#140 - 3 Cash Flow Tips for Solopreneurs
In this solo episode of the Dollars and Dumbbells podcast, host Justin Green, a certified financial planner, shares three essential cashflow management tips for solopreneurs, online coaches, and creators.
Smaller Plates
Pay Yourself First
Flow Based Spending
These strategies aim to help solopreneurs achieve their financial goals.
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01:08 Smaller Plates: Budgeting for Inconsistent Income
03:26 Pay Yourself First: Prioritizing Personal and Tax Goals
04:55 Flow-Based Budget: Managing Fixed, Flex, and One-Time Expenses
08:37 Importance of Managing Money
Transcript
[00:00:00] What's up, everybody. Welcome back to the dollars and dumbbells podcast. I'm your host, Justin green, certified financial planner.
And today I want to bring you a quick little solo episode where I talk to you about essential cashflow tips that you've never heard. Alright, let's hit the disclaimers real quick and hop into the episode.
Justin Green is the founder of Assist FP, a financial planning firm, and Be A Wealthy Coach LLC, an outsourced CFO service. All opinions expressed in this episode are mine solely and not reflective of Assist FP or Be A Wealthy Coach. As always, this podcast is not advice and it is for educational and entertainment purposes only.
Always consult with your own financial tax and or legal advisor before making any decisions.
Alright, so solopreneurs, online coaches, creators, entrepreneurs, this is the guide to managing your cash flow that you have never heard of. So we're going to dive into three essential tips that you've probably never heard of that will make your financial life
[00:01:00] just a little less chaotic, right? Because let's face it, running a business solo can feel like juggling while riding a unicycle on a tightrope.
The very first tip is Smaller plates, and let me explain what that means. And I actually learned this concept from profit first by Mike Michalowicz. But in a little bit of a different context it's essentially taking Parkinson's law and applying it to your finances. This is why it's really, really important for online entrepreneurs, solopreneurs, coaches, et cetera, your. Income. Your profit is very inconsistent. It's flexible. It goes up and down each and every single month. So it's very hard for you to set like a personal budget based on what the business is making.
So I intentionally have clients set a smaller plate because. It's proven that if you eat off a smaller plate, then you will eat less. So when you take that and apply it to finances, let me give you an example. If the last
[00:02:00] three months you've made 20, 000, 25, 000, and 23, 000, you shouldn't be spending that much.
2025 23, respectively in your personal budget, you should set up a spending plan based off of the lowest number and be conservative. And so, for example, I would set a spending plan up off of the 20, 000. And I might even go a little bit lower. I'd usually do about 90 percent of that. And the reason is, is that.
Yeah, you had a couple more up months, but you could have a couple down months and every 90 days. I like to re examine this. So if you do that, and then the next 90 days, you're 252728. Sweet. We can bump that spending plan up to 25. At 90%. And this will allow you to always have a little bit extra, be a little bit conservative because on the flip side, if you were to have planned to using my first example, if you had planned your personal spending off of the
[00:03:00] 25 number, but two of the other months are under 25, then you're having to try and figure out each and every month, like what the cut.
And that's just a lot of mental fatigue that. Is completely unnecessary. So smaller plates intentionally. Set your budget off of a smaller dollar amount and stick to that. And then every 90 days you can pay yourself a bonus and you can reevaluate for the next 90 days, what you should be using.
All right. So the second one is pay yourself first. What does that mean? That means before any expenses, any planned spending in the business, you should pay yourself and your goals first. And I also like to add in your taxes, so you should pay your taxes and yourself. First, highly recommend using an online banking system such as Novo or relay where you can set up automatic allocations.
So every time money comes into your bank account, a percentage will automatically be divvied up and set aside for you to put towards those goals. And I
[00:04:00] always recommend start with the taxes and start with a personal pay account, because of what I see a lot with business owners is they don't pay themselves.
They just kind of wait until their bills are due and then just take money out and they have no systemic way of paying themselves. Whereas this way you can. Set up an automatic percentage going into this owner's pay account and then make sure that you're paying yourself consistently, which will allow you to achieve your personal goals because at the end of the day, , the whole reason for building an online business is to be able to pay yourself to reach your financial goals, set your family up for long lasting wealth.
And you're not going to be able to do that if you're not paying yourself out of the business. I also like to apply this in your personal side. So once you do actually pay yourself from the business then pay yourself first is really just means set aside the money for your goals, your financial goals before you, you spend on anything else.
All right. The third one, this is a new concept for me, and I've been learning about it and
[00:05:00] it applies really to your personal side, but a flow based budget. And what this means is you're going to have like three categories. So there's fixed expenses, there's flex expenses, and there's one time non recurring expenses.
So the fixed expenses is basically any expense that's going to happen on a monthly basis. It doesn't have to be the same amount. So for example, your electricity bill, it's going to happen every month, but it's going to go up and down a little bit. Anything that is a fixed expense and you know, it's going to be getting spent no matter what.
There's no decision making process. That's going to be in one category. The second category is flex. This is basically. Anytime you're having to swipe a card or make an active decision to purchase something. So this could be groceries, which in the traditional sense of budgeting, a lot of people will put into the fixed expenses because, you know, it's going to happen every month, but it's a little bit different.
But the flow based spending unit. Is considering how it's being spent, right? So this is an active decision where
[00:06:00] you have to swipe your card. You have to buy the groceries so you can really determine how much you're spending. You can buy a little bit less, a little bit more, but then the day you have to swipe your card.
So coffee eating out target. Amazon, anything you're having to swipe your card. Those are flex expenses. And what you want to do is you want to use one single credit card for you and your spouse. If you're married and all the flex expenses go on this one account, no other expenses are added on in here.
And then the third category is one time expenses. A lot of people, they break their budget because they don't consider the impact of, the one time insurance premium that's coming up, the holiday spending, all those big one time expenses that you just don't really think about. But they seem to always come up every month.
So if you kind of list out those annual expenses, divide by 12, you have a portion that you're automatically setting aside. So for example, let's say your annual expenses is 12, 000 you've estimated in one time
[00:07:00] expenses each and every month you'll put 1, 000 into a bank account solely specified for those one time expenses so that way you're always adding to it And so it's not catching you off guard You're not have to hitting up your emergency fund when these expenses hit because they're not an emergency they're planned and to go back to the fixed expenses that should also be its own separate Bank account or credit card separate from the flex expenses.
And what this allows you to do is you can very easily, very simply just set this up by listing out all your fixed expenses. You're one time expenses and then you don't even have to list out your flex expenses. You just know whatever's left you can spend, right? So you can take those numbers. Let me give you an example here.
I will piggyback off the previous example. So if you're doing 1, 000 a month into one time expenses. And then you have, let's say 10, 000 worth of fixed expenses. So that's 11, 000 and you're bringing in 20, 000 in income.
That flex means you now have
[00:08:00] 9, 000 remaining. If you divide that up to weekly divided by fixed. Then you're going to have a little over 2, 000 a week to spend. And then you're going to pay that credit card off every single week. Cause I find that a lot of clients a month is just too long for them. It's so easy for them to rack up the credit card, et cetera.
And then. They kind of get themselves into a little bit of hole this way. You're checking in weekly. You have time to pivot and adjust throughout the month. And you have a very specific number where it's like, okay, over the next seven days, I can't spend over 2, 200. Okay. That's a little bit easier to, to actually manage.
All right. So those are the three essential cashflow tips I have for you as an entrepreneur, solopreneur, online coach. It's super important. Managing your money is extremely important. If you want to stay in business and actually reach your financial goals. I've met too many business owners where they're really, really good at making money.
They're really, really bad at managing money. So, They work really hard to grow
[00:09:00] a business and they have absolutely nothing to show for it. So make sure you're managing your money, right? Keep your finances in check and you'll just have one less thing to worry about. You'll build wealth. You'll have flexibility in the future.
And ultimately that's the goal. All right. Until next time, stay wealthy, my friends.