All businesses have, or have had, money problems. Whether that’s having too much money and not knowing where to allocate it (savings or investing, not frivolous spending), or not having enough and needing more.
And as any business owner can tell you, knowing how to budget well is key to keeping your revenue goals on track. Just because you have money coming in doesn’t mean you have money to spend — a sentiment I know all too well.
Back in 2015 when I started my first (successful) business, I wasn’t exactly sure where to put my money. And so, I ended up spending a lot of it on the wrong things. But thankfully, I’ve learned my lesson.
And one of the biggest things that helped me get there? The 50/30/20 Method!
So the 50/30/20 method is pretty straightforward and easy to implement. It’s really more of a guideline, or guardrails (like the ones you use when you go bowling that they say are “just for kids”).
It can help you allocate your funds according to the biggest need.
As a business owner, those categories could look like…
Sorting out your revenue (not your income, I’m talking about ALL the money that’s coming into your business) can help you stay on track to hit your financial goals. But…I like to do this method a little differently, in a way that helps ME stay on track.
That’s actually the really cool thing about setting up a budget like this! You can be flexible and adjust it to fit your own financial sitch.
I want to add the disclaimer that I’m in no way saying that it’s my way or the highway. Again, setting up a budget for your biz should be done in a way that caters to your life, not mine. But so you can see how it can be adjusted, this is what I do instead!
I call it, “The 40/30/20/10 Budget” (what a unique name):
Because as a business owner, I can tell you I’m not doing all these shenanigans for fun. Okay…so maybe it is fun, but I still want to be paid for the work I do!
And by setting up my “budget” like this, I was number one — able to get out of a mountain of debt that haunted me as I started my biz much faster than I would have. And two — continue to stay out of debt so I can invest in the long-term success and financial health of my business.
So obviously, just creating a budget and calling it a day doesn’t really do much for you. I mean, it does help you know where money is going and how much disposable income you have to spend on little pick-me-ups, like a scented candle or a Tesla stock purchase (just me?).
But, if you have no problems spending money (like me), you need to start automating that budget.
Basic automatic transfers can be done through nearly every bank and almost every invoicing/payment system. Having the money automatically transfer there as soon as you get paid means you won’t have to think twice about it.
No more second guessing how much you’re putting into savings because you saw something on TikTok you really wanted to buy but know you didn’t need (half of my makeup drawer…I’ve been influenced).
By letting the automations do the work for you, and speaking from personal experience, you’re so much more likely to stick with good money habits.
Having separate accounts for each of the percentages I mentioned earlier (and however else you decide to split up your revenue) simplifies this process even more. And having separate accounts for everything makes overspending harder to do because the money isn’t as easy to access (versus having everything in just one account).
Essentially, it helps you stay focused.
You should have separate accounts for:
And then, when you need to, or want to, spend the money, you have a better idea of what you actually have, rather than leaving it up to your best guess.
And I dunno about you but my best guess is always going to be I have the money to do anything my mind whims up, even if I definitely do not (which is partially the reason I got into debt in the first place…but more on that later).
At the end of the day, budgeting best practices only work if they can work for you. If you’re an overspender like me who gets a dopamine rush when you buy anything, even if it’s just the little $5 chapstick at the checkout counter, it’s not realistic to NEVER allow yourself to buy anything other than essentials.
It’s kind of like the way you eat…you shouldn’t restrict GF Oreos from your diet in general because one day you’re going to be craving them so bad and before you know it you’ve eaten the whole box (just me???).
Instead, building better habits over time is the way to go, and the way to longer, stronger, growth.
And if you want more biz-related money management tips…then check out the video below!
Listen in as I take a look at some of the most common business owners stay broke, and what you can do to move forward.