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Building Financial Flexibility Into Your Solo Business & Lifestyle

Running your own solo business can feel a lot like riding a wave. There are lots of ups and downs and you're probably looking for a smooth ride. Building financial flexibility into both your business & personal financial situation is one way to do just that. Today, you'll learn how I approach this process and how you can add breathing room into your cashflow too.

Do you have 3 to 6 months worth of living expenses set aside as a cash cushion?

A separate and distinct cash cushion is one of the building blocks for continued financial well-being. If you've got your cash cushion in place but find yourself dipping into it frequently, creating some breathing room within your cash flow can help you put an end to that.

On the personal side, start with a quick audit of your spending. Log onto your online banking. What recurring expenses are unfulfilling or unnecessary? Any big ticket items that aren't of real value to you? Could they be replaced with a lower priced alternative? As an example, we cut our cable awhile back and replaced it with lower cost streaming options. I'm also switching cell phone providers to lower our monthly cost there too. In both cases, I'm still getting what I want but not paying as much for the pleasure. Consider doing a spending audit every 6 to 12 months as a way to make sure you're building the financial flexibility you need into your cashflow.

Is your solo business paying you a salary?

Here's an easy way to build breathing room into your business cashflow. In my business, I pay myself a base annual salary and then make one-off distributions periodically throughout the year. The base salary covers my regular, recurring living expenses but is less than what I can afford to take out of the business. At the beginning of each quarter, I refill a separate paycheck account with my salary for the next quarter and automate those transfers into my personal checking. This system allows me to quickly see how I'm doing from a cash flow prospective and figure out when I can afford take an additional distribution and for how much.

Have you done a spending audit for your solo business?

Try approaching every business spending decision with a simple question.

Expense, investment, or both?

To provide an example, I currently have a monthly co-working membership in Chicago. As a solo business owner, it checks a lot of boxes. It offers access to a creative environment & community of other solo business owners, a place to work from, and a spot to meet with clients easily in the city. For these reasons, my co-working membership is an investment and expense.

However, if I'm not going into the city regularly or meeting clients online or at my Oak Park office instead, it would be wise to reclassify the co-working membership as an expense. While some expenses are necessary, an easy way to create breathing room in your business cashflow is to stay mindful of investments that become expenses and eliminate expenses that ultimately become unnecessary.

Building breathing room into both your business and personal cashflow will allow you to focus on doing the work you love while creating the lifestyle you want. And that's what having financial flexibility is all about.