How To Keep More Of The Money You Make

Here’s the thing about money. It’s one thing to make it. But it’s QUITE another to keep the money you make. In fact, it’s ALL about the money that you keep. (That also means that just having “more money” isn’t necessarily going to solve your financial situation!)

This is one of the most common topics I discuss with my clients. They ask me questions like, “when I make more money, what should I do with it?” Some of them want to minimize any financial damage, while others are looking to grow their money.

Whether they know it or not, questions like this relate to what is called “Cash Flow Projections.” Basically, we’re talking limiting liability and keeping more of what you make. THIS is what Cash Flow is all about!

So bottom line? Improving your Cash Flow amounts to two things: making more profit, and keeping it! Here’s the part that a lot of us miss, though…

If you don’t make a plan to keep more of your profits, you’re making a de facto promise to pay more taxes. And seriously, who wants do do that, right?

So how DO you make that profit plan so that you pay less in taxes and keep more of what you make? Your plan greatly depends on what stage you’re currently in with your business.

For example, are you a brand-new startup or are you moving out of the upstart phase and into a more sustainable business? If you’re in the start-up phase, start with what I like to call the Pre Profit Plan. Here’s what that looks like:

The Pre-Profit Plan

1. First, ensure your business can sustain itself. The first step is ensuring that you have enough revenue to cover your business expenses. Looking at where you are now, when do you project that you’ll get to this stage? What needs to be reviewed and adjusted to make that happen? This is what I call a “break-even budget.”

2. Second, your business needs to support your personal budget. Once your business can cover its overhead and generate a profit, you need to ensure your profits are first funneled into YOU. Do this before you commit your profits anywhere else. This is for two reasons: first of course, you need to live. Second, also need to ensure you are following your personal budget. So essentially, you need to be sure that you pay yourself first.

Why is this so important? Because helps you predict your monthly salary or owner draws so you can generate predictable cash flow over time. Now, keep in mind one other thing: getting to this point takes a WHILE. Sometimes it takes even years to get there. But once you hit a rhythm, it is pure MAGIC, and you literally never go back!

So take the time to set your Cash Flow foundation. Make sure your business covers its own expenses and has some profit left over. Then invest that profit in your living expenses and your personal budget. Then when you hit your stride, start thinking about how to keep that Cash Flow increasing in a positive direction!

3. Account for the “below the line” items. Now that your Cash Flow is getting consistent, start thinking about the next steps for expansion. Consider which costs will start going up as you make more money. Then consider things like how much money needs to be set aside for items like taxes and emergency savings.

Now, let’s say you’re past the Startup Phase and on the fast road to “Profitsville.” How can you keep your Cash Flow going?

Here are your next priorities in the Post-Startup Phase:

1. Expand. Now is the time to create a plan for expansion. This includes hiring staff, adding new revenue streams, acquiring office space, or investing in education and training to expand your expertise (and profitability).

2. Benefits. Even if it’s just you (especially if it’s just you!) add yourself on a payroll (after getting advice from your accountant first, or course!). Then layer in benefits like retirement, insurance, fringe benefits, etc. Do this both for yourself and for your team members.

3. Protection. It’s important to protect not only what you have now, but also what you WILL have in the future. Some positive steps in this direction are first means creating contracts with professionals who can advise and assist you, such as lawyers or business consultants. It’s also important to invest in various types of business insurance at this point. Not only can these steps give you and your business more protection, but they can also double as expenses!

So once again, keeping more of what you make is the name of the game, and it’s ALL about Cash Flow.

The bottom line is this: how do you want your business to support your personal and professional goals? Ask yourself this at every stage in your business. This will be your guide to the bigger conversations that will ultimately lead you closer to your true goals!

Until Next Time,

Love, Light, and MONEY, Honey…

Kaylee