Today we’re going to cover practical money skills and I’m taking you behind the scenes of what I do with my own money – each & every week.
Budgeting, saving, and knowing how to move your money around, ESPECIALLY when you’re self-employed can feel really confusing.
That’s why I’m going to take you through my ACTUAL step-by-step process.
Following this process will help you reach your financial goals, ensure your bills are being paid, and help you feel confident and in control of your finances.
Most importantly, what we’re covering here really is the KEY the key to smoothing out your cashflow and getting off that feast and famine income rollercoaster – especially when you’re self-employed and you have irregular income.
And the best news of all is it only takes five minutes a week!
Having the right practical money skills when you’re self-employed can be a total lifesaver -because when you don’t know what to actually do with your money as it comes in, it can land you on this really crazy, stressful roller coaster, where it’s feast and famine, where one day you feel like everything’s great, and then suddenly there’s not enough money to pay your regular bills, and it just never feels like enough.
I know what it’s like to have next to no money. At one stage I was a single mum on welfare payments.
And I also know what it’s like to have a healthy, six figure business income and still feel like you have nothing to show for it!
The good news is that between those two very personal experiences and the process of building a successful finance business where I helped my clients sort out their money stuff, I developed practical skills and strategies that help you smooth out your cashflow and help you take control of your money.
And what I REALLY REALLY love about all this is that it helps raise your vibration!
It aligns you with abundance and it makes you magnetic so that you attract even more money and abundance. It’s win, win, win.
Maybe the best news of all is that there’s no budgeting required because budgets don’t work.
Money systems, however, can be absolutely life-changing.
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So I’m going to take you through my actual personal step-by-step process that I go through each and every week as my money comes in to allocate and distribute it all.
Let’s do this.
STEP 1: Tally your income
The first thing I do each and every week is sit down and add up all the money that came into my business that week. (For you it might be fortnightly or monthly)
This is the money that you then need to allocate and distribute and move around.
Now, I did a whole video about giving every dollar a job to do which is linked for you below – because that’s what this is ultimately all about – so go check that out next.
While I’m talking about tallying your income:
This is actually one of my favorite money mindset strategies, because as I sit down and I do this, it allows me to keep tabs on my mindset and see what my thought processes and patterns actually are.
STEP 2: Calculate your tax
The amount of tax you need to put aside is going to vary week to week, depending on how much money came into your business.
It should always be a percentage of your gross income and you should have a fairly good idea of what that number should be. This will be an estimate, but you want to make sure that you’ve got it well covered. (If you’re not quite sure what that percentage should be, then speak to your accountant, look at last year’s tax returns and make the best educated guess you can for the time being)
STEP 3: Calculate your surplus or shortfall.
Once you know how much tax you need to put aside, you want to deduct that from the gross income that came in, and then you also want to deduct how much money you need to keep in your business account to keep your business running as well as the amount you’re going to need to pay yourself in salary or wages.
Once you’ve done that, you will either be left with a surplus or a shortfall.
You need to either allocate that surplus or make a note of the shortfall and make a plan for it.
And this right here, this little move, that is the key to smoothing out your cashflow when you have irregular business income.
Is this something you do? Do you keep track of surplus and shortfall each income cycle so that you can help use those numbers to smooth out your cashflow?
Let me know in the comments below:
Do you keep track of your surplus or shortfall?
Okay – once you know whether you have surplus or shortfall, it’s time to decide what needs to happen next.
STEP 4: Make your adjustments.
If you’ve got a surplus on your hands, it’s time to celebrate, do a little happy dance, but then you need to decide what to do with it.
First, you need to check your notes from the last payment cycle. Have you carried forward a shortfall from before? Because if you have, the first thing that needs to happen is to pay that back.
Once that’s done, if there is still some surplus available, then you need to allocate that in alignment with your current highest financial priority. (And if you’re not sure what that is, then make sure you check out the linked articles below next!)
So that’s what you do when you have a surplus. But what about when you have a shortfall?
Well, there’s not enough money to do everything you need to do, so something’s going to have to go without.
Let’s use an example and say that you’re $500 short, and what you decide to do is short-change your tax account, because you don’t need to pay tax for quite a while yet anyway.
So do that, but then it’s important that you make a note of that so that you can cover that shortfall next time. Otherwise, you end up in a feast and famine cycle.
So yes, there’s a short fall. It will happen from time to time.
That’s OK, make the best decision you can, take a note and then make it up next time.
This is how you smooth your cashflow and avoid the rollercoaster.
Now, once you’ve done all of that, it’s time to do the magic money shuffle.
STEP 5: This is the easy bit – time to do the magic money shuffle
Now that you’ve done all the work (in all of five minutes it took), you simply transfer that money.
You need to move that money around.
So transfer that tax money to your tax account, transfer that personal income to your personal account and transfer the surplus to wherever it needs to go to make up for any previous shortfall.
That’s it – you’re done! It’s that simple.
If you’re wondering how to calculate all these numbers, then grab yourself my handy income target calculator!
It comes with a bonus income distribution calculator to help you do all those things we just talked about and there’s even a handy video tutorial for you.
That’s today’s freebie which you can access here: www.miriamcastilla.com/calculator
It’s time to embrace your unlimited potential and you know what the next step is!
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