Do you use percentages to distribute your business income?
If you feel like your business still isn’t doing well enough, you need to STOP splitting income by percentage right now!
Lots of people will recommend splitting your income by percentages. But the truth is, that for most entrepreneurs, this approach is completely inappropriate & doesn’t work!
And worst of all – it can make you feel like your business isn’t succeeding, when it’s actually doing just fine.
In this episode, we’ll talk about why that is & what strategy to adopt instead, so you can stop feeling like there’s not enough money & start celebrating your success instead!
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When I first started my finance business, I also split my income by percentages. Because it’s what everyone said to do. But it just didn’t work!
At first I thought it was because I wasn’t making enough money … but as I started to understand numbers better, I realised that wasn’t the case.
Percentages just weren’t appropriate for my stage of business!
So I developed a better way, that you can start using from the very beginning – and continue to use as your business matures. I call it the Magnetic Money™️ System.
I frequently see students come into the Magnetic Money Program with the same issue. They’ve been using percentages to split their income but it’s not appropriate for their stage of business and so it doesn’t work!
Unfortunately, they usually don’t know that the problem is and just assume their business isn’t doing well enough.
Let’s talk about the idea behind using percentages:
- Why do people advocate this system of using percentages to split income?
- What’s the thought process behind it?
- And who’s it really designed for?
The idea behind using percentages to distribute your income is that you’re always splitting the pie equally.
During big income months, you have more money available for your business, for yourself and of course, you need to put more tax money aside.
And on slow income months, you split the pie by the same proportions.
The idea is that it all evens out in the end. Except it doesn’t!
Because here’s what happens:
On big income months, you get more money. Your business gets more income, you get more income and you put more aside for tax.
The problem is that people usually SPEND that money.
Even if you’re paying it towards a credit card, it’s still gone. You no longer have access to that cash.
So if the next month is a LOW income month… what happens?
Well, you have less money to go round. The DOLLAR amounts are smaller. Your business gets paid less and YOU get paid less. It may not even be enough to cover the bills.
And that money you spent last month? Gone.
So the problem with percentages is that there’s no accountability & no SYSTEM to ensure that things will even out as intended.
Because this system of percentages is designed for people whose business brings in at least their ‘baseline income’ every single month.
Then it’s not a problem.
But for most entrepreneurs – especially in the early years – there are plenty of months where they do NOT meet their baseline income target.
And this can cause an ongoing problem they can’t seem to get on top of.
It can leave you stressing about money and feeling like your business isn’t doing well – when in fact, if you were to average yoru income, it’s actually enough.
So tell me in the comments:
Is this making sense?
Have you tried to use percentages? How did it go?
So if percentages are not right for you, then what can you do instead?
Well instead of using percentages – which can lead to a feast and famine rollercoaster, where you go from jubilation to depression – you want to smooth that cash flow.
You want the low income months where you fall below your baseline income to be offset and balanced out by the higher income months.
In order to do that, you need to PROACTIVELY smooth your cash flow.
That means tracking any shortfalls and then making them up with surplus. I’ll link an episode below where I talk you through how to do that.
It actually only takes 2 steps to smooth your cash flow – but you do need to do them religiously. And when you do that, everything changes.
When you’re proactively smoothing your cash flow, you’re no longer giving away money one month, that you may need next month.
That’s why it’s so critical that your money system helps you smooth your cash flow.
And this is why I developed the Magnetic Money™️ System. It helps you achieve your financial goals, pay off debts, accumulate savings, spend your fun money guilt-free and very critically… it helps you smooth your cash flow if you have irregular income.
You can check out & enrol in the Magnetic Money™️ System Bootcamp HERE.
It guides you through the entire process of setting up your Magnetic Money™️ System.
It’s time to create more abundance, inside & out, gorgeous. And you’re ready for the next step.
Have a great day, gorgeous!
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