I was going to write a long question...but it all boils down to: How do I get more clear on my finances?? I feel untethered and like I’m avoiding my money so I’m probably not making the best decisions or progress possible.
Head in the Sand
Dear Head in the Sand,
This is a big one. Some real talk: Looking at your money can be intimidating if you feel far away from your goals, but it can also feel really empowering. It’s better to talk about it now and not ignore it. Congratulations on reaching out and staring at the money topic straight-on.
Let’s start with one task: Figure out what you need.
How much money do you spend or need on a monthly basis? To do this go through your bank account and credit card statements then categorize your spending. That way you can’t lie about what you need or don’t need. Everyone lies to themselves about money -- but you don’t need to. I want you to be able to see what’s going on with your money.
I’m not about proposing a regimented budget on people. I’d rather you get to know how your business flows and then you can anticipate your slow and fast months (I've written more on this topic before.) That said, if you are consistently overspending that’s a clue that you may need to budget more effectively. And, saving money is an amazing way to feel more clear about your finances.
While you’re looking at your budget, ask yourself, ‘What do I actually want to do with this money?’ There are ways to contribute to a buffer, save some money for the future, and have some pleasurable things in your life. Talking to a long-term financial advisor should be at the top of your priorities to get retirement accounts (and more) set up.
Next, look at your products and/or services.
How many billable hours do you have every day? How many products can you make in a quarter? What tips you over the edge into burnout? Maybe you need to shift your pricing so you’re not scrambling to pay bills. (Or maybe get a part-time job on the side.)
A few years ago I wrote about keeping your magic in your business and I think it applies here:
“Figure out what you don’t do well, not just the things you don’t want to do. Do not give anyone else the work that you enjoy. It’s tempting (and maybe not conscious) to hire someone whose work you understand instead of someone who will complement your work. … Better yet, hire someone who sees the weaknesses in your business, the things you literally can’t see, and let them run with it.’
In that excerpt, I’m talking about how important it is to get clear on what’s winning you new business. Maybe in your case, your initial interactions with clients ARE what makes them love you. So you probably shouldn’t hire someone else to handle onboarding. This is where general business advice (such as “Hire a VA”) can be dangerous if it’s not the right fit for you and your business. Maybe it makes more sense to hire someone to clean your house so you can focus on clients for a few extra hours.
Finally, keep your cash flowing.
Building a cash flow helps you answer questions, such as: How much can I get by with if it’s a slow month? What’s my ideal income for my business? Can I say “no” to this project? Can I fire this client? When can I start the marketing campaign that I want to spend some money on? (I love helping my clients with this so much I created an entire Cash Flow Cleanse workshop!) Remember, your finances are a puzzle and everyone is different. Part of figuring this out is paying close attention to your personal expenses because they help you figure out what salary you need.
To summarize, this is the overarching order I’d suggest you follow:
FIRST — work to understand your personal and business overhead and patterns.
SECOND — clarify what services or products you offer, their pricing, and time requirements to make them happen.
THIRD — start building a cash flow analysis. This will help us both understand how to make enough money, what needs to shift to make it happen, what patterns affect the financial health of your business, and the implications of your inflow/outflow (i.e., when you run out of money).
All of the above helps you to uncover and understand the financial health of your business, which leads to making good, informed decisions. And I think that's a beautiful thing. One last note: Beware the tendency to get mad at yourself because you haven’t been doing something you know you should be doing. Forgive yourself and move forward. Start with the above!