I used to be horrible at saving, because I never learned how to handle money, so I'd spend lavishly and then regret it. In fact, I owed over $1100 to my first credit card at 18 years old! Thankfully, I've always had a supportive family, and my dad pulled me out of that hole before I dug myself in over thousands of dollars. Looking at my bank statements used to always be scary too, as if not seeing them meant I wasn't broke.
Do you relate?
Most people don't understand money, and searching for help online can get overwhelming. That's why I'm writing this article to ease your stress with a fabulous resource.
As an entrepreneur, I've had to learn to plan, organize, and manage my income and expenses. In the beginning, I'd live project to project, because I wasn't saving. Then, I was recommended this AMAZING LIFE-SAVING app.
NOTE: This information is not only useful for entrepreneurs that have already started their business idea and need to organize for sustainability. It's also incredibly useful for you if you have a 9-5 job or are freelancing, because you can start saving for your business idea! I totally wish I had known about this app back when I started college.
The app is called Qapital . Type your phone number in the link, so you can download the app and check it out!
In Qapital, you create savings goals with rules on how much to save from your income. For example, you can add a goal called Future Home with a Payday Rule of 5% from every deposit over $500, and another goal called Dream Car with a Set & Forget Rule to save $100 weekly, and another goal called Emergency Fund with a Round-up Rule of $2 every time you swipe your card.
I know, I know, all these terms probably sound like code or another language. When you check out the app, it'll all make sense, because it's actually super easy to use. Here are snapshots of what I'm talking about:
Personally, I chose to just use the Payday Rule for all my deposits, so that the app doesn't gobble up all my income into savings that I might want to just transfer back into my bank. The Payday Rule percents also allow me to know exactly how much is going where at all times, since I can base the number out of 100%.
So, how do you plan your business finances?
STEP 1
I recommend analyzing your business idea and writing down all the expenses associated with it: supplies, office rent, marketing, subscriptions, transportation, hiring staff, etc. Those would all be your savings goals.
STEP 2
Then estimate an annual revenue goal(which I'll explain how to get that number in a different article). Based on your revenue goal, calculate taxes at 19-25% of that number, and add it as a savings goal too.
STEP 3
Add a Backup Fund goal of however much you believe you'll need in case something goes wrong for maybe a season or month or year.
STEP 4
Based on your revenue and expenses, decide what you want to do with the profits. The smart thing to do is not just to deposit it all into your bank account. Instead, maybe you can divide it as half for you and half staying in the business, or most for you and the rest staying in the business.
STEP 5
Now start figuring out the percents per goal.
The easiest one to add into your Qapital account first is your income from Step 4, since you already know your revenue, expenses, and what's left. For example: if monthly revenue is 10k, expenses are 4k, and you divide what's left in half, then this goal would have a Payday Rule of 30%.
Then from there, you can divide out the other 70% into the rest of your goals.
Whooo! That might be a lot to process, so
Here's my example for the Spring 2019 Fashion Program:
Welcome Kits $2,400
Creative Cloud annual subscriptions $5,760
Class Space rental $12,900
Fashion Shoot $2,050
Graduation Exhibit $2,000
Marketing $5,000
Personnel $6,000
After writing all that down, I added them as goals on my Qapital account. Then I estimated the business annual revenue goal of $114,000. From there, I added the savings goals Taxes $25,000( a little higher than the tax percent to be safe) and Backup Fund $33,000. Based on revenue and expenses/taxes/backup, I figured out that I wanted my personal income to be 16% of every sale. Then I divided out the other savings goals(expenses) at 1-7%, with two at 10% and one at 15%.
TADAAA!! You've got your business finances organized and never have to think about them again, because all this automation is for your benefit. It's like your very own personal accountant for FREE. You'll be saving for your future business or keeping track of all your expenses, and you'll also now have full control over what your income can be.
Isn't this so cool?!! Comment below if you have any questions, thoughts, or want to contribute your own advice. Also, share your experience about the app and finance/savings method, if you try it out!