Safety Net: a safeguard against possible hardship or adversity.
In the Savvy Groomer's Roadmap to Financial Success step two is to have a starter safety net. This is a small amount of liquid money you have available to you in the case of something unexpected happens. You can put this money in a savings account, an envelope in your sock drawer, a safe, anywhere that works for you.
How much should I set said?
$500 - $1000 as an employee
$1000 - $2000 as self employed / employers
Blah Blah Blah, write your budget budget down, blah blah blah.
I find myself sounding like a broken record talking to groomers about the importance of writing a budget down. I feel like the grooming instructor mentioning how your grooming is only as good as your bathing. The truth of the matter is when I write down my budget, and I honestly do every month, I am signing a contract with myself. I am holding my word of honor and integrity to myself. I am agreeing that not spend more than what I've written down... by that same token I've also agreed to not make myself feel guilty for spending that money either.
Your budget gives you permission to spend money. -Rachel Cruze
The grooming salon is a place of chaos, things are always changing, it is a dance between having a system and acknowledging that the system only works with flexibility... it's the same with your budget. Let's assume you've decided you will only spend $200 this month on...
We've all done it... we are all guilty of it.
The company card in hand, at the gas station, out to dinner or at the store. Is this really a business expense? Probably not but we tell ourselves "this is part of being a business owner, the business paying for things". It starts with a tank of gas, then it's towels that are actually for the house but you can always give the old ones to the shop... A laptop "for work". You slowly start embezzling from your own company without realizing. Some it's an occasional thing, some it becomes a way of life. You've turned your business into your personal piggy bank which does not allow it to function as needed.
Is it because you are a bad person? Obviously not. Is it because you're lazy or dumb? Of coarse not! It's just so easy because there isn't someone to tell you no or to stop you. If you were a manager of "Your Shop Inc" would you handle your business finances the way you do?...
Thrive is the final step, this is where you can focus on getting the best insurance you can afford, giving to charity, growing your business and feeling comfortable knowing you have a fully funded 6 month - 1-year emergency fund.
Protect you and your family:
Health Insurance (the good kind!), life insurance, disability insurance, an emergency fund dedicated to that potential "career ending bite".
Financial & time-based charity
Grow yourself and your business:
Trade shows, books/DVDs, online courses, hands-on training, business growth, business coaching.
At this stage, you should feel safe. That cat bite or slip and fall will not leave you broke and broken. You can share your prosperity by teaching other groomers or do foster.
Live is your next step, this is your grooming tool, entertainment and saving to your beefed up emergency fund of $2500-$4000.
Keep your grooming tools in shape:
Sharpening, blade/scissor replacement, clipper/tool repair
Keep connected to the outside world:
Phone, internet, cable
Keep yourself entertained, live a little:
Subscriptions, books/audiobooks, pocket money, pet pampering allowance.
At this stage, you should have some wiggle room to get beyond these basics but may still need to temper what you are spending your money on.
Survive is your first step, this is your food, clothing, housing, transportation and saving to your starter emergency fund of $500 - $1000.
Food on the table:
Groceries, restaurants, daily habits (coffee, etc)
Professional, home/seasonal, kids grew out of
Car payment, car insurance, car gas, car maintenance, car repairs
If you are currently living paycheck to paycheck or playing catch up you may not get beyond these basics in survival. If you do not get beyond your survival budget there is a strong probability you are living beyond your means OR not making enough money to... well... survive.
Survive is based on business over head. How much money do I need to make to "break even" and pay all the bills? Do you have low or high expenses? These are all the bills you need to pay monthly in your business, minus your own paycheck.
Live is based on my business expenses PLUS how much I would make to be content. You may be the type of person to be content with an extra $100 a week, $1000 a month or maybe $5000 a month. How much would you need to make to in order to feel like you accomplished something? Personally, when I break this down I always add an additional amount to save for tax. You can set aside 20-30% of gross profit. If you're the type who would rather give themselves a tax return or over estimate go with 30%. At 20% you may still owe a little more money depending on your profits for the year. (*cough talk to your tax professional*)
Thrive is where you go "how much...
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