Ep 42: Balancing Personal and Business Finances: A Holistic Approach
Discover the Secrets to Designing Your Business Finances for a Tailor-made Lifestyle
In this engaging episode, Sarah Noel Block and Christy Bowie delve into the art of creating personalized financial goals for business owners that align with their unique needs, desires, and ambitions. Learn how to break free from generic financial targets and design a goal-oriented financial framework that supports your vision for success.
Master the Balancing Act: Uncovering Your Personal Financial Needs
Listen as our speakers walk you through a step-by-step process to break down your financial requirements into comprehensible categories. Discover the importance of determining your "break-even" point and how reverse engineering your business finances can propel you towards meeting your personal financial goals. Get ready to unlock the doors to a fulfilling professional and personal life that's as unique as you are.
Making Your Money Work for You: Integrating Business and Personal Finances for Financial Freedom
The Importance of a Goal-Based Financial Framework
In the world of online business, it's all too common to come across arbitrary goal-setting advice that promotes big, shiny numbers as the ideal benchmark for success. However, these generic goals often don't translate to the personal and unique experiences of small business owners and solo entrepreneurs who want to thrive in their own individual way.
To achieve a financially meaningful and fulfilling lifestyle, it's crucial to take a goal-based, personalized approach, which considers not only the revenue one generates, but also how that revenue aligns with their individual needs, wants, and priorities.
Striking the Perfect Balance: Breaking Down Your Personal Financial Needs
Following a systematic approach can help you in determining how much of your income should be allocated to different areas of your life. This approach simplifies the process of breaking down your financial requirements into distinct categories:
1. Day-to-Day Spending: Analyze your monthly expenses and consider annual expenses that don't occur each month to understand how much you spend over time.
2. Debt Payments: Incorporate regular payments for loans or outstanding debts.
3. Tax Obligations: Account for annual taxes, including income tax and other hidden fees.
4. Savings & Wish List: Envision your future savings goals and any additional expenses for items on your wish list.
By combining these categories and establishing a "break-even" point, you can determine the income needed to maintain your desired lifestyle.
Reverse Engineering Your Business Finances for Success
With a solid understanding of your financial needs, it's time to examine your business finances. Implement a goal-oriented strategy to determine the number of clients, services, and pricing structures required to achieve the revenue that aligns with your personal financial goals.
Breaking down your business finances into strategic financial statements helps you to:
- Regularly evaluate the cost of goods sold, expenses, and pricing in relation to your unique business structure.
- Monitor project-based work through time tracking to understand the actual time spent on tasks, enabling an informed decision regarding reevaluating pricing and workload.
- Streamline your payment processes and financial systems to minimize emotional decision-making and optimize efficiency.
Bringing It All Together: Creating a Holistic Financial Approach
Integrating your business and personal finances by understanding your unique financial requirements is the foundation for financial freedom. By developing structured financial systems, you can progress towards reaching meaningful goals and unlock the opportunity to thrive both professionally and personally.
The Pitfalls of Emotional Financial Decision-Making
A glaring issue that often arises is making emotional decisions when it comes to money. While experiencing emotions is human nature, they can often lead to impulsive and irrational choices. Therefore, it's vital to systemize financial management and reduce the emotional component as much as possible.
Using a spreadsheet to keep track of your financial data can help eliminate emotionally-driven choices. Concrete numbers provide an indisputable perspective on your financial situation. As a result, there will be less room for making decisions based on feelings or impulses.
Tips for Preventing Emotional Decisions
Implementing the following steps can help you avoid emotional decision-making and stay on track with your financial goals:
1. Set principles and rules: When you're not stressed about money, take some time to establish your beliefs and rules around money management. Note your values and principles related to finances and translate them into specific rules for various situations. These rules can help guide you when making important decisions.
2. Delay impulsive purchases: Establish a waiting period before purchasing above a certain price threshold. By waiting 24 hours, you can reassess the situation and determine whether you genuinely need the item or if it's an emotion-driven impulse buy.
3. Allocate unexpected earnings wisely: Create a rule for allocating any unexpected windfall, bonuses, or extra income. Determine how much you will save and how much you will spend to prevent sudden splurges.
Financial Conversations with Your Partner
When managing personal finances, involving your significant other is essential, especially if you have differing views on money management. It's crucial to have open discussions and align on financial goals and expectations. Organize regular "money dates" to evaluate progress towards your goals and make any necessary adjustments.
Maintaining a Positive Attitude Toward Your Finances
Your mindset plays a significant role in how you manage your finances. If you harbor negative thoughts about money management, consider adopting a more optimistic attitude. Don't set yourself up for failure with self-limiting beliefs, such as "I'm terrible with money." Instead, remind yourself that you can handle your finances and make good decisions.
Achieving financial freedom by integrating business and personal finances requires a holistic approach that ameliorates emotional decision-making, strong communication with loved ones, and maintaining a positive attitude toward your finances. By taking a systematic, goal-oriented, and rational approach, you can make progress toward fulfilling your financial objectives and building a thriving professional and personal life.
Christy Bowie
Christy is a CPA & Fractional CFO who empowers service-based entrepreneurs to grow their business by taking away the stress of finances & creating strategic plans to scale. After starting her career at Deloitte where she served some of the world's largest private equity companies as well as high net worth business owners and investors, Christy learned the powerful strategies that successful CEOs use to scale. Christy has served hundreds of small businesses in various industries, stages of businesses, and revenue ranges and has a passion for helping founders build legacy businesses that can provide generational wealth and a lifestyle they love. Christy also hosts a podcast called The CEO Wingwoman where she brings on guests to discuss important topics about scaling a large business. Christy’s goal is to help you feel empowered as a business owner & get back to being the CEO instead of stressing about details.
