Do you have good financial habits?January 17th, 2018 by Morna
Many artisan entrepreneurs feel uncomfortable with the money side of their businesses. It’s not uncommon. You want to spend your time creating not thinking about numbers. Of course, you are in business, and your goal has to be to make money. If you don’t make money, you won’t be able to run your business. You won’t be able to grow your business. You won’t be able to share your art beyond your family and close friends. And, the world will be less because you aren’t sharing your art with a wider circle of people.
Now is a great time to put some good habits in place on the financial side. If you take these steps, you’ll reap rewards both personally and financially.
Understand your money story
We all come to our business with a story about money. It will have good elements, and it will have not so good elements. For example, your story might be, “I’ve just never been good at handling money.” Or it might be, “Other people deserve this financial success more than I do.” Or, ” Money just isn’t important to me.”
Take some time and journal about the stories that you have about money. The stories came to you honestly. They were what you heard as a young child, what you saw on television or the movies, and what your friends or spouse believe and share.
Once you understand where your money story came from, you can ask yourself if it’s true and if it serves you. Just because you came to them honestly, doesn’t mean they are true. They might just be an opinion, and a false one at that.
Rewrite your money story
If you know that your story isn’t serving you, then you can do something to change that. If you know it’s just not true, you can reject it. Often when you write them down, you can see them for what they are.
You will need to reframe some of your limiting beliefs. Using my first example above, you could reframe your belief that you have never been good at money too,
“I’m smart and can learn one step at a time to understand my finances.” Of if you believe that money just isn’t important, you might reframe this to say, “I value money for what I can do to help others in the world.”
Once you reject or reframe your story, it’s important that you live into it. You can do this by being aware when a limiting belief about money shows up. (Keep that journal handy.)
You can also use affirmations on a daily basis. A friend who is a financial specialist suggests sandwiching your new affirmation with two statements that you know are true. For example, the first statement would be, I live at …. Your second statement is the new affirmation. Your third statement is, My daughter’s name is …. By including two true statements, you are setting your brain up to move faster on the new affirmation.
Both understanding your money story and rewriting it are ongoing processes. Keep an ongoing journal so you can make it a habit. You’d be surprised how a limiting belief can creep in to your every day.
Separate personal and business money
When you start out, it’s easy to pay for your expenses from your personal money. You already have a checking account and a credit card. As long as you keep track, you figure you are in the clear.
Not so fast. The specific term for what you are doing is “commingling” funds and it’s a bad idea. One problem is that in the United States, the IRS is very particular about what you can deduct for your business. When you have only one account, it’s hard for them to understand why you have deducted monies from your personal assets. Using a separate bank account is a way of being sure that you’ve tracked all your business expenses.
And, if you are a LLC or corporation, you are opening up your personal assets for creditors in the event of business problems. The legal term for this is “piercing the corporate veil,” and you don’t want that to happen. You and your spouse, if you are married, have worked too hard to get yourself in the financial position you are. You do not want to put your personal assets at risk.
To make your business life easier, take time to get a business checking account and a business credit card.
Look at your numbers
Growing your business depends on your looking at and understanding key numbers in your business. While you don’t have to be the person who does the bookkeeping, you need to understand what the numbers mean. Take time to learn what is involved in bookkeeping and how to read a financial report. Set up a system to look at your numbers on a weekly basis. You can’t make adjustments if you don’t know where you are in your business.
Pay yourself first.
When you worked at a corporate job or worked for someone else, you expected and likely received compensation. Why should your creative arts business be any different? Make it a habit to pay yourself first. This could be $10 or 10% each month. It doesn’t matter. In the beginning it may not be as much as you like, but you are sending a message to yourself and your bank account that you are a real business and deserve to be paid like one. As your business grows, you can adjust the amount you pay yourself.
Watch your expenses and your debt
Look at your expenses on a monthly basis and understand how they move your business forward. Understand what the ROI is for the expenses. A good example of this is to look at your participation in a retail or trade show. How much did you spend and how much did you make? Was the expense worth the return?
Years ago I went to a seminar and remember the speaker selling us all on a program that he offered. A woman in the front row asked about the program and said that she’d already spent $XX and hadn’t made the money to break even. She was living above her means already. The speaker encouraged her to put the course, a hefty five figures, on her credit card and then pay it off later. In my mind, that would have put her further in debt, since she had no plans to make the money to pay it off other than a wish and a prayer. Perhaps she’s comfortable with that situation. I’m not. At times you may need to have some debt. Just be smart about it and know how you will pay it off. Debt is a major stressor, so think about your personal situation and mindset before you dive in.
Invest in the foundation of your business
You’ve heard of the self-made successful business owner. It’s not really true. No one becomes successful by him or herself. They always have people who help build the foundation of their business. This could be hiring a business coach, joining a group coaching program (like ICAP’s Members’ Studio), finding a mastermind, even taking a course. Learn what you need to build the right foundation and set out to do so.
Understand the value of your time
When you started your business on a thread, you did just about everything yourself. As your business grows, it’s time to look for others to take over some of what you are doing. Spend time figuring out the value of your time. Use that to decide if it’s smarter to hire someone to do some of your tasks. For example, if you can make $35 an hour working in your brilliance, it makes sense to hire someone at $10 an hour to do tasks that free you up.
What financial habits do you have in place? What financial habits will you add?
Tags: debt, entrepreneurs, finance, financial success, money
Laura Estes said:
Never spend more than you have. After that, delegating and hiring out, basting, cleaning, things that can be “good enough”, pay myself and the handsome bookkeeper and see where I can economize without sacrificing quality and supporting entities.