How to Pay Yourself Consistently When Your Income Isn't

Welcome to the Creative Mind Smart Money Podcast, where we turn financial confusion into creative confidence. I'm Samantha Ek, the keeper and fractional CFO for creative entrepreneurs. Each week, I'm sharing my financial expertise and actionable strategies to help you build a thriving creative business. Plus, you'll hear from industry experts who bring fresh perspectives on growing your business beyond the numbers. Because building a successful creative business starts with strong financial foundations. Your next chapter starts now. Hello, and welcome back to Creative Mind Smart Money. And today, we're going to talk about maybe a topic that's a little bit different than just typical pay yourself. We're going to talk about how to pay yourself consistently when your income is it? So for most creative service writers, and I'm talking about copy writers, website designers, graphic designers, occasionally social media managers, people that don't have retainers, the income is not consistent. So the idea of being able to pay themselves and being able to understand their cash flow, everything that seems like a wild idea because they don't have consistent income. So how are they able to do all of this? And the Feaster Famine cycle is so common with these types of creatives because they're not planning ahead. And I know that sounds like very critical, but it's honestly the truth because I said it before, but if you don't know what's coming in and out of your business, you're not going to understand what's actually going on with your business. And you're not going to be able to actually make the moves that you need to make, especially when it comes to things like inconsistent income. And paying yourself. So the core problem, of course, is a lot of creatives will just kind of pay themselves whatever is left over at the end of the month. And that can often be zero dollars. That can be sometimes, you know, $10, whatever it is. When you leave yourself last, and we've talked about this before, but when you leave yourself last, you end up being in this place where you're just kind of okay with whatever's left. So maybe it's, you know, maybe it is $10. Maybe it is $50. Maybe it's a dollar, you know, and you're like, okay, well, that's all I have left. That's all I can afford to pay myself. But realistically, you probably could have afforded to pay yourself more during the month, but you only paid yourself what's left because you're like, okay, well, this is what's left. But then also, if you pay yourself what's left, are you accounting for expenses that are coming up? Are you accounting for other things that are going to be happening? The pattern that happens and what happens to your personal finances, especially, okay, like let's just say that you are a single mother and you don't have a partner that said, home that is working a regular job. So your income is all that you have. If you just pay yourself what's left, you end up putting yourself in this Feast or Famous Echo where you're like, okay, I have more money coming in. You know, I'm going to just pull it for me because I need the money. Like, you know, you don't end up being able to plan appropriately and you end up panicking because you don't have a set system in place. After that core problem, then becomes the fact that you are not planning ahead essentially. So you're just taking what you kind of need when you need it. And I've had many clients do this. I trust me. If they need $300, they're just pulled through $100. And there's been many times where I've told my clients, we need to get you on like a cycle of paying yourself either. Maybe you pay yourself once a month. Maybe you pay yourself for a week. Maybe you pay yourself every couple of weeks. But it's consistent and it's the same amount every time and it doesn't matter because you want to make sure that you are getting paid and that you're not lost, right? You want to make sure that you have enough money for your finances, which is why in the last episode, you know, I said you got to start from the back and then kind of build yourself forward. So now that we've kind of covered that, of course, there comes budgeting with variable income. So a lot of creatives, and most of creatives that I work with have very variable income. Their income is not set in stone unless they have some sort of retainer. This could be a coach. This could be, again, like a graphic center, a website center, maybe they, you know, book five projects so they know they have five projects coming in. But maybe they also have, you know, like a mini website sprint that they could sell throughout the month that boosts their income or maybe they have cancellations or whatever it is. So how do you even start budgeting when every month looks different? Well, the truth is the matter is you start with what's recurring. So you start with what you have that is recurring. So obviously your pay would be recurring. You start with your subscriptions. You start with your utilities. You start with whatever you know that is going to come out of your bank account at the same point every month. You start with that. So if you have, you know, $300 in software subscriptions every month, you know that you need to at least have $300 in your bank account every month. And then if you're paying yourself, you know, maybe $1,000 a month, you know that you need to have at least $1,300 in your bank account at the end of the month. And the mindset shift that makes that a possibility for you and that makes you understand that budgeting with a variable income is possible is understanding that you do have to pivot. So there are going to be times when things come in and maybe you missed something, maybe you owe an insurance bill, whatever it is, you're going to have to pivot. But when you put down and you write down what is recurring and you know what is coming out, like you know, absolutely 100% this is what is coming out next month. It's going to change the way you run your business. Because if you know, okay, I need at least a $1,300 next month, you're going to be able to be like, okay, at the end of the month. I have $2,600. That means I have an additional $1,300 that $1,300 is going to cover next month. What do I want to do with this other $1,300? Reinvest. Do I want to set aside for taxes? Do I want to pay myself more? It's just going to change the way that you think and you know, make everything feel less impossible because then you actually get the idea and the thoughts and the realistic perspective of what's going on in your business. So again, how do you figure out what you actually need to cover personally every month? Well, on your personal side, you look at how much you need to be bringing into your business to support yourself. So for example, on my end, you know, I looked at what I needed to bring in an addition to my husband's income that would allow us to live comfortably. So I said, okay, this is the dollar amount that I need to be bringing in every month. Okay, this is how much money I have to spend above that based on what I have coming into my business currently. So now I know, okay, I can spend this money, but I need to at least bring in this much money personally. Again, knowing that number is going to change the way you run your business for the exact reason that I just stated because if you need to bring in $5,000 a month to support your family and everything that you have going on with your family, maybe you need to bring in $9,000 a month, you know that anything over that, obviously you can spend on expenses. So if you know that you have $9,000 a month that you need to bring in for you personally to be able to sustain your lifestyle, whatever, you know, you have going on in your life, you have $500 in monthly expenses every month. So that's $9,500. That means that if you only have $10,000, you only have $500 left that you can wiggle with, which means if you are talking to a service provider and they're saying, hey, you know, to do, I don't know, let's just say my social media. The management costs are $2,500 per month and you only have $500 extra per month. You can be like, I'm sorry, that's not in my budget. I just kind of forward that right now. And that's not saying that you don't respect their pricing, but now you actually know you have to spend versus what you don't have to spend. It gives you that really realistic perspective on what your business is actually capable of because you have that baseline. You know what your baseline is. Now you can build the blocks above it, you know what I mean. So knowing the baseline is one of the most important things and the most biggest thing that I can tell you that you can do in your business. It's also considered your cash floor. The baseline is the most important thing that you can do. If you just took one thing away from this episode today, figure out what your baseline is. That is what I want you to do. Now of course, you want to build yourself a personal salary system. So what does that look like to pay yourself a consistent salary even when your revenue is fluctuating? Well, like I said, if you already know what your baseline is and you know that next month, you're only going to be able to bring in 5,000 when you need 9,000, you know that in this successful month, maybe you have this really great month, you need to be setting aside in the additional 4,000, which means that, you know, if you're bringing in $20,000 a month and you already have 15,000 of that allocated, you only have a thousand dollars in that month to spend because essentially you are planning ahead and you're saying, okay, I know I need 9,000 dollars a month to pay myself. So do I have that for the next month? And then if you want to push yourself during the next month to make more sales so that you can, you know, make up for that, you can, but you already have that set aside. So you know you're going to be able to pay yourself, but you can also go ahead and like push yourself for sales to be like, I want to make sure that like, you know, I do have extra cash coming in during that month, which you can do. But then at least you are covered for what you, you've already planned for. So again, when you know your baseline, that's how you can make sure that you're building a buffer to make that possible because then when you're actually looking at you're saying, okay, I've $5,000 left in the bank, but I know I need $9,000 to run my household properly and for personal, for my pay, I need to make up that $4,000 somehow. Oh, wait, you know what? I have another payment coming in at the end of the month. It's $5,000. $4,000 of that automatically needs to be allocated to next month's payroll for myself, right? You already know that. You're taking care of yourself first and then you're like, okay, I have $1,000 left over for expenses that I could put elsewhere. So it's so, so, so important. So similar to what I said in the profitable month episode, when you have a phenomenal month, you need to be thinking ahead and you need to be looking at everything that's going on in your business. You cannot just look at the perspective of what is happening today because if you just go out and you spend that money and let's say next month you have an absolute crap month. Like, it happens, honestly, especially in a world where sales are going on and everything I think that sometimes we have bad months, sometimes we have good months. Being able to say, okay, I have enough for this month. I have enough for half of next month. I need to make sure that I set aside enough for next month. If you are able to plan ahead and kind of look forward because you had a good month and have that foresight, you're going to give yourself much less stress in the following months. Because when you use that great month to protect yourself from a potentially slow month, it gives you the ability to go out and just continue to make sales like normal, right? You're not making sales from desperation. You're not scrambling to make money. You're not being like, oh my gosh, am I going to have enough for next month? You already confirmed, like you already know that you have enough for next month. So there's no real reason to stress or worry about it because you're confirmed. Like you have the money set aside. So there's just a way of making sure that when you are actually planning ahead and you actually look at your business on the full spectrum of things and actually make a baseline, understand what you need to pay yourself, and then kind of build on that. It's going to make you not only understand your business better, but also be able to pay yourself more consistently because you're actually going to understand what you need to make, right? Now, of course, when we first start, if we need $9,000, that's probably not a possibility, but that's something you can also build up to, right? You can build in a percentage. Maybe you want to make sure you're taking at least 30% of every picture. Whatever it is, you want to start with finding out the baseline and then building upon it. So when you are actually, you know, getting it right, you're actually paying yourself consistently and everything like that, that financial stability brings you just so much more peace because you're not having to struggle, you're not having to go and try and like desperately plead for a sale. You're able to just let your systems work and do the jobs that they need to do. And then you're also able to make sure that you have money set aside and that you're good to go, you know? And that's where cash fell becomes really, really powerful. So if you are able to, you know, look at your bank account and say, okay, you know, I have $4,000 in expenses every month. I'm covered for the next six months before I would hit zero, would then not bring you some sort of peace of mind to be like, okay, I don't need to stress about that. So again, if there's one thing that you can take away and start by doing this week and that you need to figure out, it is your baseline. So not just what you want to pay yourself, but what you need in your bank account every month at the end of every month to survive another month. So if that's $10,000, you need to have at least $10,000 in your bank account to survive another month, right? So you need to make sure that your bank account has at least that in there, that alone, while you're not, you know, predicting your cash flow, that alone having your floor line, like your baseline is just going to help you so, so much. Okay? Otherwise you guys, you know, if you like this episode, please make sure to like it, share, subscribe as always. If you have any top suggestions, please feel free to message me on Instagram, thread, wherever it is. Let me know what you guys want to hear. I do wish you guys the best week ever. As always, we'll see you next week. Farewell fellow travelers.