In today’s episode, I share how I budget as a financial coach. Budgeting is the second step in my five-step plan for building wealth, and I give you my perspective on personal and business budgeting.
First, I explain the power of a zero-based budget, where every dollar has a purpose. I highlight how this approach brings clarity and flexibility in spending while aligning with my financial goals. Then, I explain how my personal and business budgets intertwine in my three-tiered budgeting strategy.
I am spotlighting how I budget to inspire you to make changes in your finances. Whether your goal is to pay off debt, save for the future, or get set up for retirement, this episode guides you in creating budgets that fit your unique circumstances.
Stay tuned to hear insights on these key topics during this episode:
[01:10] Zero-based budgeting explained
[04:55] How my business budget informs my personal budget
[10:40] Why I have 3 personal budgets
[16:25] Budgeting is not about restriction
Tune into this episode of Money Files to learn how I leverage budgeting in my personal and business finances as a money coach.
If you’re ready to improve your relationship with money and start making moves towards your financial goals, apply to work with me so we can create a plan to get you there.
IF YOU LOVED THIS CONVERSATION ON HOW I ALIGN MY BUDGET, SPENDING, AND FUTURE GOALS AS A FINANCIAL COACH, CHECK OUT MY EPISODE ON THE #1 REASON PEOPLE STRUGGLE WITH BUDGETING!
Transcript for “How I Align My Budget, Spending, And Future Goals As A Financial Coach”
Intro: Hi, and welcome to Money Files. I’m Keina Newell from Wealth Over Now. I work every day with professional women and solopreneurs to help them get out of financial overwhelm and shame so they can experience more flexibility and ease with their finances. Are you ready to gain confidence and learn to manage your finances intentionally? Tune in and grab financial tips that will help you master the way you think about and manage your finances.
Keina: Hello and welcome back to another episode of Money Files. So I am going through my five steps to building wealth, but I’m giving you my perspective. So last week I talked about the fifth Step, which is investing, and I told you a little bit about how I invest as a financial coach. And today I want to dive into budgeting and I want to give you some details on how I budget. I feel like there are so many different ways in order to create a budget. The personal framework that I like in terms of building budget is to do a zero based budget. And so when you’re doing a zero based budget, that means you give every single dollar a name. So if you get paid $2,000, every dollar is accounted for down to the $1,999 and 52 cents. If you’ve ever worked with me, I’m going to ask you about the other cents.
I’m going to ask you to give me the real numbers because I want to actually account for what’s happening. I actually had a session with someone a couple weeks ago and it was so funny because they’re like, oh yeah, I make like $4,700 a month. And I said, okay, well can you actually like look at your paycheck and give me the number and the paycheck, I can’t remember exactly what it was, but it was really more like $4,633 and 25 cents. And I bring that up because if you are going around thinking I make $4,700 every single month and you’re not accounting for that extra $70, that’s like $840 for the year, that’s unaccounted for.
And so I like to make sure that we’re accounting for every single dollar, both in my own personal budget and with my clients because I want to make sure that you are really clear about where your money is going. And I like that same clarity for myself because it allows me to see how I can lean into financial goals. If I want to shift what I’m spending money on, then I can do that as well. And so I like to be really exact and not just focus on one area of my spending. Like, okay, I’m going to pay my bills and then figure out what’s left. So when I had a nine to five, zero based budgeting was very, very clear. All you had to do was look at my pay stub that I got twice a month. I would plug that into my budgeting sheet and I would budget that money.
And just to give you a little bit of perspective on budgeting, so I don’t change my budget from month to month. My budget is pretty much static for the entire year. I might change it month to month, like if I took on a new expense, if I was like, oh, okay, I’m going to get a star subscription or I’m going to get a Peloton bike. And so it may change on that level, but I budget the same way every single month because I think about my spending on an annual term. So on my personal side, I would be thinking about like what trips am I wanting to take. I would think about how much money do I want to save for the year. I would be thinking about how much money I might spend on birthdays. So I try to really blow it up. And then that annual perspective breaks down into a month to month perspective.
And so I do this type of thinking in both my business and my personal finances. So I have a budget on my business side, and I also have a budget on my personal side. I know a lot of business owners that they pay themselves when their personal bank account is low, and so they don’t actually give themselves a paycheck. I have always given myself a paycheck from my business, even before I went full-time for myself, even if it was like at the time that I was working full-time and starting my business, I was paying off some debt on my personal side. So I would give myself a paycheck from my business that would go towards paying off debt, and then I would put some emergency funds too.
I can’t remember exactly how much it was. Let’s say it was like $500 a month. But I would do that and I would do it consistently. So I had that dopamine hit for myself and for me my personal budget informs my business budget and my business budget informs my personal budget. So when I think about money in my business, I was actually thinking about when I left my full-time job, I was making about $10,000 a month when I left. And someone can hear, oh, you’re making $10,000 a month in your business and that $10,000 is not all my money. That is Wealth Over Now’s money and Wealth Over Now pays me as an employee.
And I’ve always had that level of clarity because when you’re in business for yourself, like $10,000 is not all yours. And one of the books that I love in terms of business finances is Profit First. So I use a level of Profit First in my business, but I’ve kind of manipulated it and I’ve also manipulated it for my clients. So they actually have a budget. Profit First doesn’t really talk about having a budget, and I like having a budget and Profit First also doesn’t talk about like paying yourself the same amount all the time. And I like to pay myself the same amount all the time.
And that’s really a matter of being able to build reserves and creating a buffer. I equate it to being able to build security and have a little bit more financial control. But in my business, if I’m making $10,000 months, all of the money is not mine. If I have really good profit in my business, I could pay myself $5,000. So I knew that when I wanted to leave and work full-time for myself, I at least needed to double whatever my take home pay was. So the last job I had, I think my take home pay was about $5200, $5500, something like that.
And so knowing that I made sure that my business was hitting, that’s why 10 K months were a really good number for me because I knew that I would feel some level of safety if I was able to leave my full-time job and make 10 K months in my business based on my business expenses, etcetera. So when I’m telling you that my business budget informs my personal budget, it informs it in a way that I have to be really clear on what my expenses are in my business and not just the ones that are taken out of my account month to month, but like I said, the annual expenses that come out of my account. What are those broken down on a month to month basis?
Because if I’m averaging $10,000 months, which I use averages in my business, so if I’m averaging $10,000 month and I know that I want to be able to pay myself $5,000 and I know that I want to set aside $1,500 of what I make for taxes, which is about 15%, well just from that math alone, you already know that $6,500 of that money is spoken for. So that means that my business budget should be around $3,500. And if I’m being even more clear with myself, not all of that is even in my business budget, I’m probably going to take 5% or so of that and put it into savings.
So now my business budget is more like $3,000. And that’s important for me to know because whether I am looking at all of my expenses at once, or if I am saying that I have $3,000 to budget, whichever approach I use, it gets me really clear on what expenses I want to have in my business. So for me, in my business, I make sure that I’m looking at what I make on average, and that’s how I develop my business budget. My business budget is a percentage of what I make on average. And I look at my averages in my business every like six months. And I also look in 12 month increments because it tells me about the fluctuations of my numbers and my business.
So as a business owner, I make sure that I have savings that’s accounted for, like every single time I get paid, I save money. Every single time a client pays me I put money aside for taxes. Every single time a client pays me, I put aside money for my operating expenses and every single time a client pays me, I put money aside for my owner’s pay or my compensation. So I do the same thing with my money every single time. And I feel like I’m getting a little in depth and I’m telling you more about the systems, but I’m telling you that because that informs, like I said, how I budget in my business. And when I am doing my money date in my business week to week, I am looking at a budget, I have a budget that I go in and I adjust, I have money dates with and I am going in and I’m allocating, for my dosado payment that’s not coming out until November or for my active campaign subscription, that’s not coming out until April. But I’m doing the same thing for my personal finances as I do for my business finances.
So that’s a little bit about my business budgeting. My personal budget, like I said, it’s informed by my business budget, so I can’t really pay myself more than I can afford. And for that reason and I’ve learned a lot of things about Money being a business owner. But what I’ve learned and what I’ve done on the personal side is I have built three different budgets, three different personal budgets. And this is something that I did in order to be able to support my brain and being like, oh my goodness, you should be paying yourself more money. But I created three personal budgets. So I did a bronze, silver, and gold, alright, you might say like peanut butter, jelly, chicken and rice and then one of them, is like steak and potato.
I developed these three budgets because I wanted to be really clear like what was the minimum amount of money that I could live off of, what was kind of like the budget that I wanted to be able to run, and then what’s the budget that’s my next version of how I want to be able to spend money. So the bronze budget is really a picture of non-essential and essential expenses. And I ran the bronze budget a lot when I first started my business. So I was paying myself a little bit less in 2021 than I was getting paid when I actually was working in a nine to five. And so the bronze budget was making sure that my mortgage is paid, my utilities are paid, my car payment is paid, like all of those essential pieces are all paid.
And then there are some non-essential expenses like working with a health coach or maybe getting my house cleaned all the time, although my house wasn’t being cleaned, I prefer to clean my own house. I don’t know why I gave you guys that example, but I don’t have that version of a budget pulled up in front of me. Maybe I would’ve spent a little bit less on eating out or spent a little bit less on travel in the beginning because I was looking at my non-essential versus essential expenses. Because at that time what was most important to me was to be able to work for myself and to be able to make the type of money that I thought I was able to make.
And with more hours in my day to dedicate towards my business, I was like, okay, I’m going to be able to see an increase in income and be able to pay myself more before the end of the year. So I ran my bronze budget a lot when I first started. In 2022, I had to use my bronze budget as well, a couple of times when I had some income dips in 2022 that I wasn’t expecting. I mean as a business owner, there are some dips I think we can account for and then there are others that we can’t. I knew that like, okay, here’s the minimum amount I need to pay myself in order to keep the lights on. And so I was able to do that because I have the bronze budget.
And then my silver budget is the one that I run off of most often and it’s just like a full budget, like the budget that I would use as though I was working for anyone else. And I’m saving money, I am contributing to my Roth IRA, I have money for entertainment, like that’s my silver budget. And then my gold budget is really about the next level in where I want to be. So if you’ve listened, I believe the podcast is called Financial Visioning and I talk about this a lot with my client, Brent, if you’ve ever listened to his podcast episode. But my financial visioning budget is like my gold budget and I probably plan this budget more than anything. But it’s really thinking about where’s the next level of what I want to be, like, what do I want my take home pay to be?
Notice I’m saying take home pay because I’m already accounting for taxes and all of those pieces. So the budget that’s most top of mind for me in terms of a gold budget is to bring home $10,000 a month in take home pay. And so when I am looking at that, I’m thinking about more travel, I’m thinking about more savings, I’m thinking about more luxuries in my life that either make life easier or they are aligned with my values for family or even just thinking about my health. Do I want to invest in another trainer or whatever that looks like. So that’s kind of what I think about when I think about my budget being $10,000 and that being my take home pay.
Something else that I’ve played around with too is like, what does it look like if I want to buy another home? So I have a home right now, but just knowing like my next home is probably going to be a million dollars. So what does that budget look like? So my gold budget is really fun for me to be able to plan and kind of think of what happens as I make more money in my business, what does that actually mean for my take home pay? And just to give you guys a little bit of insight, I was giving you the example of like a $10,000 a month and paying myself 50%, I pay myself about 30 to 35% of my overall income of what comes into my business.
And once again, it’s just based off of what my business budget looks like because I also have financial goals in my business in terms of like building reserves. I also told you that if you listen to that investment podcast, I told you that I contribute to my solo 401k. So when I’m talking about this $10,000 a month that I want to bring home, that would mean that off the top of that, there were several thousand dollars that were already put into my solo 401k as well. So I have a lot of different numbers, if you will, that I’m running in the background as I’m thinking about and I’m creating my budget.
And I hope that as you’re listening to me, right now when I’m talking about budgeting, I am not telling you anything about being restricted. My budgets in my life, it’s like I’m using them to dream. Even my bronze budget isn’t about restriction, my bronze budget when I’m using it, it’s because I’m looking to build something. I’m being like, when I was in my first year of business, I wanted to make sure that I held onto reserves. So I was like, let’s roll with the bronze budget. I wasn’t missing out on anything. I felt pretty good and I was able to make more money. Even in 2022 when I had to use my bronze budget, it was like being mindful of like let me protect my reserves. And it just created a level of discipline and it helps me always be clear on where I am.
So I lean into budgeting even when money may feel hard, like being an entrepreneur, there are months that I’ve had $0 months and you’re like okay, what am I supposed to do now? But I have built systems that allow me to not feel as financially anxious as one may expect when you have a $0 month. And it is because like on the personal side, like I said, I have my bronze, silver, and gold budget, and then on the business side, I do the same thing with my money every single time I get paid. And so it’s allowed me to build some level of reserves. And I’m also really, really clear on, okay, if I need to increase my cashflow and build my reserves back up, like how many clients do I need to sign? What type of income month do I need to have?
Do I need to do some corporate workshops or whatever? Like I’m able to play with the numbers because I’m really clear on where money is going, both in my personal life and in my business. So I hope that in today’s episode, just think about like I think for you, if you are on the personal side, I think you can still have, like if you just have personal finances, you don’t have business finances, you could have your own bronze, silver, and gold budget, maybe your bronze budget, you’re really thinking about, okay, I’m in the middle of paying off debt and this is what it looks like, but then when I get done paying off debt, I’m going to my silver budget.
And then when I’m done with my silver budget, I’m going to my gold budget, which incorporates me asking for a raise at work. You could be really creative with that bronze and silver, gold strategy. If you are in business and you’re thinking about how you want to pay yourself, you can be thinking like, what does my personal paycheck need to be?
What’s the minimum amount I can pay myself? What’s the ideal budget I would like to be on? What’s that next level budget? But being able to see money move fluidly like that for you is going to create this level of safety and security and knowing like I’m on the right path. I can stick with this and I’m making progress with my finances. So thank you again for tuning in, and next week I will be talking about one of the other five steps to creating wealth. So have a great week and I will chat with you guys later.
Outro: Thank you so much for listening to Money Files. If you’re ready to take the next step to reach your financial goals, head to www.wealthovernow.com/appointment and let’s get started.
