Take Charge of Your Personal Finances
When it comes to money, it’s easy to get stuck. Between student loans, rising rent, and Friday cocktail hour, it’s hard to even think about growing your business. We get it. Managing your personal finances while trying to improve your business can feel like you’re stuck on a treadmill- working hard but never getting where you need to go.
Fortunately, we’re here to help you get off that treadmill and towards the finish line, whatever that may mean for you and your business. Here are 5 top ways to take charge of your personal finances as a small business owner:
1) Budget, Budget, Budget
Photo by Norfolk
Whether you’re a newbie at budgeting or a seasoned veteran, you need a plan for how you spend your money. This will be your best tool for understanding your finances and sticking to your goals.
I’d recommend creating a monthly budget so you can tackle your goals step by step. Start by recording your monthly income, keeping in mind to aim on the lower side if your income fluctuates (more money left over later!). Then record all of your monthly expenses, including taxes, living, transportation, entertainment, and savings. Check out the chart below to see what kind of expenses you should be considering:
Once you’ve sorted out your expenses, subtract them from your income to determine your discretionary spending and adjust as necessary. Pay attention to these numbers throughout the month to stay on track, and adjust as needed EOM if you find it hard to stick to these goals.
PRO TIP: THERE ARE A TON OF GREAT BUDGETING RESOURCES OUT THERE. I’D RECOMMEND USING MINT FOR A MOBILE BUDGET, AND/OR CHECK OUT THEIR FREE BUDGET BUILDERS TOO.
2) Manage Your Student Loans
Photo by STIL
Ah, the ultimate paradox: spending money to eventually make money! If you took out student loans, those pesky things might still be hanging around and draining your monthly budget. If you’re still stuck with loans, consider a few moves to help your budget: refinance or consolidate them, check if you qualify for a student loan forgiveness program, or add them to your debt plan.
One super easy trick to stepping up your loan repayment schedule is to pay half your student loan amount every two weeks instead of once a month- you’ll end up making a full extra payment every year.
Don’t believe me? If you pay $100/month for 12 months, or 12 payments, you’ll pay off $1200 total. Paying every two weeks on the 14th day means you make 26 payments throughout the year because of the week-month alignment. If you pay $50 every two weeks, or 26 payments, you’ll pay off $1300 total. Magic!
PRO TIP: BE SURE TO SIGN UP FOR AUTOMATIC LOAN PAYMENTS- SOME LENDERS WILL CONSIDER REDUCING YOUR INTEREST RATE BY AROUND 0.25% IF YOU DO SO.
3) Reduce Monthly Expenses
Photo by Alyssa Strohma
Let’s go back to that expenses chart above. Take a look through each item and ask yourself this question: is there any way for me to reduce this cost?
Some things, like rent or a car payment might be less flexible when it comes to changing your habits (and we’re not asking you to uproot your lifestyle). But are there other ways you could reduce variable expenses like clothing and entertainment in a realistic but frugal way? This doesn’t mean sacrificing happy hour or a new pair of jeans, it just means picking a $6 glass of wine instead of a $12 cocktail or waiting for those Madewell jeans to go on sale. Paying attention to details like this won’t feel like you’re saving a ton of money immediately, but it’ll add up quickly.
Here are some other ways to frugal-ize your habits:
Lower electricity consumption by unplugging all electronics that aren’t in use and running your dishwasher every four days, instead of two.
Consider switching providers for home and life insurance to a cheaper but still quality option.
Take a look at your shopping list- do you really need to buy crackers at Whole Foods when you could find similar ones at Publix? What could you buy in bulk instead?
Are you using your gym membership? Are you using enough of your gym’s features to warrant a membership that could be cheaper somewhere else?
Save the lattes for Mondays when you need an extra boost and something to get you out of bed. Stick to regular brew Tuesday-Sunday. (This might be the toughest one!)
The point here is to stay conscious about how you spend your money. It might be convenient to go to the Whole Foods down the street or keep your blender plugged in, but paying attention to these habits and making small changes will leave you with extra cash in the long run.
PRO TIP: IF YOU’RE A REGULAR AT YOGA, A LOT OF STUDIOS WILL LET YOU HELP OUT WITH SIGN-IN OR CLEAN UP IN EXCHANGE FOR WAVING CLASS FEES.
4) Don’t Mix Business and Pleasure
Photo by STIL
No, not like that! We’re talking about mixing business and personal expenses. As small business owners, this can be really difficult. We want to support our business in whatever way we can, but a line must be drawn. If you want to set aside some personal money each month to save for your next big project, go for it! But for many reasons, resist the urge to secure any business finances with personal funds when things get tight. Trust us, it’ll create a mess you’ll eventually have to deal with.
Fortunately, there are simple ways to avoid this crossover so you can still personally and professionally grow. For starters, be sure to set two budgets- a personal budget and a business budget. Stick to these and be sure to keep credit cards, loans, and payments separate. This will help you have a clearer sense of where you need to be saving money, and will save you time when it’s time to pay your taxes or hire an additional employee.
PRO TIP: HEAD TO OUR BLOG MARKETING ON A BUDGET TO SEE HOW YOUR BUSINESS CAN SAVE SOME CHANGE.
5) Educate Yourself
Photo by William Iven
Even if you hire a bookkeeper or work with an accountant, knowing the basics of business accounting (or refreshing your skills) will help you have confidence when it comes to decision making. Check out courses online, at your favorite networking group, or ask your accountant for a crash course to learn the ins and outs of your finances. Of course, the most important thing is being proactive and hands-on when it comes to managing your money- but a class can certainly help you feel more confident in doing so!
PRO TIP: FOLLOW @ELLEVEST ON INSTAGRAM FOR DAILY TIPS AND INSPO FOR YOUR FINANCIAL HEALTH.
—
When seeking financial wellness, it’s all about taking things one step at a time. You won’t get rich overnight, but you can certainly strengthen your security but sticking to your plan and learning all you can. Good luck in your financial adventures and don’t be afraid to ask for help!
