The Roller Coaster Of Income For Business Owners


Do you own your own business? If so, then you are accustomed to the monthly roller coaster of pay that a self-employed individual might expect, it is never the same. While some business owners with a steady stream of cash flow may have a system where they take a set salary or distribution each month, a majority of business owners are at the mercy of their monthly business volume.

90% of the clients that I work with are business owners and they are riding the roller coaster. If you are on the roller coaster, planning becomes an even more critical piece in regards to your personal finances. Planning can be composed of many different parts, but the top two I have found are BUDGETING and SAVING. These two components work hand in hand. If you want to save, you have to budget to save each month. I have found that savings is one of the hardest things for people to do, everyone wants to save and have the security of a savings account, but they don’t do it. There is an easy fix for this – budget a savings line or two into your personal and business budget so that you ensure that you are saving each month. Make saving an automatic exercise that is done at the top of each month, don’t blink, just do it.

Don’t personalize the “rules” that are out there. How can these rules apply to the masses in regards to their finances? Don’t stress about saving 10 – 20% if you can’t save that, save 5%, save 1% – anything is better than NOTHING. If you are a business owner, you want to save a portion of the income that you pull over for your personal finances and you also want to save a portion of your income within the business for business needs. Always remember to keep a definitive line when it comes to your business and personal finances do whatever you can to never co-mingle these. Why? Because it gets confusing and confusion never produces success.

How? Be sure to apply the following to your business savings and personal savings. I view savings in 2 categories – 1) savings that you need to consume in the near future and 2) savings that you are protecting from being consumed until the future. Category 1 savings would be savings that you would have for “emergency” income needs, vacations, major purchases, down payments on a house and taxes. Category 2 savings would be savings that you don’t intend to consume until you don’t want to work anymore but you need income to survive on.

Within your personal finances, you will have both a category 1 and category 2 savings. The best way to keep these separate is to have 2 separate accounts, one for category 1 and one for category 2. I feel that in most cases for business, it is sufficient to have a category 1 savings account for things like taxes, major purchases, ect.

Remember that you can’t save if you overspend, therefore, get a budget in place for your business and add a line item for savings at the top. This forces you to look at your cash flow and regard savings as a typical expense. Do the same with your personal budget, put savings at the top and make it an automatic deduction – no matter how big or small