lifestyle cost Archives - Solopreneur Profit Coach |

Boost Your Happiness By Clarifying Your Lifestyle Costs

Your business exists to support you; to fulfill your needs. If you don’t have a clear picture of what those needs are, it can be difficult for your business to fill them.

That’s why it’s so important to have a clear idea of your lifestyle costs. This gives you a foundation for your income goals. Here, you can clearly see the relationship between your personal and business finances. Below, let’s talk about a couple reasons why getting clear on your lifestyle costs is key.

Set Clear Goals

When you are clear on your lifestyle costs, you’re able to set income goals in your business that reflect how much money you actually need to live a satisfying life. You can make decisions about how much of your lifestyle costs you want/need your business to cover. As your business grows to support you, you gain a sense of fulfillment from running your business, and living an abundant life.

“Fulfillment” is a great destination – figuring out what income number feels like enough to take you there is the important part. Your income goals provide you with a roadmap for your business, so making sure they’re based on covering your needs and wants is paramount.

Create a Solopreneur Paycheck

Your solopreneur paycheck, or owner’s pay, is the result of a finely-tuned money system that connects your business and personal finances. You can create a regular monthly paycheck for yourself, even if you don’t have a regular income. This can be especially helpful for people who go through feast-or-famine cycles in their finances, like performers or realtors.

Money-mapping is a great visualization tool that can help you build a solopreneur paycheck. Understanding your lifestyle costs and how much you want your business to support you will help you start to fill in the blanks.

How Do I Figure Out My Lifestyle Costs?

Ok, you’re sold. You’re ready to figure out how much your lifestyle costs, so you can start incorporating this figure into your business goals. So, how do you figure them out?

I have a couple resources for you! First off, the process of doing this is outlined in How to Tailor Your Income Goals to Your Lifestyle. This process mostly discusses things from a manual, paper-tracking point of view, but I also recommend using money-tracking software if you’re looking for a digital solution. Lastly, if you’re more of an audio/visual learner, you might like to hear what I had to say about how to define your lifestyle costs in last week’s episode of Financial Self Care Friday.

If you enjoyed reading this, you’d probably enjoy my free eBook, 9 Secrets to Financial Self Care. This 12-page e-Book will give you nine different steps to take towards creating a solid financial self care routine.

Angela

Image: Eye for Ebony

Are Your Business and Personal Finances Mixed? Here’s Why You Need to Separate Them

Let’s get real here – many solopreneurs I work with mix their business and personal finances. If you’re running a one-person show, a side-hustle, or a business that has few transactions, it might seem sensible. Why open the extra account? It might also be difficult to put the time in to really untangle everything. Oftentimes, expenses and income seem to land in a gray area between business and personal.

While this strategy might seem like it saves you time and money, separating your business finances from your personal finances is much more profitable in the long run. Here are a couple reasons for that:

Simplify Your Record Keeping

You want all the numerical data from your business available with a few clicks. If you keep your personal and business finances separate, it’s much more possible to simplify your record keeping and make that possible. Here are a few pieces of info you have much better access to if you do it this way:

How much income your business is making and whether it’s supporting itself
All information needed for tax time. Having your accounts separated and that information readily available means you’re less likely to give up and overpay on your taxes.
Which offerings and times of year are most profitable for your business.
What your business is spending on and whether you’re getting a return

Along with having clear ways to see all of these metrics, you can also deeply reduce your stress level when your records are simple. The value of this is not to be underestimated!

Learn About Your Business & Boost Your Profit

As you can imagine, having easy access to the information above can do wonders for your bottom line. You can tap into yearly or seasonal income cycles and focus your offerings to generate more revenue. You can also make business spending decisions much more easily, and learn what investments can help your business become more profitable.

If your business is currently not making enough money to support itself, you can look through your records to understand why this is, and come up with solutions. Lastly, having a clear idea of how much you need to pay for taxes can prevent you from overpaying, and lead to more profit in the long run.

Your financial metrics tell the story of your business. Separating them from your personal banking makes it so much more simple to check in on your business finances.

Get Clear on How Much You Need to Make

Aside from providing valuable information about the state of your business finances, separating them from your personal accounts will also clarify some personal finance questions for you. You’ll be able to clearly see how much money you’re spending on your lifestyle every month.

This can help you determine what you need to pay yourself from your business. Creating personalized income goals according to what you value in your life can make running your business more personally meaningful.

Take This to The Bank

Now that I’ve made a case for separating your business and personal finances, let’s go over two different ways you can do this. In the beginning of this article, I mentioned that some solopreneurs think its sensible to avoid opening another account. It’s true that this can help you bypass banking fees associated with business accounts.

Sometimes I work with clients who are just starting a small side-hustle. I may advise them to set up a system that helps them keep a comfortable distance between their personal and business finances, without actually opening another account. Usually, this involves opening a sub-savings account at your bank, and creating a detailed money map and tracking spreadsheet.

For people with larger businesses and more transactions, it’s better to open a separate account. Read the section on banking in my free eBook, 3 Essential Steps to Starting a Business, for more thoughts on this setup process. I hope this article helped clarify the many benefits of keeping your business and personal finances separate. Happy banking!

Angela

Image: Tetiana SHYSHKINA