figure out everything, look at your income coming in, look at your expenses, and then try and figure out your percentages. That is the biggest first step. Once you get those percentages down, then you basically just create little boxes where you can write in that fluctuating income. And so that you’ll know every day when you sit down to do your finances, all you have to do is plug in the number that’s sitting in your one bank account and whatever numbers there, you hit it. So if it’s $1,000 and then it would get dispersed between your five accounts for your business and then your four accounts, four or five accounts for your personal. And it just makes life so much easier when you can get a system in place. And with that being said, I don’t want you to feel like you need to get hung up on just following one system.

You don’t need to follow Mike’s full Profit First system. You just need to follow a system. And if you use his as a guideline or mine as a guideline and a variation of the two, a variation works for you, whatever it is, all you need to do is find a system that works for you, something that allows you to have fun with it, make it simple, make sure that you cover all of your bases. So for me, my expenses are a tough one because they change monthly. And what I’ve done is I’ve actually gone through and I’ve put every single one of my expenses into a spreadsheet and then broken it down by what I pay for that expense weekly. So if it’s a bill that I pay monthly or yearly, I have that broken down to what I pay in the course of a basically a week.

So if it’s a big course that I pay for, um, that’s like $400 a year or a program that I pay $400 a year for, then I know that I’m only paying like $15 a week for it. That math is not correct by any means, but I’m just trying to give you a figure here. So I know that as long as I’m paying $15 out of my expense account and I’m just putting it into my bills account and leaving it sitting there or my operating expenses account and it just sits there all know that when that big $400 bill comes up, I have the money in that account to cover it. As long as I don’t ever touch anything in that account, I know that all of my bills are always going to be covered and then each time I decide to make a new expense in my business I have to sit down and think about it.

Okay. Do I want to add this into my business? Is the expense worth the recalculation of the math? Which luckily I have a spreadsheet that’s already figured out that for me where I can just easily add an expense. It’ll divide it by the week and it’ll tell me how much more I need to bump up my percentage if at all. Cause sometimes the the percent is just so minimal that it doesn’t actually make a change. So keep that in mind. Remember all basically set up the math, set up the spreadsheet, set up the systems that make sense for you in your business. Try to not forget anything, make sure that it’s easy to add and subtract expenses and income from your spreadsheet or however you want to set it up. And then from there you’ve, you’ve got this, it will be so much easier if you can set this up and really take control of your finances.

And then at that point, because you know your numbers because you know your expenses because you can expect a certain amount of income. Then from there you know where you need to spend your time, what you should be doing in your business, and how much you can anticipate to make in your business and you’ll really get a good sense of what you need to be doing and where, what is going to be the most profitable steps for you to take in your business. So not only has the Profit First Method allowed me to take real control of my business, but it’s also allowed me to remember to do everything with profit in mind. So not just income but profit and that is the biggest thing. If you take nothing away from this episode, I want you to know that you need to work on your business with profit in mind because you could have the world’s highest income and with that you could also have the world’s highest expenses and your profit could be nothing and that’s not what you want.

You want to make sure that you are always working with profit in mind. So with that being said, I’m going to leave you. I hope that you got a lot of value from this episode. I hope that you will sit down and really take a look at your business finances. If you haven’t listened to Episode 14 please go back and listen to that one where I kind of break down money management and why it’s important and I hope that you check out the show notes and as I said, I will include links to everything there. It is found at GreaterThanBusiness.com/015 because we are now on episode 15 of the Greater Than Business Podcast and next week I will be hosting a brand new episode and we are going to be talking about the importance of having a hobby outside of your business. So that is going to be super exciting. I hope to see you then and I hope you have a great week.

Greater Than Business Podcast – Episode 015

 

 

For the full podcast and show notes, please go to www.GreaterThanBuisness.com/015

Share This