Top 5 Money Mistakes Of Women Entrepreneurs
Here's a great problem to have: you've become successful with your business, but you're not sure where all of your money is going. How can you make thousands of dollars more— considerably more than you were last year—and still not have anything to show for it?
There's no reason to feel embarrassed or feel like you're not "good" with money. But it's important to change the way you see your money, because when you gain more clarity, you make better decisions around what you need your business to do for you. And the sooner you address the most common mistakes, the sooner you'll experience greater peace around your financial life.
The Top 5 Mistakes
Here are the 5 most common mistakes I see when working with entrepreneurs:
Mistake #1:
You're not "owning" your money attitude Many entrepreneurs avoid managing their money. Why do we do this? Partly because making money is the fun part. It's great validation when you have worked hard to build your business and finally see the results flowing in. The rest of it...not so much. Financial reporting and tax payments can feel tedious.
Or maybe there is some debt from when you started the business, and you don't want to think about it. Dealing with it would feel like stepping on the scale after a long, cookieridden holiday season.
Energetically, it's like carrying a full water bucket right to the edge of your crops, and then setting it down before actually watering your plants. You finally have enough water to hydrate all of your seedlings, but you keep just setting down the buckets. And the buckets are leaky, so the Your goals—buying a home, upgrading your lifestyle, traveling, stabilizing the future—are your crops. If you're not set up to use your money, none of your crops are going to flourish.
Mistake #2:
Equating investing in your business with spending in your business
Investing in your business is a good thing. You're supposed to. But are you overbuying too many programs and not following through? This is a typical (and common) avoidance behaviour. It means you need to slow down and decide on the one thing that you'll focus on to grow your business for the next 90 days. Then if a program comes up that isn't aligned, don't buy it.
Mistake #3:
Thinking a bookkeeper solves all of your problems
Everyone should have a bookkeeper. Bookkeepers manage all of the financial data for your business, and provide a historical record. But don't hire a bookkeeper and think you've delegated financial responsibility. You've only delegated financial recordkeeping. It's still up to you to make the most of the money coming in the door, and to set your financial policy. "Financial policy," simply means automating what you do with your money and how you make those decisions as conditions change.
Mistake #4:
Not separating your business expenses from personal expenses
Entrepreneurs need to know what their lives and businesses cost before income starts to take off, so they can capture profits. Knowing the specific amount you need to make your personal life work is essential. Most people know their fixed expenses (like mortgage, loan payment), but variable expenses like food and entertainment get murkier. Not sure what your variable expenses are? The simplest way is to get started on Mint or YNAB. This clarity is essential to everything else that comes after.
And having two separate accounts—one for business expenses and one for personal expenses—is not only good financially, but also good protection, should legal liability issues ever arise. Separation stops expense "seepage" that organically happens when everything is lumped together. When you move a fixed amount to your personal account 1-2 times per month, you make a greater effort to limit your spending. Whereas when it's all lumped together with your business spending, it's easier to buy on impulse.
Mistake #5:
Not having a plan for savings and spending increases
Cash reserve and retirement savings should always be factored into your expenses. Don't wait until you're making your dream income goal. Build them into your minimum budget so these areas are always being fed, regardless of income. Raises should be factored in as well. If you're thinking about giving yourself a raise, wait 6 months. Stick to your fixed personal draw and save extra in cash (which will be good for taxes too). Once you're confident that your average income has permanently increased (versus just having 1-2 good months), then you can add to your business or lifestyle—get that house cleaner or business assistant. This would also be a good time to increase contributions to your retirement and cash reserves, or any specific goals you have.
Move Toward Financial Clarity
Financial success is about clarity. And you never want to wait until everything in your business is perfect to start taking your money seriously, because "perfect" never happens. It's all about incremental improvement and building on existing momentum.
But just because money is "serious" doesn't mean it can't be fun! Drink your favourite beverage while reviewing expenses. Put on some relaxing music, take your laptop and snuggle into a comfy chair. Hold a weekly or monthly "money conference" with someone you trust.
Your financial health depends on what you bring to it, so for 2014, be sure to bring all of your favourite elements so you can feel good not just about the money coming in, but also the money going out.
Written By: Mindy Crary
