Saving. You know you *should* do it in your business but you have NO idea where this magical money is going to come from. There’s bills, taxes, and shiny new things that are fun to buy. Let’s not forget that elusive owner pay.
Business savings is SUPER important for the health of your business and you don’t have to be making tons of money to do it.
This week on the Andi Smiles show we’re going to talk about how you can start saving in your business EVEN IF you are barely getting by. I’ll be sharing my top 3 creative savings strategies with examples of how you can make them work in your business.
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3 Types of Biz Savings (02:37)
Let’s start with three types of things you can save for. This will help you later as we go into the creative savings tips because you’ll be able to visualize exactly what you could be saving for.
These are the three types of savings that all small owners should consider:
#1 Tax Savings
Your tax savings is a non-negotiable savings account for your business.
We call it tax savings, but you’re actually putting money aside to give to the IRS later. That means you are NOT saving money for yourself. This is money that you’ll eventually owe to the government. You’re putting it in a safe place where you won’t spend it and it stays there until it’s time to pay your quarterly taxes.
Even though we refer to it as saving for taxes, don’t think of this as saving. Because when we think about savings, we subconsciously associate savings as being optional. Instead, it’s something that should be built into your business finance system and something that you should be doing if you make $10 in a month or $10,000 in a month.
Think of tax savings as a short-term savings account. This isn’t something that you’re building over the course of five years. Instead, it’s saved then spent in 3-month intervals.
#2 Checking Account Cushion
Within your checking account, you should choose a number that’s your cushion. This is the number that your checking account floats at.
Your cushion number should NOT be zero. Rather, it’s should be a higher number that you’ll think of as your personal zero. For some people, that number is $1,000 which means that you don’t touch the money in your checking account unless you have over $1,000. For others, it’s $2,500 or $5,000.
This cushion amount will vary based on your business income and your financial needs.
Your cushion insulates you from cash flow stoppages or shortages. For example, let’s say a client lets you know that their payment will be late. If their invoice is $500, and you only have $250 in your checking account, then you’re going to put yourself through a lot of stress waiting for that late payment.
Here’s why it’s important to have that checking account cushion.
If you have $1,000 cushion in your checking account, then you’ll still have money to cover your expenses while you wait to get paid. With that amount of money as your cushion, you’ll easily bounce back once your client pays you.
Your cushion is NOT money that you spend. Don’t think of your cushion money as spending money. Rather, transform your mind to think that your $1,000, $2,000, or $3,000 cushion is actually $0.
That way the money will be there to cushion you (get it?) in tough financial times.
#3 General business savings
Your general savings are the savings you set aside for your business growth. For example, maybe you want to update your camera or your computer. Perhaps you want to hire a web designer to re-brand your website or travel to a business conference once a year.
General saving can also be for big business budgets like launching a new program or product and the costs associated with that such as advertising, paying a VA, and tech help.
And that’s a wrap on the three different types of savings accounts!
Now let’s get into the really fun stuff- creative saving tips for your business!
Creative Saving Tip #1: Automate Your Savings (08:42)
Automating your savings means taking the money that’s being saved completely out of the equation. Often, we look at our checking account and think, “How much money do I have to spend on this thing I need to buy for my business?”
When the money is already out your account, the temptation to spend can’t creep up on you. If you’re somebody who is a chronic spender investor, then automating your savings is going to help you because you’re forced to save before you spend.
I recommend breaking up your savings automation into smaller chunks. Setting up an automatic transfer of $500 to savings once per month can feel like, “Holy shit- I just drained my account!”. BUT setting up weekly transfers in smaller increments goes unnoticed and is easier to maintain on a cash flow level.
Now, here’s one thing I don’t like about automatic bank transfers: It’s easy to get scared and turn off your weekly automation.
This leads to my second recommendation, my favorite savings app Qapital. One of the BIG reason I love Qapital is that it’s not within your bank, but rather it creates a separate place for your savings, so it’s harder to turn off and harder to dip into the money you’ve saved.
Try Qapital using the Roundup Rule
One way I use Qapital is by implementing the roundup rule into my automated savings. For every purchase you make, you round it to the next dollar and place that amount into your savings. If you spend $13.50, then you would round up the purchase to $14.
That is a tiny amount of savings, but it adds up over time! You’re saving just a little bit and you don’t notice $0.50 on a daily basis. However, $0.50 a day adds up to $15/ month which is $180 year!
Try the Freelancer Rule to start saving!
Every time there’s a deposit into your checking account, you can have a percentage of that deposit put into savings for you. You can set up an exact percentage like 25%. Every time you make money you are automatically saving for taxes, which is really nice. If that number scares you, you could start with 20%, or even as little as 10%.
Are you a victim of spending on guilty pleasures?
If you’ve been trying to curb a spending habit on a guilty pleasure (like Starbucks), you can start saving every time you make a purchase from that place.
For example, you go to Starbucks every day and spend $3 on a latte. You really want to reduce your coffee spending. With the Qapital app, you can set aside $2 every time you spend $3 at Starbucks, so it’s actually fun to break a spending habit like this. And suddenly your $3 latte is a $5, which makes you WAY more aware of your spending.
Spend less with this rule…
The Spend Less rule is awesome because you can set a budget on a certain place your frequent. Let’s go back to Starbucks. Say to yourself, “I don’t want to spend more than $15 per month at Starbucks.” If you spend less than that, you reward yourself by saving the difference. If you spend $12, then $3 goes into your savings. That creates a reward structure of breaking spending habits!
Save by connecting with IFTTT.
Finally, you can connect your Qapital app with the IFTTT (if this, then that) app. Through this app, you can connect your savings with a bunch of other apps, like your Fitbit. Everytime you walk 10,000 steps, $10 will go into your savings account for a new pair of shoes.
Or you could set a rule that saves $1 everytime you post on Instagram. That’s a way to reward yourself if you want to post more on social media!
Again, we’re talking about very small savings here. Remember, we’re not talking about saving $500. These are very small amounts, but they will add up over the course of time.
Creative Saving Tip #2: Create a small product and save all the proceeds (19:36)
This savings tip is one of my favorites! I highly recommend that you create a small product and save all the revenue. This is a great way to start saving in your business without actually impacting any of your current income and expenses.
When I say create a small digital product, I mean creating a small product that doesn’t take a major time investment. We’re not talking about taking six weeks to create an entire course.
We’re talking about a very small $5 – $7 product. All the revenue from that product is dedicated to savings. You can promote this product here and there, and who knows? It could even be a lead magnet to help you score some high-paying clients!
Let’s say you created a $5 digital product and you sold that product three times a week. That is $60 a month in savings, which totals $720 a year. That money could buy you a new iPhone or a tablet or a new camera lens. On top of that, if you pair this strategy with the roundup method, you could easily save over a $1,000 each year.
Keeping that in mind, here are some ideas to help you get started:
- Stock photos
All of these are great ideas to help you make some passive income to grow your savings account. It’s awesome because it doesn’t impact your general business finances.
(Psssst- here’s my small digital product I use for savings)
Creative Saving Tip #3: Implement the cash envelope method and save (25:43)
This method is what I used in the early days of my business and, through this method, I was able to save for the camera and the lens that use for my live show which cost around $1,000.
Every single week, take a cash owner’s draw out of your business. This money is for personal use, like going out to eat, going on vacation, or buying new clothes. Then, whatever you didn’t spend at the end of the week, put into an envelope and save it.
There were some weeks that I only put $3 cash into my envelope and other weeks I put $50. It really depended on what I had going on that week- and that’s totally okay!
The best part about this method is that it controls your personal spending. You’re able to monitor it easily by spending cash. Plus you control your businesses cashflow because you stop sporadically pulling money out whenever you need it and feel like spending it.
Physically seeing the money grow in that envelope will really motivate you! It’s tangible, which helps you see that you’re in complete control of it. You can see your end goal getting closer and closer when you use this method.
And that’s it! I use the Qapital mobile app to implement these strategies in my own business, and I hope you will too! Want to learn more about Qapital and how to set it up to automate your tax savings? Check it out here: andismiles.com/setupqapital