Let’s start with the caveat: I am not an accountant. I barely passed college Algebra, so don’t expect this to get math-y.
With that said, building a financial plan is something that most of us avoid doing, especially when we’re younger but creating a plan for your cash flow, both in business and in life, is so critical to your success.
Think about it like a diet app. Statistics show that people who create a habit of logging their food religiously end up losing more weight and the same should be said for entrepreneurs who plan out their financial future (well, I guess replace “weight” with “financial stability” but who knows, maybe you’ll drop some pounds, too!).
What a Solopreneur Financial Plan Should Look Like
So how the hell do you do that?
Start by brainstorming all of your costs and putting them in a big “pile” (Konmari Part 1 style): bills, debt payments, transfers to savings accounts (ahem), pet care, health care, home stuff, entertainment, taxes, employees, apps, PO boxes, website registration and hosting fees, gas, travel, groceries. You’ll notice that I’ve included both business and personal stuff here and that’s intentional. As a solopreneur, you should be cognizant of everything that’s going out of your account every month.
Total it all up and keep track of it
I have an Excel spreadsheet where I do this which you can get in my Library (click the blue bar in this post), in addition to the Expense Tracker printable I created. I have it broken down into total monthly costs. Then 6 months total, then 1 year total. I do this so that I know how much savings I need to create as my emergency fund (numbers vary on this from 3 – 6 months, but I try to shoot for a year. It ain’t easy, believe me!)
Be totally honest
This is somewhere between Step 1 and 2, but needs to have its own, separate point. One thing I’ve learned from books like I Will Teach You to Be Rich is that you shouldn’t feel guilty about things that you love, but you should account for them. If you love getting a Starbucks coffee every morning, don’t feel ashamed and hide it from your costs. Add $50 or whatever you spend per month into your budget and own that.
I have an entertainment budget every month of $500. There are months we don’t go anywhere near that, but Steve and I like to travel and have big trips planned in 2019 and 2020 so that $500 per month goes towards those big-ass blow out trips, and I ain’t mad about it.
Keep track of your goals for money
Plan for fuck ups in your money, savings buffers, and the ultimate unicorn: retirement. If you’re strapped for cash and feel like savings is a luxury, you’ll feel doubly pissed when some medical catastrophe happens or your computer goes kaputz all of a sudden.
The point of a financial plan is to account for everything tied to money in your life. If you see what costs you have, you can begin to figure out what income you need from your business to sustain you. But don’t feel like you need to start with a year's worth of savings or you’re a failure. Try to save $5 a week in a savings account. It’s small, but you’ll start reaping the benefits of compound interest and building a mentality that puts the priority of saving into your mindset.
Remember that as a solopreneur your future relies on your success alone, which is why I feel like talking about money is so important. We’re all afraid to mention our finances, and consequently, we never learn how to make them grow. Let’s start this month with a plan to work on our financial futures together!