2 ways to stop living paycheck to paycheck
“How did I make over $200k last year and I’m still living paycheck to paycheck?”
Someone sent this msg to me earlier this week and I really, really want to share my thoughts on the answer because, tbh, it’s a great question. And I’m guessing you might be scratching your head with something similar.
Heck, I’ve recently worked with clients who made well over $2M in revenue but were struggling to pay themselves at the end of the month.
This is real life for a lot of business owners right now so let's take the shame away if you're also struggling with this, friend.
In fact, I’d be lying if I didn’t say that I’ve had to watch my cash closely these past few months too. Yay entrepreneurship! 🤦🏼♀️
Instead, let’s talk today about how to stop living paycheck to paycheck (or invoice to invoice) in your business.
I don’t think I need to explain why this might be a good idea for you and your biz. I think we’d all like to be able to think more about our summer vacays instead of wondering whether we can make payroll.
But first, let’s discuss about how you might’ve gotten lost in this cycle of spending cash as soon as it comes in the door:
You get paid by a client
You pay your cash-only expenses
You try to pay off your credit card because you have expenses that are already “paid for” there. You put a lump sum payment on your credit card, but you aren’t able to pay the whole balance off
You carry a small credit card balance forward
Lather, rinse, repeat and your debt grows, the expenses continue until you have a month where clients don’t pay on time and the entire cycle kinda falls apart because you can’t pay your team or your mortgage or all of the above.
In order for us to “fix” this sitch, I need you to change your behaviour. [I also need to change your thoughts, but that’s for another day. ;)]
Here are two simple things that you can do today to stop living paycheck to paycheck:
Open a business savings account and add to it every 👏🏻single 👏🏻 month 👏🏻
I can hear you already, “But Tanya, doesn’t it make zero sense to put money in a 2% savings account when Visa is charging me 24.99% interest on my balance??”. Yes, you are correct, friend. This does make zero sense - especially if you’re putting $10k into a savings account instead of on your Visa. But I’m not asking you to do that. And if you’re like most people, you probably don’t have an extra $10k so keep going, friend.
What I’m trying to get you to do is modify your behaviour so that you get in the habit of using savings for large expenses instead of blowing up your credit cards.
Your action step: Aim to put 10% of your revenue in short-term savings until you have about 3 months of biz expenses saved up. If this feels impossible, aim for $50 per month. Just get started.
(And I recently learned most banks allow you to open a savings account *by yourself* on your online banking platform 🤦🏼♀️. It really is that easy..)
Make a budget
If you’re short on cash, one of three things are happening: your business expenses are too high, you’re withdrawing too much from your biz for personal expenses, or you just aren’t bringing in enough revenue. I don’t know which it is until you put something in writing aka make a budget.
Your action step: Put together a SUPER simple budget for next month. I want to see a line for revenue, then list out your top 5 expenses, and then show me a net income/loss number (revenue - expenses = net income or loss).
If you get a positive number (i.e. you have more revenue than expenses), good. Check-in with this doc throughout the next month to make sure you're still on track.
If you get a negative number (i.e. you have less revenue than expenses), less good. Ask yourself: Can you do anything next month to increase revenue or decrease expenses? Hint: the answer is not “no.” 😂
That's all I have for you today, friend.
If you're feeling inspired to get your cash flow under control so you can sleep through the night, we should talk.
I have spaces available in The 7-Figure CEO program for a September start.
It's best for those who are ready to “go big” on their business - you desire a clear plan that's going to take you from where you are now to wherever it is you want to be → consistent 5 or 6 figure months, a biz you're excited about again, a team you actually trust or systems/processes that support your business' growth (so growth doesn't feel like a 4-letter word).
In the past, I’ve worked with professionals - lawyers, web designers, accountants, interior designers, HR consultants - but this offering is good for any service provider ready to make some serious money.
Click the button below to book your consult. Can't wait to hear from you, friend!!
Take care and talk soon,
Tanya