SELF EMPLOYED? PAYING YOURSELF TOO MUCH OR TOO LITTLE?

I love talking with people who are self-employed. Its amazing to hear the various reasons they chose to move away from the security of a pay check to the uncertainty of an income.

For some self employment is because they are so passionate about something, they can no longer sit in the passenger seat and let someone else drive the direction, others it is the long-term goal of having a sale-able entity that will provide financial security at retirement.

I really get inspired by those who know that what they do makes a difference to the lives of their clients.

In business, to achieve our goal we are often challenged to change the way we do things and it is in these times we need to ensure we understand our goal.

Without a clear understanding we often change our plan and get distracted by chasing something new and shiny, something that doesn’t fit with our plan but becomes attractive because it seems better than what we are achieving right now.

So what does this have to do with money?

Here’s 3 simple questions to ask yourself

  1. Do you take cash out (drawings) on an ‘as you need it’ basis or are you paying yourself a set wage?
  2. With either option do you have a clear understanding of exactly how much your business can be paying you without compromising your business goals?
  3. Have you established a clear understanding on your personal finance needs?

Not having a clear understanding on what you need at a personal level may be compromising your business goals and growth.

Taking too much out of the business often translates to people thinking they don’t have the cashflow for growth or new opportunities.

Taking too little often causes stress and then compromises your ability to stay focused on your plan (This is why many people will bounce form one plan to another).

By removing stress and providing clarity with your personal finances and needs, anyone newly self employed or wanting to grow their business can stay focused to their plan.

If you don’t have a personal budget my challenge to you is to set aside some time and put one in place. You may be quite surprised at the outcome.

Think of the opportunities you could chase if right now you are paying yourself move than you need and instead could be leaving capital in your business.

More importantly you may gain clarity on how much your business needs to generate to pay you and cover the business needs.

If you have a personal budget in place when was the last time you reviewed it to ensure it was still accurate?

You may be robbing yourself of the opportunities for growth in your business. Review it today!

There’s a lot to think about, getting the money foundation right is a perfect place to start.

Download our ‘Personal Budget Template to use if you don’t have one.