The other day Matt said to me “Hey Mel, we’ve been watching others ever since we started our business and it started to grow. We’ve seen people who started at the same time as us come into money, we’ve seen them blow money. What are we doing differently?”
Well let me tell you – I live with the cheapest man alive!!! Matt is so frugal and he is my coupon clipper, my discount hunter, and he is always analyzing every financial decision that we make to make sure it’s the right one.
Over the past six and a half years that we’ve been growing our business, we’ve really tried to be smart with our money. So today we want to give you some advice so that you can be better off as you begin to grow your income. Maybe you just started your business or you might be a couple years into it. No matter how much money you make, you can still take these principles and apply them to your life.
Now keep this in mind – I don’t usually talk about financial stuff with my coaches and customers! Everybody has a different spending and saving style and everyone is in a different situation. So Matt talked to our financial advisor and the two of them put together some pointers to share with you all, and here they are!
Delay Instant Gratification
I’m a spender and I REALLY enjoy shopping, so this was hard for me in the beginning! I actually had to write it on a notecard and place it on my desk – “I will delay instant gratification for long term success.” I watched people buying cars and getting new houses and I always wondered why I couldn’t have what they had! I had to work on constantly grounding myself and reminding myself that we were on the right path.
Create a Separate Bank Account for Your Business
So one of the things we did when we first started out what to create a separate bank account for my fitness business. That way everything that I made from an income standpoint would go into that account. We used that for business fees, travel, marketing, etc. From there, we took 30% and put it into our savings.
Taxes: Set It and Forget It
You are now a 1099-MISC, so your company isn’t taking taxes out of your paycheck. So we created a separate tax fund so that we would always have the money we needed to pay our income and business taxes. Matt actually hid this from me so it was almost as if it wasn’t there. That way we couldn’t spend it and didn’t think about it being part of our “fun” money.
Set Aside Money for Emergencies
A lot of times people live a little too close to the edge – and that’s totally okay if that’s your thing and you know how to manage it, but we like to have money set aside for emergency situations. You’ll want ideally three to six months of your income set aside in case you need to travel for an emergency, get your car fixed, pay hospital bills, etc. This is money you should NOT touch unless it’s an emergency.
To get this started, take a specific percentage of each paycheck you get and set it aside in your emergency fund. Even if you start with just $25 a month, it will add up.
Pay Off Your Credit Card Debt First
I will admit that I love my credit cards. That does NOT make Matt happy. He actually swore he wouldn’t propose to me until I had paid off my credit card debt!! Matt is a stickler about only using credit cards if you have the money sitting in your checking account. If you are paying 20% interest it’s really hard to keep up and you can get yourself in trouble. That’s way higher than student loan interest rates or car loan rates, so always pay your credit card debt off FIRST.
Right now, if we put something on a card, we know we have the money for it. I have a personal card and a business card and we pay them off in full each month.
Open Up a Roth IRA
A Roth IRA is basically like a 401K for retirement, but it’s pre-taxed money so you pay the tax up front instead of when you take the money out. This is one of those things you won’t touch for awhile but it’s good to have. Keep in mind there is a limit to how much you’re allowed to add to this account each year.
Set Up a 529 Plan
For Matt and I, our kids are everything so setting this up for our boys was really important. This was the very first thing we did when we started to earn income from the business. The sooner you start, the more time it will have to grow.
Leaving a Job
It’s important to note that when I started my Beachbody business we were planning on living off of Matt’s income. The money I made from my fitness business was going to go towards paying off our debt. All of the things we’ve mentioned were done and set up before Matt left his professional job.
A lot of people set goals to quit their full time jobs or retire their spouse and it always makes me take a step back. I do believe some people jump the gun at making that decision. So these are some of the non-neogtiables Matt and I would say are important before that happens:
- Emergency fund with at least a year’s worth of salary
- No credit card debt
- Mortgage paid off
There is Never a Guarantee!
Remember that there is never a guarantee. Whether you work in corporate America or you own your own business, there is never a guarantee that the business will always do what you anticipate or project. Having that back up prevents you from having to scramble when something doesn’t turn out as planned.
Some people say they want to make X amount of money per week and then they’ll quit their job – but sometimes it happens once and then their income goes back down again. Every situation is different, but Matt says that if you don’t have your emergency fund set up, it doesn’t matter how consistently you are hitting that number.
Remember – you can make a lot of money, but if you spend a lot of money it’s totally irrelevant! This is all just our advice and our opinion on money matters. You’ll always want to consult your own financial advisor before taking any big steps. This is just a road map of the way that we plan.