028: Manage Your Money or Your Money Manages You
Listen Here and Now for How To Manage Your Money
In this episode we share a tool with its four rules to help you manage your money within your business. As an entrepreneur, you’ve got to know your numbers but you don’t have to hire a CFO… we share how.
Quotable of the Week
“I feel that your ambitions should always exceed the budget.” -Guillermo del Toro
Keep your ambitions alive. Then budget the resources you have available. With your ambitions, you’ll know what to do as your available resources increase! Never stop casting your vision for a better world.
Highlights from the Manage Your Money Episode
As an entrepreneur, you’ve got to know your numbers. We all know that to be true but HOW do you get a good sense of your numbers easily without having to hire a CFO or spend hours doing data entry and developing reports?
Today, I want to tell you about a tool I’ve been using for over 4 years. I use it to manage my personal budget, my mom’s budget, and the budget for our business. It’s called You Need a Budget (YNAB, for short). Now, before you turn off the podcast because you think we’re going to use this curse word “budget” too much, stick with us. As the people at YNAB say, “You’ve never budgeted like this before.”
YNAB has 4 rules. We want to share them with you and how they can apply to your business.
Rule 1 – Give Every Dollar A Job
- As an entrepreneur, money comes into your business.
- This rule basically states that as the money comes is, you assign it to what you need it to do… you give it a job. In entrepreneurial speak, “Treat each dollar like an employee.” Let’s say you just got paid $2,000 from one of your clients. YNAB allows you to say things like, “You, $500, buy inventory. You, $1,000, you’re going to my take-home pay. You, $150, you’re going toward marketing. You, $100, you’re for those nasty monthly subscriptions I have to pay.” etc until the $2,000 is fully given jobs.
- A big point here is that you only assign dollars you have. You could forecast if you want but lots of businesses get in trouble counting on money they never receive. That’s one reason I like YNAB. I’m giving every dollar I’ve actually received a job.
Rule 2 – Embrace Your True Expenses
- You know that bill that comes once a year or quarterly? Maybe it’s an annual renewal of a business license or software. Maybe it’s taxes.
- “Embrace your true expenses” means you set aside money monthly for everything – even the things that don’t happen monthly.
- A big one for most entrepreneurs will be taxes. Whether you pay annually or quarterly, you want to be setting aside the amount you expect to pay in taxes right when your income comes in. Then, you’ll always have the money when tax payment time rolls around. Some business owners I know have a separate account for taxes only so they don’t have to worry. With YNAB there no need to keep transferring money to a separate tax account. You can move it around within YNAB and know it’ll be there when you’re ready to pay up to Uncle Sam.
- I know I have a lot of things that happen annually or quarterly that might otherwise put me back financially if I don’t embrace the expense on a monthly budget within YNAB – website domain and hosting renewals, annual software renewal, licensing, special promotions.
Rule 3 – Roll With The Punches
- All entrepreneurs know that the unexpected comes up. We used to joke that the #1 rule of the coffee shop business is, “Everything happens at once.” We’d get a bunch of catering orders back-to-back. Then, we’d have a season where it seemed like all the bills were due. We’d have equipment problems all at the same time.
- A big reason budgeting doesn’t work for many entrepreneurs is that it’s too rigid and doesn’t account for the unexpected. Not true for YNAB. YNAB makes it easy to adjust your budget on the fly.
- The bottom line here: give yourself permission to adjust the budget as needed and use a tool that provides you the flexibility you need as an entrepreneur.
Rule 4 – Age Your Money
- I’ve found that when I follow the 1st 3 rules that this 4th one sort of takes care of itself.
- What are some of the benefits of having “old” money? Here are 3.
- You aren’t freaking out and needing to have a flash sale on an emergency type basis. Individuals live paycheck to paycheck. Many businesses live sale to sale. Break the sale-to-sale cycle!
- When it’s time to pay expenses (payroll, vendors, licenses, taxes), you know you have the money to cover those expenses. You simply write the checks.
- You get to stop stressing about your money and worrying if you’ll have enough for everyone else who takes their cut. In fact, you’ll get to start dreaming about what you’ll do with more revenue coming in. Your dream (whether paying yourself more or being able to make a bigger impact) can be a big motivator for going out there and getting the sales!
So, there you have it.
4 simple rules and 1 tool to manage your money.
A bonus tip: 1 subscription to YNAB includes unlimited budgets so you can use YNAB for both person and business budgets. I even use it to manage my mom’s budget as her caregiver. It helps tremendously when she wants to spend more on Christmas gifts than I think is appropriate. But that’s an entirely different conversation.
Time to take action
We have 2 calls to action for you today:
- Try YNAB. Use this link and, if you sign up after the demo, you’ll get an additional 1 month free. Disclaimer: it’s an affiliate link so we get a month free too (at no extra cost to you). We’re sure you can tell that we are only recommending YNAB because we love it and use it ourselves. We just thought we’d get you the free month since they make it available.
- Schedule a meeting. YNAB works even better when you have short and long term plans in place for both business and personal finances. We’d love to offer you a complementary financial analysis. To get started, visit businessactivistentrepreneur.com/firststep or text BAEFinancial to 44222.