Managing Money as a Mompreneur: The one small step to take that can transform your business and life

Posted by on October 17, 2018

I have this friend, she's had her own business since 2012 and for many years just kept everything in one big mush and was scrambling month to month to figure out how she was going to make it work. She heard the recommendations that she should keep it all separate but thought, “it's all good I know what's going on.”

Then she got audited…

After 5-figure tax bill she finally got the message: she didn't know what was going on and something had to change.

Does this sound like you?

Are you using your personal accounts to fund your business and putting all the income you get right back into those accounts? When you first start out it's pretty easy to keep track of things but then the expenses start piling up and suddenly you have no clue if you are actually making any money!

Now I hear you, going and setting up a separate bank account sounds like a lot of work. I've had those days when getting myself to the bank when I have a toddler to care for, dinner that needs to be cooked and laundry that is threatening to take over my house seems impossible. Here is the thing though, by committing a small amount of time now, you can save yourself time, money and oh so many grey hairs.

Here is a step by step guide on how to navigate this transition.

Step 1: Go to the bank (or…)

Pick up the phone and call them. Most things can be taken care of on the phone and before you say it, yes i know that business bank accounts cost a lot more than personal… I don't know why either… The thing is if you are just starting out it doesn't need to be a “special business account”. Most banks will allow you to set up more than one account or sub-accounts (for free) on your personal banking record so you can separate the business stuff without having to pay up the nose. WOO!!

Step 2: End the co-mingling!!

Now that you have a special spot for all those dollars you are bringing in from being the awesome business maven that you are it's time for them to play in their own sandbox. Make sure that all of your income is being deposited into that sub-account (or separate account) that you just set up. No cheating. This account is going to be like a base-camp for managing your money.

Step 3: Create some structure!

Ok, so like I said above you have your base camp for all your business money, the next step is to put that money to work. That account is going to be a pipe-line to a whole bunch of other accounts that each has a special job:

  1. Taxes
  2. Expenses
  3. Profits (like a paycheque for you!! wow!!!)
  4. Growth

Go crazy with this stuff, have as many sub accounts as you like. I like having a separate account for growth because it's an area that is easy overlooked, but when it comes time to hire a coach or join an amazing mastermind it's nice to know the cash is there to take advantage of those opportunities.

Step 4: Work that pipeline

Now that you have your sub-accounts you want to figure out what percentage of your income is going to be dedicated to each account. For taxes I recommend at least 30% and closer to 50% if you are in the six figure range. The rest is up to you. Here is how it breaks down in my own accounts (in the early days of business you will probably won't need to put as much to taxes and can afford to put more towards expenses:

  1. Taxes 40%
  2. Expenses 30%
  3. Profit 20%
  4. Growth 10%

Step 5: Handle your dough

When you first start out handling your money like this I suggest you do it manually for about 6 weeks to 3 months. It can take a little more time (I'm talking 10 minutes every week v/s 5 minutes once a month here… not exactly a huge commitment) but it also drives home what your business money is doing and gives you a chance to get intimate with your income and expenses.

Ok so what the hell am I talking about? I'll show you.

Lets say that 1 week has gone by and I made 2 sales this week totalling $500.00 (I like nice round numbers). Here is what I'm going to do.

  1. The $500.00 is sitting in my base-camp account
  2. I'm going to put that into biz money filter (Downloadable here)
  3. This handy little spread sheet is going to tell me how much to transfer into my sub-accounts
    1. You can totally customize it if you want to add your own sub-accounts or change the percentages
  4. Then I manually transfer the money from base-camp to each of the sub-accounts.
    1. If you are using my percentages it breaks down like this:
      • Taxes: $200
      • Expenses $150
      • Profit $100
      • Growth $50

After you get a sense of how things flow in your business you can automate this and check in on it once in a while to make sure it's all working properly.

At the End of the Day

Now think about this: you log into your online banking and you can see in an instant how much you have set aside for taxes, how much you will be getting paid this month and how much you have to cover those costs and what you can afford to spend on growth!

Here is a nice added bonus. I know a lot of mompreneurs struggle with pricing, this is a SUPER easy way to make sure you are charging an appropriate amount. If you aren't covering all your sub-accounts with what you are bringing in, maybe it's time to up your rates.

You're totally worth it!

 

Want to learn more awesome money management tips? Check out our Small Biz Money Masterminds, new groups starting up November 2018.

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Comments

  1. Leave a Reply

    Sandra
    October 18, 2018

    These are some great tips! We bit the bullet a few years ago, and started using a CPA. Never regretted it! It’s a little tough sometimes to keep personal and professional separate, but if you do it from the beginning, its so much easier. Great post!

    • Leave a Reply

      jenpaterson
      October 18, 2018

      Thanks Sandra! Hiring the right professionals can make such a huge difference in your business! Glad you found someone awesome who makes your life easier!

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