[Finance Friday Practice: Know Your Costs]
There are many layers to this, and I will share more as we continue working together but for now I want to talk to you about two key numbers I want you to know, my thoughts on the subject, and how to start consciously working with numbers as DATA instead of DRAMA.
• How much it personally costs to live each month and how much you need to contribute to that number via cash from your business
• What it costs to operate your business on a monthly basis
I want you to start paying attention to what’s going on.
I want you to know these numbers. Write them down to be revisited when we get to the practice of Looking Ahead.
Does this scare you? Does it bring up feelings of scarcity, uncertainty or shame? I could go on and on about what people tell me they feel when they look at their money, but you get the idea.
If you are experiencing some EMOTIONS around looking at your expenses, please know you are NOT ALONE.
You are STRONGER than you think you are.
You can be GREAT in this area.
If it doesn’t scare you, great! This will be easy for you.
But if looking at your numbers is stirring the pot for you, I will share my experience in case it might be helpful.
My strategy for money management used to be to work hard, make as much money as possible and try to spend as little as possible.
I am telling you now this is a recipe for disaster. It comes from a place of fear, lack, and restriction.
When I started to take a look at money in a NON-EMOTIONAL WAY and view it as the amount that comes in and the amount that goes out, one thing became apparent.
It costs money to live. It costs money to run a business and by always fighting against the current of money that needed to go out to make life work I was choking myself, my family and, my business. I was holding on so tightly trying to stop the outflow that I was exhausting myself and making things worse.
Then this thought came to me: Give yourself permission to have a life that costs money.
That felt better to me.
I was able to see this clearly for the first time in my life because of the experience I was having working with my clients. When I am working with someone looking closely at the numbers, I noticed they are caught up in the emotion often making comments about how they feel about the money or a particular purchase, while I was able to see it as data.
They were judging themselves while I was asking questions like:
• What are the numbers?
• Do they work?
• And if they don’t, what needs to be adjusted?
This awareness that the situation can be handled drastically differently if you can take a NON-JUDGEMENTAL point of view helped me separate myself from the money drama that I was dragging along with me every time something needed to get paid; there was a need or want, I lost a client, gained a client, etc.
So much drama…
Now it’s just facts. What is the truth? The truth is that I am not living a life of scarcity, but I was acting like I was!
So now instead of trying to say no to everything, I say:
• What is the purpose of this purchase?
• 3 Does it make good business sense (if it’s a business expenditure)?
• Does it support the things I value in my life (if it’s a personal expenditure)?
• Can I afford it?
• If I don’t have the funds, what has to happen to allow me to afford it?
I can peacefully spend money on things that are in alignment with my values, smart investments that I know will grow my business and even money to pay things I don’t enjoy like taxes and insurance.
I have found great freedom in this shift of thinking, and the amount of money and ease of money in my life has significantly improved. I feel expansiveness where there was once constriction.
• Figure out how much it costs each month to live and how much you need to contribute to that amount via cash from your business.
• Determine how much it costs to run your business on a monthly basis – If you use bookkeeping software pull a Profit & Loss by Month Report and see what the total expenses are each month on average. You might need to add things like debt payments and payments to yourself if they aren’t included in the Profit & Loss Report.
• Write these numbers down somewhere to start tracking them on a monthly basis. We will use them together later to get more insight into your business.
• Short-cut: To do this quickly without a lot of fuss you can gather your bank and credit card statements for the last three months and circle the charges, checks and other withdrawals (the statements should total them for you) and add them up by month. The amount going out of your business accounts equal your business expenses and the amount going out of your personal accounts equal your personal expenses. This is not an exact science, and I recommend having a more accurate method of looking at what is going on in detail, but this will quickly help you see what the total costs are. I offer this method because I don’t want the daunting task of figuring out the details to hold you back.
• Congratulate yourself for moving one step closer to knowing your numbers. I’m super proud of you.
Knowing Your Costs is one of the Finance Friday Practices we work on in the Private Facebook group I lead. This private Facebook group is a Mastermind Group for entrepreneurs that want to increase profits in their business by paying attention to their numbers. Click here to join for daily and weekly inspirations, calls to action and be a part of a community working toward similar goals. http://loveyournumbersnow.com/financefridays