Plan with Me đź“ť Diving Into My Business Finances | 32
Let’s real talk for a second… I went years, yes YEARS, in my teacherpreneur business before I gave my finances even a second thought. Any money I made just went into PayPal and then when I wanted to spend it, I did. Without considering the impact or taxes or anything really… I just spent the money.
But not anymore… After reading Profit First and starting to use YNAB I completely changed how my business runs. While I’m no fianacial guru, maybe how I run my business can help you sort through the complexities of running yours. Please don’t take anything I say in this episode as a substitute for actual financial advice… I am not a financial advisor or anything close to it.
Logistics
I am in Canada, so a lot of how I run my business finances is reflective of that…
Bank Accounts & Credit Cards
My business has three accounts:
a Paypal account
a Canadian bank account in USD
a USD Visa
Even though I use the Profit First method, I really only have one bank account (I barely keep any money in Paypal because it’s not really the safest and doesn’t pay any interest).
Instead of separate accounts, I use YNAB (or You Need A Budget) to keep all of my dollars slotted into the appropriate categories. I really (like really really) love YNAB. (Use my affiliate link above for an extra FREE month!).
Profit First Method
I read this book shortly after my business really started to take off and love the simplicity of it. Here’s the current breakdown I use in my business
Profit & Taxes: 25%
Owner’s Draw: 50%
Expenses: 25%
Business Expenses
Currently, I’m working to get a month of expenses saved in my account with the long-term goal of building up 6 months worth of savings. Here’s how I’m working towards those goals and how I allot money to my expenses each month.
The Five Expenses Subcategories
Monthly Expenses - monthly software subscriptions, client gifts, irregular expenses
Each month, I budget the previous 6 month average + 10% for this subcategory
Annual Expenses - annual software subscriptions & annual membership fees
Each month, I budget the previous 12 month average + 10% for this subcategory
Professional Development - courses, memberships and certifications
Each month, I budget $200 for this subcategory. Currently, the programs I’m in cost about $100/month, so the rest of this month just continues to build up in this subcategory.
Outsourcing - contractors and other outsourcing I do for my own business
Each month, I budget the cost of current contractors + 10% for this subcategory
Other Stuff - my slush fund, large irregular expenses and all bank charges/fees
Each month, I budget $200 for my slush fund. The slush fund is the first place I pull money from if I go over in any of the other categories. It’s also where I put any extra money after all the other categories have been fully funded. Large irregular expenses are paid for with money from other categories (for example, my computer came from my Profit Savings Fund) and bank fees are actually covered very, very first before I even begin splitting the money into the main categories.
If you have any questions, sned me a DM on Intagram… As I said before, I’m no financial professional, but I am a numbers and data nerd, so I love chatting all about these things.
Links from the Episode
Facebook Ad Targeting Groups for Teacherpreneurs
My Fave Customer Management Tool: Dubsado
___
Find me on Instagram @heyitsjenzaia
Email Me: hello@jenzaiadimartile.com
The Market, Scale, Grow Community
Don’t Forget To SUBSCRIBE
&
REVIEW the podcast!
Thanks for listening to this week’s Saturday Strategy Session! If you found this podcast helpful for your teacherpreneur journey, then head over to iTunes, so you can subscribe and leave a review. Each and every review means the world to me and helps me continue to create valuable content while also reaching more fellow ambitious teacher business owners just like you!
Episode Transcript:
Hey there, I'm Jenzaia and this is Market, Scale, Grow. A podcast created for ambitious teacherpreneurs looking to have a bigger impact on the world, achieve freedom, flexibility, and ultimately make more money with weekly strategy sessions and inspiring stories from fellow teachers just like you, my goal here is to help you create a customized marketing strategy so you can grow your teacher business beyond your wildest dreams. Okay, so before we jump into the episode, I am super excited to share a brand new freebie with you. It's my targeting ideas for Facebook ads. If you've dabbled in Facebook ads or you've done them and you've tried them, and you're just looking for some fresh inspiration for your audiences, this freebie is for you. I share my top Facebook ad targeting groups for you so that you can have inspiration and find those people that are perfect for what you have to offer. From warm audiences to cool lookalike audiences, to cold interest-based audiences. I cover all three in this freebie. Head to marketscalegrow.com/audiences to grab your copy today.
Hello, and welcome to Market Scale Grow. As you know, I'm your host, Jenzaia, and this is a Saturday strategy session. Thank you, thank you so much for spending some of your weekend with me. I truly, truly appreciate it. Today's episode is a little bit different. We are not talking Facebook ad strategy, we're talking business strategy, and I think that what I'm going to dive into is applicable no matter what kind of business you have. I really wish that I have been able to find a bit more of this when I've been starting my business because we're going to be talking about finances. I'm not a financial guru, but I think that it can be helpful to just hear about how other people run the behind-the-scenes of their businesses to get a bit of a better idea of what we should be doing or could be doing. That's the better way, what we could be doing in our own businesses. So this episode's going to be split into two parts. First, I'm going to talk about the logistics of my finances, and then I'm going to break down some of the expenses that I have and how I budget for expenses at the end.
Before I dive into all of that, I do want to say, I didn't really start any fancy, anything with my budget until I was making about $500 a month. It did take me, if you know my story, it took me a while to get there. The beginning of my Teachers Pay Teachers journey was very slow and kind of boring, and I wasn't making very much money. Before I was making $500 a month, it just kind of built up in PayPal. When I had something to buy or there was kind of like a lot of money strangely sitting there, then I would transfer it out. But for the most part, it just stayed there. I know that's not the best business practice because PayPal is so unreliable. There's nothing insuring it. You're not making any interest. So that's not necessarily the best financial thing to do, but that's realistically what I did. And it was nice because there was money there. If I wanted to purchase something off of Etsy or TPT. Tons of online businesses accept PayPal. So it was a really good place for me to just keep money, and then I could without quote-unquote spending any money because it was like this other separate account. I could spend money and often it would be putting money back into my business, but sometimes it was just personal spending. I didn't track it. I didn't pay any attention to it. Once I started to make about $500 a month, I decided it was time that I needed a better plan.
So here's where we're going to start talking about actual logistics. Okay. So first off, I do live in Canada, but my business functions almost entirely in US dollars, which adds a layer of complexity, obviously because we're talking about exchange rates. Previously, most of my business was running through PayPal. At the time of recording, Teachers Pay Teachers is still only paying out, as far as I know, through PayPal. They haven't started direct deposit yet. So that money still goes to my PayPal account, and I try to keep a balance of between $500 and $1,000. Once it goes over $1,000, I withdraw money, bring it back down to $500 and then let it build up because also Boom pays into that. I do have some monthly payments that come out of it. So it kind of fluctuates a lot that account, but I don't let it sit at anything higher than $1,000 because as I said already, PayPal is so unreliable, and tomorrow that money could be gone. So it definitely is a financial risk leaving money there, but just for simplicity's sake, I have that money sitting there.
I also have a business checking account. It is in a Canadian bank, but functions in US dollars, and I have a Canadian credit card in US dollars as well. Now, one of the main reasons that I don't use PayPal for my Facebook ad clients anymore is because PayPal won't let me pay off my US dollar account. They require me to transfer money into a Canadian dollar Canadian account, and then I can pay off my US dollar credit card. But if you're following that, that's exchanging it from US dollars to Canadian dollars and then Canadian dollars back to American dollars to pay off my credit card, and I don't want to do that. So I use Stripe instead, and my clients pay me using Stripe. It goes into my US dollar account automatically. Then my US dollar account, I can pay off my US dollar credit card without exchanging any fees. By using Stripe, I actually avoid paying any exchange rates when I'm paying off my business credit card. All of my expenses come out of my business credit card, I would say like 90% of them, and then the other 10% still go through PayPal. So that's kind of how that functions for me. Obviously, my family and our day-to-day finances run in Canadian dollars. So when I transfer money as an owner draw, whether it's from PayPal or my US dollar business checking account, then I am paying that exchange rate. I understand that there is no way for me to get away from that one, but I do try to keep as much of it in US dollars as possible just to make my life easy.
With my business, I use Profit First. I read the book back when I decided to make the switch from "willy nilly, doing whatever with my money" to "okay, I need an actual plan." I really like it because the profit comes first and taxes, owner's draw, and expenses. That way I know how much to allot to each one. In the book, there are actual percentages. I highly, highly recommend that you check that book out if you're thinking you need a way to manage your money. Because I'm Canadian, and I use the US dollar account, I only have one business account. I don't have all of the accounts that Profit First suggests and says they're necessary because the US dollar accounts have a fee associated with them that I'm just not willing to pay. Part of the reason that they recommend having multiple accounts is to make the money inaccessible, but because of the exchange fee and it being a US dollar account, and just the way it's set up at my bank, it kind of is inaccessible already. So I don't feel like I need to add on that layer.
The next piece that I'm going to get to in just a second will also explain how I do keep all the money separate with only one account. So I do just have the one account and I really, really like Profit First. I am currently paying myself 50% and my expenses make up 25%. Taxes and profit are the other 25%. That's kind of the whole picture of my business. As I said at the beginning, we're going to dive more into expenses at the end. So that's coming in just a second.
So how do I keep my business expenses in those different categories without multiple accounts? I use a program called YNAB, or You Need A Budget. That allows me to slot the money into different categories. So at a quick glance, I can look and see, okay, I have this much in my tax savings pat, and I have this much in my expenses. I have this much as my owner's draw, and I can see instantly exactly where every single penny is allotted. If you've never heard of YNAB, it is definitely a different way of thinking about your budget. It's a zero balance budget, which means every single dollar needs to get allotted somewhere. So you can definitely check it out. I'll link my affiliate code in the show notes. If you're interested in checking it out, you can head there. It's a really good way of being able to manage your finances. I use it for my personal finances, we have one budget, and then my business has a separate budget and I absolutely love it.
Okay, so now we're going to go on to part two of the episode where we talk about expenses. For my expenses, I allot 25% of my income to expenses every month. If I go over that 25% for any reason, then I take the money from my owner's draw, and so I pay myself less. My expenses come directly from the owner's draw, which is a bit more incentive. It's a bit more incentive to keep within my 25%. The other thing I'm currently trying to create a buffer, and I'm starting with a buffer of one month, and then I'm going to build to three months, and then eventually I'd like to have a buffer of about six months worth of expenses in my business account so that if anything happens, I don't have to worry about it or think about it or anything. So right now I'm working towards one month of expenses and hopefully, I will get there shortly so that I can start building two, three months, and I can have a little bit of peace of mind that I won't have to steal my tax money or something else if anything ever happens.
Within my expenses, I actually have five subcategories, if you will. They are monthly expenses, annual expenses, professional development, outsourcing, and other. What I like to do is look at the average over the last six months of what I've been spending in each of those categories, and then a lot that average plus 10% into the subcategory. So let's just say over the last six months, my average monthly expenses were $100 a month. What I would do when I'm allotting my money is put $110 towards monthly expenses to cover anything that comes up.
So in my monthly expenses, I have things like Buzzsprout is a monthly expense. They don't do an annual payment, so I can't switch there. I have Google Workspaces that charge me every month, and Zoom is a monthly expense for me. I'm still trying to decide if I'm going to upgrade to annual Zoom, or if I'm just going to upgrade when I need it. I have an event coming up that I'm hosting in September, so I needed it for August and for September. So I've just kept it, sorry I needed it in July and September. So I decided just to keep it through August as well. I'm just trying to decide if I'm going to bump up to the annual or not, but most things like Loom, Flodesk, Squarespace, these are other expenses that I have. I transitioned very quickly if not immediately to the annual plans because you save a bit of money that way. As soon as I decided that I like it and I'm using it consistently, and it's something that I want as part of my business, I would prefer to pay annually and then not have to worry about it.
For annual payments, I look at the average for the last 12 months because they are annual payments, so they just come out once a month and I try to allot that amount to my account every month. Sometimes it builds up to a couple hundred dollars because I don't have any annual payments. Then other times I clear the account out because multiple annual payments came out at the same time. I'm consistently putting money into that category so that when I do have an annual payment that comes up, I have the money there ready to use, and I don't have to think about it though. I will say that when an annual payment is coming up or when it happens, that's a really good time to reevaluate if it's something you actually want to be using in your business and then to cancel it.
Most companies are pretty good if within a few days of you getting charged that annual premium, if you're like, "oh wait, I just, I really didn't actually want it." If you just send them an email or their Contact Me form, complete that and say like, "Hey, I didn't realize this was renewing" or, "Hey, I thought I canceled it already" or whatever you want to send them. Usually, they will refund you that annual premium that came out. So, just a little bit of a tip to revise and to just think about those annual subscriptions around their renewal date.
For my contractors, I know exactly how much I'm spending on my VA and my graphic design outsourcing that I have. So I do the exact same thing. I know how much I pay them every month. So I put that into that category plus 10% so that I'm building up that buffer. Which leaves the professional development and other. Other is a bit of a different category, so I will cover that afterward.
But professional development, I like to be part of a membership or two. So currently I am part of one Facebook ads manager group, a Facebook ads group that isn't for managers, it's just for Facebook ad strategy and the community, and then I'm also part of a membership for female entrepreneurs. I love all of these groups that I'm part of. So I have those that I'm paying for either every month or I've upgraded to the annual. Same thing there, I like to bump up to the annual subscription so that I don't have to think about paying every month and it's not a monthly expense. I just personally find that so much easier. So similar to the contractors, I know how much each of those groups cost me monthly so that I can alot, that much money plus 10% into my professional development category and I'm building up the buffer.
Then finally, the other category now in other, I have my office expenses for things like my computer, which is a kind of special office expense that doesn't happen ever really. The last time I bought a computer was over 10 years ago and then this year, so I kind of use computers for a really long time before I upgrade. So I don't expect that to be another "soon" purchase for me. So that went into the other category. Then all of my TPT fees are another, my Stripe and PayPal fees are there as well. Then I have what I call a slush fund. Every month I put $200 or whatever's leftover into the slush fund, and it's just there for exactly that. The first place I draw money from if I've gone over in any of the other categories is the slush fund, and then once the slush fund is used up, then I pull from my owner's draw.
So that is how I do my monthly expenses. It definitely has grown and evolved over time, and as my business income has increased and I've had a little bit more flexibility in my expenses and what I'm choosing to do, it's really giving me that freedom to know exactly how much of my income I can allot to expenses. So that is a huge benefit of the profit first method is just knowing exactly where your money's going and how it can be spent.
So if you have any questions about finances or about YNAB or anything, I would be super happy... Again, I'm not a guru, but numbers are my jam. So I'm kind of in this, like, "I don't mind it so much" space. If you have questions, shoot me a DM on Instagram. I'm @heyitsjenzaia, and if you would like to share this episode, take a screenshot and put it on your stories. I love to reshare your shares because I think that it's just super valuable and it's a great way for more people to learn about Market Scale Grow, and to find a new podcast that might be motivating and empowering them in their teacherpreneur business. So, until next Saturday, when I'll be back in your ear, I hope you have a wonderful week.
Thank you for listening to today's episode. Today was brought to you by Dubsado, my absolute favourite customer management tool. If you're looking to streamline and systematize your service-based business, I highly recommend Dubsado. For 20% off of your first month. Head to marketscalegrow.com/dubsado that's D U B S A D O and use the code Jenzaia at checkout. And don't forget to head to our community at marketscalegrow.com/community where you'll find inspiring, ambitious teacherpreneurs who are looking to grow and scale their businesses just like you... See you soon.