How to Create Your Own Paycheck Using a Money System

 

I know you like being your own boss, but do you ever have paycheck envy? Do you ever wish you could get a paid vacation? Do you get tired of the feast or famine in your personal income? Especially with creative or freelance work, this can be a real issue for some of us. Fortunately, when you create money systems around your business income, you can create a solopreneur paycheck, by paying yourself first.

The System

Setting up a paycheck for yourself is simple. Every time you collect income, set aside a portion in a separate account just for your pay. Then pay yourself out of that account, but leave a portion in the account. The balance in this account will build over time so that you eventually have a cushion built up to even out dips in income, or even pay yourself while you take a holiday.

Determining Amounts

How much should you pay yourself each round? A good place to start is keeping track of your personal expenses and ensuring you cover those every month. After that, it’s a simple question of what to do with any extra income you may have made that month. You may choose to leave it all in the account to build up your balance, or take out an extra allowance if you’ve earned a reward. Setting up reward systems for yourself can be another motivator to keep your money systems consistent, organized, and ensure they meet your needs.

More in-depth information on creating a solopreneur paycheck can be found in my money mapping series. Part II discusses setting up a solopreneur paycheck in the context of your larger money system.

If you liked reading this, you might enjoy my free eBook, the Cash Flow Reboot Guide. This resource gives you a bunch of actionable steps to take to ensure that your business can thrive through times of financial uncertainty. Click below to grab your free copy!

By |2022-04-11T12:05:06-07:00April 11th, 2022|Categories: Profit First, Small Business, solopreneurs|Tags: , , , , , , , , , , |0 Comments
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Roundup: At Peace With Money’s Best Educational Posts to Level Up Your Financial Learning

This week, please enjoy a roundup of some of my best educational posts yet. I’m getting close to my two-year blogging anniversary! In that time I’ve written up quite a few how-to’s, exercises, and perspective pieces on handling money. Below, I’ve pulled out some of my favorites, in the categories of business finance and personal finance.  I’m recommending these articles in particular because they contain foundational info that informs my practice as a profitability coach. The tips and perspectives that I blog about here are tried and true. I share them because they make a huge difference to my clients, just as I hope they’ll make a difference for you! If you’re looking to kick your financial learning into high-gear, let these resources be your guides:

Personal Finance Articles

Business Finance Articles

Suggested Readings – My Favorite Financial Books

I hope these posts are helpful for you! I find that the practice of writing a blog has been a great practice in building up an archive of knowledge – one that I hope is just as helpful for you as it is for my clients.

☮

Angela

By |2021-04-08T14:38:50-07:00October 29th, 2020|Categories: Personal Savings, Personal Spending, Small Business, solopreneurs|Tags: , , , , , , , , , , , , |0 Comments
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My Current Financial Goals!

So frequently, I talk about goals and planning and money systems here. But rarely do I share with you what’s going on behind the scenes for me. Today I want to give you all a look into my financial goals, and how systems work in my business.

System at Work

In my own business, I use a money mapping system that helps me allocate funds from my business for different purposes. If you haven’t read my full series on money mapping, I recommend doing so by clicking on the links above. My money mapping system helps me to allocate a portion of the income I make for saving up for my financial goals. I have a habit of over-saving, so it’s important for me to have a system in place that helps me navigate how much to spend and how much to save. If this sounds familiar to you too, check out my article on over-saving, and how overcoming it can help you! Making this discovery has definitely been helpful for me.

Goals: Big and Small

The goals that I’m currently leveraging my money system to save up for range from small things to big life events. Last November, I bought a 2016 Rav-4, so one of the goals I’m working on is paying off my car loan. I am also saving up to do a motorcycle tour of New Zealand! Originally I had a target date for this goal, but now things depend on when COVID-19 is no longer an issue, so things are a bit more flexible. You can read more about my motorcycling journey (and how being a small business owner helped me with that!) here. My last goal has less to do with saving and more with just practicing good financial hygiene. My husband is hoping to retire soon, so we’re keeping an eye on our spending to make sure we can live within our means when that happens!

Hopefully this post has given you a flavor for my goals, and helped you think about what yours might be too! For more help here, check out my article “Know Your Money Why.”

☮
Angela

 

By |2021-04-08T15:21:07-07:00September 3rd, 2020|Categories: Financial Clarity, Personal Savings|Tags: , , , , , , |0 Comments
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The Best Thing You Can Do For Your Business

Today I am excited to bring you a client success story. With the tax deadline coming up swiftly, tax preparations have been on my desktop and my mind. But they haven’t been weighing down my clients, because of the tools we use to prep for tax season.

The Story

I have one client that I’ve worked with for several years now. In the beginning of my time working with them, taxes were a huge, stressful burden. By using a money mapping system that relies on Profit First principles, we were able to start setting aside money to pay taxes. In 2019, the client had an excellent year and made a lot of money. In ordinary times, this would be great. However, because we faced lower income this year due to the pandemic, if we hadn’t saved ahead of time, we would have found ourselves in disaster come tax season. Thanks to the money system we instituted, we had our tax payments completely covered, even with lower revenue this year.

The Success

Now my client and I are happily relishing in a worry-free tax season. Saving for taxes is one of the best things we’ve done for this business. It’s helped us avoid a lot of sticky financial problems and kept things running smoothly.

Our success is all thanks to the money mapping system we use. I’ve written a series on money mapping that you can read through to get a sense of how to put this tool to work. Aside from tax season, it has a lot of other benefits, like reminding you to save and making your work in your business feel meaningful. This process of creating a money system is a big part of what I do with my clients. You can book a curiosity call with me if you want to know more about how the process might apply to you.

A Little Reminder

Just in case you don’t get my newsletter, here’s a PSA: By July 15th, your 2019 taxes are due to be filed and paid, if you owe. You are also required to turn in your first and second quarter estimated taxes for this year. Please read my article on 5 Steps to Get Ready for Tax Time to get prepped. I’m also happy to offer my services – please don’t hesitate to reach out. 

☮

Angela

Image by Javier Sierra 

By |2020-07-10T13:20:06-07:00July 10th, 2020|Categories: Profit First, Taxes|Tags: , , , , , |0 Comments
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How to Use Money Mapping To Give Back

At this moment, we are being called to give money to many different places. Community organizations need resources to respond to COVID-19, and so do many different non-profits, scholarship funds, etc. On top of that, the worldwide movement for Black lives has sparked a renewed need for donations. Last week, I discussed how a business owner can leverage their business to rise to this moment. Today, I want to talk about giving. Specifically, how to use money mapping to know how much to give!

Money Mapping: A Crash Course

If you’re not familiar with the term money-mapping, it’s essentially a visual way to track and create a system for your money. When I work with my clients, we create these systems for their business together. By figuring out how much money you need to cover taxes and business expenses, you’re then able to see what’s left over. How you allocate that money is up to you. Typically it’s split between profit and pay for the business owner. In this article, I’m going to discuss how you can carve out a chunk of that money for donating to organizations you want to support. Earlier this year, I wrote a series on how to implement money-mapping for your business and personal finances; read that here. Here’s a diagram to give you a better picture of what I’m talking about.

Factoring in Giving

There are several different ways you can factor giving into your money map. If you’d like the donation to come directly from your business revenue, perhaps you decide that the 5% in the profit account will go to a certain organization. Depending on your flexibility, you could also simply choose to add another account altogether, and split up your revenue five ways instead of the four outlined in the diagram above.

If you’d prefer to give from your individual finances, your options are similar. Perhaps you can carve the donation from your savings allocations (perhaps replace “new mattress”). Or, you can choose to make room in your living expenses, provided you have that flexibility.

Sticking to a Timeline

When using the money mapping system, it’s good to use a timeline to know when it’s time to examine your accounts and move or use money that’s collected there. In my work with clients I usually suggest that they move or use the money in their profit account on a quarterly basis. If you’ve decided to use this money for donations, perhaps you can set up a system in your business to switch up where those donations go every quarter of the year.

Why Use This System?

Using money-mapping and seeing your donation as a percentage of your overall income strengthens the power of your giving. It helps you see exactly how much you can afford to give, and helps you make mindful choices about amount, rather than purely emotional ones. It can be helpful for people who are prone to over-spending and those prone to over-saving. Looking at your money as a full system also helps you assess your values and re-structure your priorities if needed. If you decide you’d rather donate to Black Lives Matter than eat out in the month of June, referring to your money map can help you make and track that choice.

If you’re looking for places to donate money to in order to support the movement for Black Lives, please consider checking out these organizations:

Happy giving!

☮

Angela

Image By:  Milada Vigerova 

By |2020-06-17T17:40:33-07:00June 17th, 2020|Categories: Uncategorized|Tags: , , , , , , , , |0 Comments
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Reduce the Hassle: 3 Tips to Keep Your Money System Simple

When I work with small business owners I often run see this one unfortunate pattern; many business owners believe that your money system has to be complex in order to work. The reality, however, couldn’t be further from that. We’ve already talked about how important having a money system is, and how to visualize it with money-mapping. Keeping your money system simple and streamlined makes it easier to visualize, but also much easier to follow through on and keep organized. If a system requires a bunch of checking in or spreads your money into a bunch of accounts you forget about, it’s not worth the maintenance. Here are three strategies you can use to pare down your business’s money system to a manageable size.

Limit Your Cards

If you’ve got a ton of cards under your business, keeping track of all of them and keeping them paid off can be difficult. To make it easier on you, I suggest paring down the number of cards you use. This will help you better keep track of your bills, credit rewards, and any other info associated with your cards.

Please note, I’m not advocating for closing any of your credit cards, as this can lead to a lowering of your credit score. However, here’s a good guide on how to do that, if you’re interested.

Under One Roof

One recommendation I regularly make to my clients is to consolidate their money into one institutions. If you have business bank accounts at three, four, or five different banks, that’s gotta be hard to stay on top of! Getting it all under one roof will help you keep an eye on your finances as a whole more easily. If you have multiple banks and you’re wondering how to go about consolidating, you might like to read this piece about switching banks we featured a couple years ago. It contains a guide to comparing banking offers and picking to the best option.

Keep Track

Making a regular habit of checking in with your finances. Make this easy by consolidating your passwords to your different accounts and portals. If you don’t have to go searching for passwords before you begin your checkin, you’re way more likely to actually do it!

I also recommend using an app or other tracking system. I especially like Mint.Others also like YNAB, or paper money tracking. Digitally tracking your money can save you some time, while also giving you a quick snapshot of your accounts when you need it.

If you found these tips helpful, you might also like this article on automation, which is another money hack to keep your systems tidy!

☮

Angela

By |2020-01-27T21:52:59-08:00January 27th, 2020|Categories: Banking, Financial Clarity, Small Business|Tags: , , , , , , , , , |0 Comments
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The In-Depth Guide to Mapping Your Money, and How It Can Fortify Your Business, Part III

In the last two parts of this in-depth guide to money mapping, we’ve talked about why it’s helpful and how to get started. We’ve also touched on creating a system of accounts to set up a regular paycheck for yourself and an assurance of profit. Creating your own money map based on these ideas takes a lot of evaluation of your finances. You need to assess your operating and tax expenses and analyze your living expenses and savings goals. Once you’ve assessed these amounts, they translate into the percentages you put into each account.

What’s Your Percentage?

I help clients figure out what their percentages could be. We assess the needs of their business, and we figure out how much they actually need to live on. We discuss their life goals, and how those relate to money. There are good benchmarks for each percentage, which are suggested by Profit First. For your reference, the suggested percentages are: 5% profit, 50% owner’s pay, 15% taxes, 30% for operating expenses. This breakdown applies to most solopreneurs (anyone under $250,000 in annual revenue).If this doesn’t feel doable for you right now, don’t sweat it. It takes a lot of work, evaluation, and good financial habits to create a sustainable money system.

Applying the Model

Let’s look at an example of all of this mapped out. In this example business, the owner is using the ideal benchmarks and keeping a cushion in their Owner’s Pay account. What they do take out is then subdivided, with 20% of their pay taken off the top for three savings goals (I like to call this “paying yourself first.”). The remainder of this money goes to living expenses. While this model might be unrealistic from where you stand, keep in mind that this is something my clients work towards. I’ve included it here so you can start to picture what your own money system looks like.

If you enjoyed this guide, I recommend also checking out Part I, and Part II. And, try going to the Tools page, where you can play with an allocations calculator. Plug in your revenue and your preferred percentages to see what your amounts are! Then you can start filling in your money map.

Money mapping is an important tool, and one that I enjoy walking clients through. If you’re interested in working with me, check out my services page to check out my packages, and schedule a call.

☮

Angela

 

Image by:

Estée Janssens

By |2020-01-17T22:12:46-08:00January 20th, 2020|Categories: Personal Savings, Personal Spending, Small Business, solopreneurs|Tags: , , , , , , , , , |0 Comments
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The In-Depth Guide to Mapping Your Money, and How It Can Fortify Your Business, Part II

Last week, I talked about money-mapping, why it’s helpful, and how you can get started. Today, we’re going to dive into more money-mapping using the Profit First methodology. Profit First posits its own money system, pictured in the above map. Its goal is to ensure that you as the business owner get paid.

Solopreneur Paycheck

In order to ensure that you actually get paid by your business, you need to portion off a certain percentage of your income, and then designate that for your personal finances. This portioning off is exactly what the Owner’s Pay account is for in the Profit First system. The Profit First system advocates for creating separate accounts for all your different pots of money associated with your business. If you can’t do that or don’t want to, I advise using a spreadsheet. You can use this to keep track of how much money is designated for Profit, Owner’s Pay, Taxes, and Operating Expenses.

So, back to that Owner’s Pay Account. Once you put a percentage of income in it, you then transfer some portion of that to your personal account, which serves as your solopreneur paycheck. When I work with clients, we work to figure out what portion should go into this account. That amount depends on how much the business makes in revenue, and what portion of their personal expenses they want to cover using income from their business. If income in their business varies month to month, we decide on an amount that they transfer to their personal account, leaving the leftovers to act as their cushion during slow months. This way, the business owner receives a steady stream of income, even if their business varies from month to month. This is the solopreneur paycheck.

The Function of Profit

Cordoning off funds for operating expenses and taxes may seem practical enough, but the Profit account is what makes the Profit First system unique. The profit account accumulates and then is distributed quarterly. Business owners are encouraged to use their Profit Distributions to reward themselves for their hard work. This keeps the owner excited about and invested in the business. It also discourages any tendency to reinvest everything back into the business, or over-save.  Rewards can range from a day out to charitable giving, to really anything you want!

In part three of this series, I’ll discuss what applying this model to your business can look like, and integrate all the info we’ve gone over so far. If you’re enjoying this and would like more, check out part one! You can also head to my services page and schedule a call with me. Money mapping is one of my favorite subjects. Come talk about it with me!

☮

Angela

By |2020-01-17T01:48:43-08:00January 17th, 2020|Categories: Personal Spending, Profit First, solopreneurs|Tags: , , , , , , , , , , |0 Comments
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