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So I told you I’d be getting vulnerable on here.
So here we are.
I’m talking about something with you that I could very easily *hide.*
I’ve been a business coach for 3 years and help people make MONEY.
How can I, a successful biz coach who supports others to grow their income, admit that I have about $30k in debt to pay?! (Ps. This has gone down significantly as I share this with you–I have already started to implement my system to pay it off! YAY!)
Well, here’s the biggest lesson that I learned in 2019 (when I started working with a financial coach):
Just because you know how to make a lot of money doesn’t mean you know what to do with it.
Yes, let me say that again for the people in the back:
Knowing how to make money and knowing how to keep money are two totally different things.
And as a girl who was not raised with money, and was definitely not taught how to save money, the minute I started making ONE HUNDRED THOUSAND DOLLARS A YEAR WITH MY BUSINESS?????? Yea, I kinda went crazy.
All I saw was $$$$$$$ in my bank account and it felt like I had MORE than enough and I would never have to worry about spending again.
Another thing I learned this year is that every dollar should have a job, and I needed those thousands and thousands and thousands of dollars to DO THINGS FOR ME. I couldn’t just spend without a plan, even if there seemed to be plenty of money available to me.
At one point I remember having about $80k readily accessible to me right after a launch and I was ready to SPEND. I had NEVER seen that much money in my life!
But with lots of my clients paying in full instead of using payment plans, I had to make sure that those payments lasted almost a year! And again, that money had to go towards my team, and expenses, and bills! It wasn’t all mine! But I was spending it like it was…
However, I didn’t think that way…and all I saw was dolla dolla bills, y’all.
And so here we are, $30k later.
I could lie to you and say I’m not ashamed of it.
Oh, I totally am.
In fact, I was so completely in shame and embarrassed of how I let myself get here for a long time.
But then I finally realized that this was an opportunity.
An opportunity to finally learn about money. How to allocate it. How to make sure it was going to the proper places. How to save it.
I hired my financial coach because I kept seeing the debt pile up and I honestly didn’t know how to approach it.
What I will tell you is that the work I had to do around my money was more complicated than a blog post can fully lay out, and I recommend that if you ready to go all in about getting your finances in order, you go check out my girls at the Radical Profits Club.
I at least wanted to write this blog for you to give you a general idea of how I got into $30k of debt, in hopes that you can catch some of your own bad habits early, or start with healthy habits if you haven’t started your biz yet.
I will say that I also speak more in this article about my business money, not my personal spending, but the way that this relates to my personal spending was that I was paying myself way too much every month, which got me further into debt.
You may ask how I was able to pay myself more than I should?
Well, when you put $$$ in one area, it has to come from another place.
So I was paying myself cash, but was piling up debt in other areas like business expenses.
You could take the lessons I share here and easily apply them to your personal money situation as well (so if you are getting a set paycheck every month.)
Below, I will be talking about having ways of allocating your money as it comes in by certain percentages depending on your needs.
So as far as personal money goes, an easy way to look at it is:
- What are your bills totaled up? Take that # divided by your total income. You have to put that percentage of your paycheck to the side every time you get paid.
- If you have debt, figure out how quickly you want to pay it off (there are a ton of debt payoff calculators you can easily google) and then see if you have room in your left over $$$ to start making that monthly payment–if it’s too high of a payment for you to be able to pay off in your desired time, adjust the payment for what is doable for yourself and commit to that. You will have to adjust your personal spending for a bit as you attack that debt. The advantage of doing the math is actually KNOWING how much you need to save, and how much you can spend so you don’t go overboard.
- Remember you have to eat and put gas in your car, so if you haven’t put that into your bills, pick a dollar amount of percentage of your monthly income that you will spend on that (I recommend setting these budgets after you commit to your debt amount.)
- I recommend giving yourself a small personal fun money budget so you don’t go crazy!
- This may take some time and playing with numbers!!! It is going to feel frustrating, too! Remember that if budgeting is new for you, there is going to be a learning curve–stay dedicated, and know that there are tons of resources (including here) to keep you going! You got this!
So…back to this business side of my debt…
This is how I got myself into $30k of debt:
(PS. I am NOT counting my student loan debt. That is $70k. To me, that is not a priority at this time or something that feels crippling. It is more “it is what it is” and I will get to it as I handle my immediate debt first. My CC’s interest is far higher than a student loan, and so that is my first plan of action. I also don’t have the shame around my loans that I do my CC debt.
Ok, back to how I got myself into $30k of debt…
I had absolutely no plan for the money I had coming in
Basically the way I handled money in my business looked like this:
- Money came in
- Money went into a general bank account with lots of other money
- All I saw was lots of money in an account, and would assume I had the money to hire a team, coaches, etc.
- I had no system for saving for taxes, knowing how much I could spend on expenses, or how to pay myself
In so many words, this is essentially why I got into debt the way that I did–because I didn’t actually have a system or a strategy for my money.
So no, I didn’t take a certain percentage and set it aside for taxes. Or I didn’t make sure my expenses were limited to a certain percentage. I just saw money and spent it.
Now I realize you might be reading this and doing one of two things:
a) thinking I am stupid as hell
b) reading this and silently freaking out, wondering what the hell I am talking about–percentages for expenses, allocating money for taxes, WHAT?!?!?
Don’t be ashamed if you are in the B category. That was me. For years. I was clueless.
It seems stupid to even say, but I never thought that you should only spend a certain amount of your revenue on expenses. I just thought, “if I need it, I get it!”
But, this is how debt is created…when you spend more than you have.
My advice to you if you are reading this completely shook by what I am sharing so far, please reach out to my financial coach Callie @ The Radical Profits Club, or if nothing else, figure out what your total revenue is, and figure out the percentage you want to save for tax, and the percentage you want for expenses and the percentage you want to pay yourself.
Something to keep in mind is that you can’t max out past 100%–otherwise, you are in DEBT. So, a super simple example is this:
If you make $100 in a month, and spend $95 in expenses for that month, want to pay yourself $40 for that month, and want to save $20 for that month, that adds up to far more than 100% of $100.
This is what I was doing for the longest time.
I wasn’t actually “crunching the numbers” to see if I really *could* spend almost $3k a month on team members, and instead, I was just doing it…
As I said above, figuring out the percentages of allocation of my revenue was a process that took me easily 6+ months to get a hold of. I say this not to scare you, but to tell you that totally readjusting the way you spend your money in your biz (and even your personal life) will take time, and I highly recommend hiring a professional to help you.
I also really love this book, Profit First, and the process Mike Michalowicz outlines here has helped tons of business owners that I know personally.
You could very easily read this book and figure out how to start allocating your business funds properly on your own.
For me, this is NOT my zone of genius, and so I still sought outside help, but you could very easily use this book to figure it out on your own! Either way, I recommend you check it out!
PS. I need to mention this.
Figuring out how to allocate your funds is something you should be doing the MINUTE you start your business.
Now, I know that it might not *seem necessary* if you are only making a few hundred bucks a month.
But see–that’s the whole point of this.
Even those few hundred dollars you are receiving have a job.
Some needs to go to you to pay you.
Some needs to be saved for taxes.
Some should be saved for expenses so eventually one day you can have the money to hire that awesome coach or go to that amazing conference or buy that great piece of equipment.
Again, I DIDN’T start this system early…
I’m catching up late now.
And even though I’ll be fine, I’ll tell you I wish I would have done this 8 years ago…
I can’t image the assets and lack of debt I would have.
*Just some advice…*
I’m going to end on this note for now:
Whether you have a business or not, you MUST have a system for your money.
We start using CC’s when we spend more than we have. That simple.
Remember, like my awesome financial coach Callie told me, “You can’t have more than 100%.”
So make sure ALL THE MONEY you are spending in a month is within the amount you are bringing in monthly.
And if it’s not?
Time to readjust and get to budgeting!
PS. I promise budgeting doesn’t have to suck. In fact, it feels effing great and empowering for people who have struggled with money in the past.
PSS. Look for a ton more posts about our financial journey and how we are working to get away from debt, and into true freedom, assets and growth.