So, you’re determined to live your best financial life!
You can see it now.
You’ll keep your bookkeeping updated every month, stay on top of your numbers, and finally start paying yourself.
This year will be your best financial year yet.
But wait, you just have to figure out HOW to make that happen.
That’s where good money habits come in!
There are five core financial habits that every small business owner should adopt.
If you keep up with these steps, you’ll have a roadmap to a profitable year.
Do Your Bookkeeping Weekly
Doing your bookkeeping weekly is the most crucial money habit you can adopt.
It’ll only take 30 – 60 minutes of your time each week and has a HUGE impact.
Doing your bookkeeping weekly means:
- Enter and pay your bills
- Make deposits
- Send invoices
- Categorize Transactions
- Reconcile bank accounts
Review your numbers monthly
This money habit is all about running a Profit and Loss report every month.
Then, compare the previous month’s report to the current month’s report.
When you make the comparison, you start to think critically about your business finances.
Now is an excellent time to compare these numbers to your budget as well.
Don’t have a budget? No worries.
You can use these monthly Profit and Loss reports to see what your average expense are, where you can possibly cut back, and where to anticipate upcoming costs.
Save for taxes each month
Saving for taxes means putting a percentage of your profits aside for taxes.
You do this so that you have money available to cover your estimated tax payments.
If possible, transfer 30% of your monthly net income (not your gross income!) to your tax savings account every month.
Remember, our tax system operates on a “pay-as-you-go” basis, which means the IRS wants its cut of your income when you earn it.
So, estimated tax payments are due as follows:
- 1st Payment – January 1 to March 31 – due April 18, 2023
- 2nd Payment – April 1 to May 31- due June 15, 2023
- 3rd Payment – June 1 to August 31 – September 15, 2023
- 4th Payment – September 1 to December 31 – due January 16, 2024
Pay yourself every month
Instead of pulling money out of your business whenever you need it, pay yourself a set amount once or twice per month.
You should do this every single month, which is why we call it a money habit!
Once you budget a certain amount to pay yourself each month, stick with it and plan your expenses accordingly.
Don’t be tempted to use the business account if you run short without serious consideration.
And if you must, transfer the funds to your personal account first and avoid paying personal expenses directly from the business account.
Clean up your finances every year
Just like material clutter, we can have financial clutter!
So decluttering your finances is really important.
You should perform an in-depth spending audit at the end of every year.
If you don’t make a conscious effort to carefully go through your transactions, you’ll keep wasting instead of saving money for another year.
Here are some easy ways to clean up your finances:
- Review your account balances
- Create a budget
- Automate bills and savings
- Cancel any subscriptions barely used in the last six months
- Create or review your plan for paying down debt
- Talk with a financial planner and/or contribute to your retirement savings
- Adjust your tax withholdings
Following this 5-step roadmap can help you get on the path to healthy money habits for your business and wave goodbye to financial and bookkeeping overwhelm.