Episode 103 // Pricing & Money Management

December 20, 2016

Let’s get specific about money management. Today we’re getting really nitty gritty with how to manage your finances as a creative entrepreneur—from tracking profit to planning launches to saving for retirement.

Learn More about the Topics Discussed in this Episode
This Episode Brought to You By:
"It's really important to reframe your mindset of the smart expenses as investments."
- Emily Thompson

Discussed in this Episode

  • How we track finances + income
  • Planning out launch cycles
  • Revenue vs. profit
  • How to plan projections and revenue goals for the upcoming year
  • Paying yourself and avoiding the feast or famine cycle
  • Cleaning house
  • Credit cards and debt
  • Fear around big expenses and investments
  • Retirement for creative entrepreneurs

Resources

More from Kathleen

Braid Creative

More from Emily

Almanac Supply Co.

Transcript

Kathleen Shannon 0:01
Hello, and welcome to being boss,

Emily Thompson 0:03
a podcast for creative entrepreneurs. I'm Emily Thompson.

Kathleen Shannon 0:08
And I'm Kathleen Shannon.

Today we are talking all about managing your money. And as always, we're mentioning lots of tools and resources and books and links. You can find those on our show notes at WWW dot being boss club. You guys fresh books cloud accounting is getting a makeover, we got a sneak peek at the new platform. And I want you to know that the all new fresh books is not only ridiculously easy to use, it is also packed full of powerful features. You can create and send professional looking invoices in less than 30 seconds, you can set up online payments with just a couple of clicks and get paid up to four days faster. And you can see when your client has seen your invoice and put an end to the guessing games. Try it for free by going to freshbooks comm slash being boss and enter being boss in the How did you hear about us section. In today's episode, we are going to be talking about planning your new year looking at your money cleaning house, the tools that we use to manage our money. We're going to be talking about big expenses and investing and even retirement. So let's get into it.

Unknown Speaker 1:37
All right, so

Emily Thompson 1:38
what it's the beginning of the year? Well, Lisa's when this podcast coming out, it's the end of the year for us still like totally thinking about money. I like I think money is my favorite part about doing business. I love doing like financial planning, and looking at like income projections like this is when I get really nerdy.

Kathleen Shannon 1:56
And you know, I think that we talk a lot about money mindset. And we talk a lot about creating abundance in our lives and living rich lives. But you always follow it up by knowing your numbers, you've got to crunch your numbers, you have to know your numbers, you can't improve what you don't measure. And I think that the best way to do that, like you've mentioned many times before Emily is looking at your numbers. So in this episode, we're really going to get into how to look at your numbers. And even if you are on top of it, you are going to learn something here today.

Emily Thompson 2:33
Yeah, so

Kathleen Shannon 2:33
let's start by planning out the new year, I think that this is a really good, fresh start to start looking at numbers and really getting organized. How do you guys go about it, Emily, in your household?

Emily Thompson 2:48
Sure. So we track income, just in our accounting software, David uses zero for our business stuff. And that's x er, oh, just so we know. And so he just tracks everything that comes in, and he tracks it via our bank account. So it all like automatically feeds in, and he categorizes things as needed. And then like the software just does all the things. So um, so the thing that we recommend you do first is getting an income statement for the year. And that comes from tracking your numbers throughout the year. Or if you want to be that person spending some good time at the end of the year doing it all at once. But that's not fun for anyone. Before David was doing it for me, I was doing it myself on Fridays, Friday mornings, I would get up and do my bookkeeping for the week. And I also separately kept a very unofficial spreadsheet, where every single day as income would come in, I would go in and just put it in no one ever saw this, this was literally just for my own benefit of really having my finger on the pulse of my business's income at any given moment. So it wasn't official, no one ever saw it, it probably wasn't the most Best Kept thing ever, but I could read it and that was what was really important to me. So um, that's the ways we've done it, both just sort of weakly doing it as a solopreneur. David does it probably two or three times a week as part of his as part of his job as our financial manager. And, but you can also if you want like more ongoing peaks, just keep something really simple for yourself like a spreadsheet. I even at one point and before I really got into this really crazy spreadsheet that I built for myself once I had these worksheets that I had designed up, that would keep on my desk and every day I would come in and whatever pay point of PayPal, PayPal emails I had in my inbox, I would simply write them down that worksheet at the end of every sheet, I would add it up. And so I could go through and just sort of add up all the sheets if I ever want to know what my annual income was. That was obviously a very manual way of doing it, but it's just keeping track of your income is knowing how much money you're bringing in at any given time, but really at the end of the year, because that's where planning the new year comes from is knowing what you did in your previous year.

Kathleen Shannon 5:12
I think that this is where it's really helpful to say, if you don't already have a business banking account, you need to go ahead and get one of those set up. And so at braid creative, we use fresh books. And we have been since the very beginning. And like you were mentioning, with those auto importing of expenses, and even income, no income is a little bit more of a manual transaction, because we're usually moving money over from PayPal into our bank account, or someone is paying us directly into our bank account, like by sending us a check. But um, we have a separate bank account for our business, which you have to have to have an LLC or to get incorporated. And what I do like about that is how automated you can get the expenses. So again, we use fresh books, obviously, fresh books is a being boss sponsor, but it's because we use them and we love them. So one of the things I love about it is being able to pull that profit and loss report. And we typically do this every single quarter. So we're staying on top of our income and expenses quarterly. But then at the end of the year, definitely pulling that one big income statement. And we're always asked to take a look at how much cash we have in the bank as well. So we both have, we both have software that we use to keep track of our finances. But we also have an accountant to help us just really get things organized at the end of the year and kind of organize things for us quarterly, I think we're in a unique situation, where we have employees, we have contractors, we have lots of expenses, we have lots of income coming from various different places. So for us getting an accountant to help us even organized further was super important. But I also think that you can do it by yourself if you are a solopreneur. Or if you don't have a ton of complicated things happening in your finances.

Emily Thompson 7:15
Yeah, simple business things are really easy to handle, we looked into getting more help whenever our business was growing. And we got to a place where you know, taxes were getting a little more complicated. We were looking at moving and we just needed someone to help us help us feel more secure. And David is still doing all the bookkeeping, in terms of just the daily tracking of all of the things. But we do have someone, an accountant that we get with either once a month, or once a quarter to do some of that more like legit business chatter about your income and expenses. So let's move on though with like planning out your year. So you know what your income and your expenses have been for the year. And you want to do some projections for the next year. I feel like I get this question all the time people like how can I plan my revenue goals for the next year. And like there are a couple it's like, I think it's like equal parts art and science, you have to do some good guesstimating just based on like feeling and planning. And then there's also science in terms of like, look at what your records have been. How has your business performed in the past, if you've been open for a year or two, you were starting to recognize the ebbs and flows in your business, some seasonality to how it is that you're able to sell what it is that you do. So what we like to do, and before we get into selling and seasonality, and all of that, I'm looking at expenses, I think is really important for being able to project future revenue and also future expenses. So look at the year that you just got done with and where did the whole of your money go? Basically? Did you hire an expensive coach? Did you get your website redone? Did you decide to invest in lots of education, look at your big expenses where all of your money went? And in terms of projecting for the next year? Will any of those expenses carry over? Because a lot of time, a lot of times some of the bigger expenses in your business are just one off expenses. Or maybe it's a coach that you invested in for like six months, or something like that, or it may be something like employees, which will be an ongoing expense. So looking at your big expenses, and recognizing if any of them will carry over into your next year or not.

Kathleen Shannon 9:31
Do you consider PayPal fees and expense?

Emily Thompson 9:36
Yes, we consider I think we categorize those as like bank fees and like in that sort of category. I'm not positive of that because I don't do that personally myself, but it is an expense. It's a it's a literally a cost of doing business. It is an expense that cuts into your overall revenue.

Kathleen Shannon 9:57
Okay, so we also want to look at where You made your most money, or where you make most of your money or all your streams of revenue. So here at being boss, it might be looking at the clubhouse for our individual businesses, it will be looking at our digital products, it will also be looking at our one on one services. So all the different ways that we make money, we like to look at those, and really almost break it down into a pie chart. So how much what percentage of our income was from one on one work, what percentage of our income was from subscriptions, or digital product. So I think that's really important as well, as far as projecting into the new year how much money you plan on making,

Emily Thompson 10:42
right. And it also will help you make some smart decisions around what it is that your business is offering if you have a couple of pieces in your pie chart. And there are things that you're putting tons of energy into, but you're not seeing that much of a return. Like maybe those are things that you need to think about letting go or repackaging in some way so that you're getting more bang for your buck, I think getting really clear about where your income is coming from, is what allows you to really invest your energy into places that's going to give you a fruitful business. This is something like it sounds super basic. But I don't think people do it often enough, look at where your money is coming from and make educated decisions around how your business model may shift in the new year. Just because you've been offering one thing for however long does it mean, you have to keep it going, you can certainly use these numbers to help you make really smart decisions about how you grow and manage your business. I think

Kathleen Shannon 11:37
also once you start looking at your streams of revenue, and where you're making money, you can start to uncover the monthly trends in your business, you can start to see what months you have more expenses and wet months, you have more income. I think one of all of us who have done one on one client work, see those like kind of peaks and valleys and when people are interested in hiring, but also with digital product and retail. I mean, we know that all of our friends in retail are really busy right around Christmas time and Mother's Day, Mother's Day, and then maybe a little bit slower in the summer, or maybe even in February. So look at the monthly trends in your business. But also looking at your launch schedule. I think that this is maybe one of the first times I've been able to look into the next year and know exactly when I'm launching every single thing I'm launching,

Emily Thompson 12:30
I've been doing this for years.

Kathleen Shannon 12:33
And I've done well for myself, it hasn't been bad. But really doubling down on my focusing on what I'm launching at any given time, I know will help increase my revenue by just putting my intention in those places. But what's cool about it is, I think it's easiest to plan a launch schedule around digital products, and really holding yourself accountable to putting the time and effort into promoting this thing and marketing this thing that you've really made. And we'll talk about setting goals for those launches. But then what I like about it is coming back to braid creative, for example, and really figuring out a promotion cycle for our one on one client work. I feel like it's just kind of a given that we always do that. But we can kind of fit that into launch cycles as well and really push our one on one work when we're not promoting the E course, for example.

Emily Thompson 13:29
Yeah, I think the way that I like to do this, and this does work for product and service businesses, I've done it for both kinds of businesses for myself, where like I literally will sit down with a piece of paper. And I'll divide it into two columns, and have six sections in each column where I put a month of the year, so January, February, March, April, May all the way through to the end of the year. And then I just start like brainstorming what's coming, what's coming up for me, maybe you have a trade show in one given month that you need to write down as like that's going to be a busier month for you both in prepping for it and hopefully also in cells. Or maybe you are launching a digital product or you're going to be launching a digital product once a quarter. Like mapping that out in terms of months is really important. But also holidays like if you do have big sells during Mother's Day. Or maybe you sell barbecue sauce in the fourth of July. It's just amazing for you or whatever it may be writing down on that under the month that coincides with this bump that you expect in your business. And this will give you so much information not just around like when you can expect revenue, but what when and where you need to be putting your marketing efforts when you may need to think about growing your team, when you may need to think about making your team smaller, those sorts of things. And then if there are months were there any holes, that's where your vacation comes in. Or that's where you could think about adding something new in your business and launching something new. Maybe if you're in a product business and you do like seasonal life. Have something you can put those things down on as well. Something as simple as just writing this out on a piece of paper, I do it actually, I usually do it a couple of times a year, I definitely do it at the beginning of the year. But I'll usually do it every quarter, every six months, just to get an idea of the next six to 12 months of my business, it's a really good practice for being really clear about how you're moving your business ahead every month, over the course of a year, and what it looks like in terms of what you're going to be responsible for, or how and when you need to take hold of opportunities that could be coming your way in terms of holidays, or launch cycles, or whatever it should, or whatever it could be. So I love doing that just looking at my monthly trends in the past, and then looking forward for the next 12 months and sort of replicating that, for as a web designer, I know that January and February are dead, absolutely dead. So those are going to be the times where I'm going to be working on something in house. But I might do a really big like client to launch like a big drive to get one on one clients in March and April. So you can make some really good educated plans by looking at how your business has been performing and thinking about the things that you can do in your business moving forward.

Kathleen Shannon 16:19
Okay, so we're looking at the trends we're looking at are launching, we're looking at marketing those things, I think now is a good time to look at revenue and profit goals. So I want to talk a little bit about the difference between revenue and profit.

Emily Thompson 16:36
Right, because they are very different things. So just to get super business one on one with you guys, your revenue is how much money your business brings in period, just flat out cash in your business revenue. Your profit is when you have your revenue, and you subtract your expenses. So all the money that leaves your business for anything that you could be paying for what's left over is your profit. As a service provider with relatively little overhead, I rarely make profit goals. I usually just stick to revenue. But especially if you're in a product business, or if you have a brick and mortar store or those sorts of things, you're going to also want to make a profit goal, how much do you want left over at the end of the year, after you've paid all of your expenses? Those two are really important.

Kathleen Shannon 17:23
I typically think about profit goals first. So I usually think about what do I want my yearly salary to be. And that's probably leftover from my days of working a day job, because that's how you get paid. You just have your yearly salary. So I still very much think about how much money do I want to make this year? Like how much money do I want to be paying personal income taxes on. So that's kind of what I think of as my salary, which I also kind of think of as profit because I own my companies. And I don't really think about revenue very much, because for me, it doesn't matter. Like let's say I'm running a million dollar company, but I have $900,000 in expenses. It's not that impressive.

Emily Thompson 18:09
Right? Right, well, but I think for our business, because we know that our overhead is so relatively small like we don't, I'm glad that you don't think of it that way. But you don't have to think of it that way in terms of you're never going to have 90% of your revenue being expenses. If that's the case, we need to rethink our business model. For sure. Um, so I do think that at least knowing the difference there, I always set revenue, you always set profit. I think together, they work out pretty well. But knowing what that goal is both what it is that you want to take home because that is something that I do think about, like if this is my revenue goal, then this is how much I want to be taking home every year. And then there's some other expenses that will play into that as well. But revenue and profit goals are really important before and setting it for the entire year. And you can do this, you can do this two ways. I tend to do them both ways. But you've written down this like monthly chart of what you have going on. Maybe you have a year revenue goal, maybe you don't even know where to start because sometimes that happens. What you can do is this breakdown of the months that you have go through and make revenue goals for each month. So if Mother's Day when is Mother's Day is that in May.

Kathleen Shannon 19:26
Yeah, is that is that when it is middle of May.

Emily Thompson 19:29
So if you have a big Mother's Day, like make a revenue goal for me. And then you can do that for each month based on what you see ahead of you and your calendar and then you can add that up to be your yearly goal. Or you can like do it the other way around where you have a yearly goal and then divide it into the 12 months I usually do a little bit of both like the other day I was doing this for myself for 2017 and I made a yearly goal and then I went through and made My plan for the year, like each month of the year, and then I went and like wrote out, alright, this launch, I want to make this much money because they want this many students in this digital product. And here's what it'll look like. And then he went through and added up those 12 months. And it was actually more than the revenue goal that I had initially initially set for the entire year. So you can do it both ways just to do some good checking for yourself. But by doing this, you're not just picking an arbitrary number out of the clouds and hoping that you can get it, you actually are putting a plan in place to get it by having these events that happen every month to get you to those revenue goals.

Kathleen Shannon 20:36
Yeah, I want to mention that sometimes we get asked a lot, how do I price my product? Well, once you set your goals, you did you just do the math, you divide it by 12. And then that's how much you need to make per month, then divide that number by how many projects you want to work, or how many things you want to sell, it's really pretty simple. And I want to talk a little bit about paying yourself and how to avoid kind of that feast or famine whenever it comes to owning your own business. Because both of us get a monthly paycheck, it feels very much like we work a job. So I want to talk a little bit about how we avoid feast or famine and how we stay really steady in our businesses.

Emily Thompson 21:17
Yeah, and I, the way we do that is we cut ourselves a paycheck like we've we've looked at our numbers that we have some income projections, we know we have some projections as to what our expenses will be, because we have a really good handle on what our expenses have been. We know when we want to launch and what we want to do. And so we can look at those things and say, all right, we can afford to pay ourselves this amount of money every single month. And absolutely, the idea is that at the end of the year, there's some leftover profit that we can then like split, and like have a nice end of your bonus. But we're not going to be paying ourselves so much that we're not going to be able to cover all of our expenses throughout the year and especially like as we begin wrapping up the year. So having that paycheck so that you're not overpaying yourself, and then not having enough money the next month, or whatever it may be is really important. I think a good idea is maybe start small. Whenever we started paying ourselves from being boss, because it took us a little while to actually get to a place where we were getting paid to do this. We started small in terms of how much we were we were paying ourselves. And then as things became more steady as we were able to really finalize a business model and how we were going to get paid. And we could really anticipate that money and doing some good income projections and really getting a good handle what our expenses were. Because as a new business, you don't know you don't know lots of things, you have to start out slow and start familiarizing yourself with, with everything that's going to be going into your business. And for this reason, I really do encourage people to begin doing your own bookkeeping, like for the first year or two of your business, even if you hate it, like I almost don't care. I think it is so powerful, powerful for you to have your hands in it really seeing where the numbers are going. It gives you the ability to make smarter decisions around how much you can pay yourself. And if you can afford that new thing that you want, whether it be a website or a coach, or some course or whatever it may be, you will know that if you're feeling your money every day or every week, I would recommend I think that that's my case for everyone just sticking out some bookkeeping for themselves for the first year. So

Kathleen Shannon 23:43
when I first started working for myself, there would be some months whenever I would pay myself $300 for the month and other months whenever I would pay myself $6,000 for the month. And I always felt like a total baller on those $6,000 months. And so whenever I partnered up with my sister, and we created great creative together, I was managing the money at first. So I had already had the freshbooks account set up I was already used to running my business account and paying myself but then after the first like few months of giving us either a $600 paycheck or an $8,000 paycheck, just kind of crazy, wildly different paychecks. My sister was having none of it. So she took over and again, it was simple math, it was making projections of over even a quarter how much money we can make and then dividing that by three. So each month we would get our paycheck based on the average mean of the quarter, and it usually really evens out and that was a really great way of just paying ourselves consistently and steady and it does start out small And I think that that's really important. And a really good thing to do is start paying yourself. But even if you are just paying yourself, like you've just started your business, and you're only paying yourself $300 a month for a while, go ahead and do that. Because I think it's really important to get in the habit of moving money from your business account, to your personal checking account, I think it starts to get systems in place, and it starts to really set the habit and standard and precedent for creating a business that is paying you.

Emily Thompson 25:33
Amen to that. I know, and I feel like so many people wait far too long, and then they get burnt out. And they're not enjoying their business because their business isn't paying them. I think doing that physical pain like and again, even if it's just $300, the first month or the first year of months. I mean, that's really powerful for just getting you in this mindset that your business is paying you and it should be paying you. Even if it's just a little bit. In the beginning, the goal is to make it more as you grow.

Kathleen Shannon 26:00
I want to talk about cleaning house a little bit and just doing some kind of beginning of year things that will help you set up for the new year. So one of the things that we just did at being boss was we took a look at all of our contractors and employees. And we started to figure out how much we wanted to give and raises, and what the New Year might look like for our team and expenses there. But we've also accrued a lot of subscriptions over the last couple of years. And I know it breed creative, we need to do this as well. But the little things add up like that crowdcast account, that subscription to the stock photos. And there are quite a few things that we could probably take a look at and see if we're actually using them. And seeing if there's anything that we can kind of cut.

Emily Thompson 26:52
This is David's favorite thing on the face of the planet. I swear it is hysterical and also very painful for me every now and then I'll hear him like yell at me like, Hey, are you still using that whatever account and I'm like, Yes, David, leave it alone, or no, feel free to cancel it. I think that's that's a really good thing. And David is always on top of it. But I think it could be I think it is a very good practice to do every year, absolutely. Or every six months, or maybe even more frequently, if you want to make it a monthly thing or a quarterly thing that you look into. Because you do like I'm so bad. Uh, not yet Oh, I am bad about it. I love like signing up for like free trials of things for 30 days to test it and I log in and I use it, and I never log back in and then it starts charging me. And because I'm not physically looking at it anymore. And this is same for anyone who has an accountant or isn't doing consistent bookkeeping for themselves, there are probably things that you're paying for on a monthly basis that you're not even using. So cleaning house in this way, really looking at all of those recurring payments that you you may not be using is really important for gaining some cash flow back in your business. Another thing that you can do around these subscriptions, and I think this is a good thing to do every six months as well, is to look at anything that you could start paying annually. So I'm one of those people that will sign up for a subscription to something and then choose monthly because I don't know if I'm going to actually use it like I want to test it out and see if I use it. And then six months later, I'm using it like I really love and it's really helpful, but I'm still just paying monthly. Whereas if I were to upgrade to paying yearly, I could save 10 to 20%, or sometimes even more by paying annually as opposed to monthly. So that's something that David really loves doing as well as checking in with me to see if I am using the thing, if it makes sense to pay annually so that you're just saving a little bit more cash every year to checking in with those subscriptions is a really good way to be a lot more proactive about all the dollars that are going in and out of your business.

Kathleen Shannon 28:57
I think it's also not a bad idea to check your credit score, I think you get it for free every year. Do you guys do that?

Emily Thompson 29:04
I think David does it.

Kathleen Shannon 29:06
And I can't remember what all there are three different resources for getting your credit score for free. And we'll be sure to link those in the show notes. Because there are some that are not for free or are totally fraudulent, and will screw you if you put your information into them. But we end up doing it like if you ever buy a car or buy a house, they're going to run your credit report for you. So you don't have to say so you don't have to worry about it, you do have to worry about it. But that's also going to help you see what credit cards have been opened in your name. A lot of times, you might be accidentally opening a credit card whenever you're making a purchase at Lowe's for something for discount, and then that might be dinging your credit score. So it's also a really good idea to look at what credit cards you have open and what your credit score is, and how you can maybe start to Stay on top of that, to get that in shape, and good to go. And we also in my household, we use some tools for budgeting. So I know that you guys use wine AB, which is you need

Emily Thompson 30:14
a budget, David swears by wine AB.

Kathleen Shannon 30:17
And we interviewed the founder of wine app. So we'll be sure to link that in the show notes. We love talking to Jesse so much. And he created this tool for his own budgeting needs. Here at the Shannon household, we use mint. And I love it because my husband does manage our finances. And he's the engineer and the numbers guy and the total nerd about all of that stuff. He's got a spreadsheet. So I was gonna say this, Emily, you used to have your spreadsheet, he actually has a spreadsheet that then converts to a graph. And we can see we can make projections as many years out as we want to see not just how our money will grow, but how our wealth will grow. So we invest in real estate, and I'll talk about that in a second. Because I do want to talk about investments and retirement for creative entrepreneurs. But I really like having meant on my phone because it helps me stay in touch with our expenses and what we're spending money on and kind of what our household budget looks like. And if we do need to tighten the belt a little bit, I can look at mint and really see where that needs to happen. Alright, so

Emily Thompson 31:31
let's let's talk about big expenses, then because budgeting is definitely one of the things I've never been great at budgeting like I I definitely did our financial management both at home and for our business until David he graduated from from graduate school. And then he started taking over at all. So I was very like hands on in it, but not great at it. David, on the other hand, has did plenty of finance in school, he always had this dream of being like a wealth manager, which I think is amazing. He thought he was going to be doing it for someone else. And I think he enjoys more that he can do it for himself, which is really great. So he was much better at the budgeting piece than I have ever been like I don't even here grew up understanding what the word budget meant. But David supernatural, he loves wine AB and him being so great at it has really been very helpful for us making lots of big purchases over the past couple of years. So whether it be some big vacations or buying a house, or those sorts of things. So big expenses. Having budgets in place to help you do that is really important. It doesn't have to even be as hard as having like hardcore budget software, though I think we're in a day and age where like, use your software to make your life better. And I think budgeting is one of those things that very much so can help you in ways that a spreadsheet or God bless you if you use pen and paper will ever do. So Mint is really great. We use why NAB. But let's talk about investments in business or expenses in our business.

Unknown Speaker 33:06
I have a quick question about personal expenses. Do you guys use credit cards?

Emily Thompson 33:11
David recently got our first credit card, like very recently we've like within the past six months, we don't, I have never, we have never used them. For the reason that just not great at doing it. I don't think I don't think I would have now I'm much older and wiser and wouldn't be an issue. But we did just recently get our first credit card.

Kathleen Shannon 33:34
So not having a credit card is a great way to avoid getting into debt. And I don't think I mean, I think you guys are smart listening to this, like don't buy things that you can't afford on your credit card. And I feel like a lot of my friends who are in serious debt, it started with college, they went into serious debt for college. And then those numbers just felt like no big deal like being $80,000 in debt, what's another $5,000 shopping spree on top of that, like debt became the norm.

Emily Thompson 34:06
As well as seeing that it's like hitting so home for me because I definitely graduated college with you know, mid five figures of debt. Actually, maybe not quite mid but lots of debt and was totally overwhelmed by it in a way that like Don't even mention credit card to me, because I'm already never going to be able to pay back my student loans very happily like I was asking David earlier, it's so minimal what's left like we're we're not paying them off just because we don't want to give them the pleasure of having all of that money at once. But we're almost done with them. And that has definitely been huge for me and really like buying a house for me was the most stressful thing like adding debt to the like pile of debt that I had already like paid off like just sort of starting over was really stressful for me. And the idea of getting credit cards just build on top of that has always been really stressful for me. So I agree that college that thing I think plays into so much of our money mindset, probably in ways that we won't recognize for the next 50 years, and then it's gonna hit the fan.

Kathleen Shannon 35:12
So I sacrifice my college experience a little bit to not go into debt. And I know that I'm kind of like seen as the crazy, wacky creative, who has no foresight, but I really do think about the numbers. And that does kind of freak me out. But I've gotten really good at creating debt in places where it's to my benefit, so I'll talk about that a little bit. But um, I decided to stay in Oklahoma and go to the University of Oklahoma, my tuition, I think, was right around 15 $100 a semester. Yeah, yeah, my college.

Emily Thompson 35:55
I like not living on college or on campus fees were raised.

Kathleen Shannon 36:00
My college costs less than my child's daycare, and I did graduate college without any debt. Whenever I was going through my first divorce, I did manage to rack up around $800 on my credit card, and it stressed me out so much that I borrowed money from my parents to pay off the credit card. So basically, I took out a 0% loan from my parents to pay off the credit card, which had basically 12% interest. And I was able to pay my parents back at 0%. And I think that they gave that to me for like a year. So I really like looking at interest rates. And particularly whenever it comes to buying a house, I know a lot of my friends went to put a ton of money down on the house, and we're recording this in 2017. So if you're listening to this, actually, we're recording this in 2016, in November of 2016, to be particular. So if the if the market crashes in a month, right, it very well could. Let me come back around to credit cards. This is like such I could nerd out on this topic for a long time. But I really like using a credit card as a tool to get more out of my money. So what I do is I keep all of my cash in a bank account that yields like, a certain amount of money back, I don't know if it's like 3%. But it's a lot of money. Like basically, I make 50 bucks a month by keeping a certain amount of cash in my in my checking account. And then I'm putting all my purchases on my credit card as much as possible. Like even some of my bills I put on my credit card, because I have a united card. And I get mileage points for every dollar I spend. So every year I'm getting like two or three flights for free a year basically, because I'm putting all of my purchases on my credit card, but then I pay off that credit card at the end of every single month with the cash that has been accruing interest sitting in the bank account. Anyway, I pay off my credit card. And it's kind of like a win win from both angles. So you can kind of use your credit card and your bank account as a tool to actually make even more money. So I'm like all about the credit cards, and getting the credit cards that get you free trips places. Yeah, that

Emily Thompson 38:28
dance of money freaks me out, which is why I just let David do that. And I don't even want to think about it. Basically, because I this gets me to about guys, if you guys want to read a fucking creepy book that will make you think about money in a whole new way. Go check out sacred economics, and then think about money and credit cards and debt a little bit differently. Um, or, actually, we're totally doing what you're doing right now we have an Amazon card. David's racking up those Amazon points are putting everything on it. He's loving it, he's paying it off every month and everything it works out great. But thinking that way. I just have other things I want to put my brain power to.

Kathleen Shannon 39:06
Personally, I feel like David and I are the dorks reading the Tony Robbins.

Emily Thompson 39:11
Oh, he's he read it once. And I think you listen to the audiobook at least once like he loves that book a ton. So let's talk about big expenses, though, because one of my very favorite things about not having credit cards for you know, as long as I haven't, is that everything that I've done in building my business, the big investments that I've made, I've done with cash money, and that does take some budgeting. So let's talk about big expenses, whether you want to do the credit card route, and if you want to do that, it's still a monthly expense that you need to pay off at the end of the month. So you're still needing to accrue the cash to pay it off. Or maybe you just want to straight up pay it off with straight cash. So the thing about big expenses in your business when you're looking at looking at that profit and loss sheet and you see that big number that is your expenses. And it may like give you a freakout moment because that usually gives me a little bit of a freakout. moment, I'm like, this could have been my paycheck. If I hadn't paid Adobe, however much money I do in a year or whatever it may be, it's really important to reframe your mindset around at least the majority of your expenses, all of the smart expenses, into investments into your business. Everything that I spend money on in my business has some sort of return. And it may not be an immediate return, I don't think that is usually ever going to be a thing. But the subscriptions that I buy helped me work smarter, not harder, my employees would not trade them for anything, all of these things are investments that allow me to build a better business. And you need to think of them that way. So that whenever you're looking at that number, you're not feeling resentful for how much money you spend, because you have to spend money in a business to make money. But let's talk about like planning expenses, because this is one of my favorite things, too. I like to look at my year and think about all the money I'm going to bring in and what launches I'm going to have and how much is going to bring me but I also love thinking about what I'm going to spend it on. And in your business. This can be I think even more fun things maybe than personal. And this may just be because I'm a nutso entrepreneur, but you can do things like coaching or getting branding or website, investing in things like community like we have the clubhouse that people who are joining that are are investing in their business, but it's an expense that they have to have to plan for your employees or hiring an accountant or things like trademarking things in your business or traveling for conferences, or doing masterminds, those sorts of things. These are all big expenses, and you need to plan for them so that you can handle them a lot more responsibly, especially if you're if your resources are slow moving, or still newly being accrued. What are some of your favorite expenses?

Kathleen Shannon 41:59
I mean, for sure, traveling, and then continued education. And I will say, if just me alone, whenever it comes to expenses, I would be so slow to travel, to hire to do all the things that have ultimately helped me grow my business. Coaching is another huge one that I'm like, so hesitant to do, but every time I do it, I never regret it. And so those are expenses that I really like investing, and I mean, their investments. But one of the things I really like is having business partners like you and like my sister over at braid creative to say, Hey, can I afford this? And having an objective person who can see the value in that thing, and they're not so emotionally attached to the income? And the expensing? Yeah, go for it. So we also do this with our being boss vacations and retreats, we're really generous about how we spend our money. If we have a sponsor like freshbooks, hooking us up, we're going to get our entire vacation a yacht to have dinner on instead of pocketing that money, like let's create an experience with that expense versus hoarding it away. And so for me, though, I will say having someone who can see the value of the expense, and tell me to go for it has been super helpful for me, I think otherwise, I would just be a lot more stingy or not even stingy but scared, like scared to make those investments.

Emily Thompson 43:33
I agree with that. I mean, making bigger expenses. I mean, both both of us as service providers who sell expensive investments for our clients like having to deal with those, those money conversations, or even the people that we talked to, who are owning their own business, who struggle with making investments in themselves as these sort of expenses. I love that you find so much comfort in talking it out with other people because I do feel like this is just like one of those boss tenants of like, you having a struggle chatted out with someone, because you can create all kinds of funny like things around what it is that you're spending money on. And one of the things I was talking, talking to David about this, getting him to give us some some money tips on how we do this. And he was like, he's like, you know how you guys always say that you should never make money assumptions about other people, like whenever you're trying to sell your thing. If you're not going to do that, why would you ever do it about yourself? So like, a lot of times people have a hard time imagining that they can ever afford this thing. And the moment you say I can never afford this thing, you will never afford this thing. So if you're wanting to invest in a new website, or if you're wanting to invest in a coach or whatever, like change the money mindset around around the assumptions you're making around your own skills to come up with that money. I think that that holds a lot of people back because here's the thing About investments like this in your business is every time I've made one, I have seen so much growth in my business, whether that was the first computer I ever bought, because I guess about three months after I started doing websites, my computer crashed. So the first big project that I got, I had to immediately take that money and I bought my first iMac. And that iMac like fed me back multiple times over by proving my productivity by giving me like a better features and control over what I could create. or whenever I think about investing in travel, like I always come back with more relationships and ideas for moving forward, or investing in coaches, like all kinds of crazy, amazing shit comes from that. Every time I invest in something I see huge explosive growth in my business.

Kathleen Shannon 45:48
Yeah, I was so nervous about investing in the mastermind group that we did with terrigen Tilly, and it was a huge confidence boost to come out the other side, having seen the return on that investment, like we definitely came out of that more organized, motivated and ready to do this thing. And so I think that also kind of dipping your toe into investments is a great way to start. So we talked about this with paying yourself with a paycheck, practice making investments and practice going into making those investments with very strong intentions on seeing a return. And if you can get really intentional about how you're going to see the return, you're actually going to do the work to make that expense, pay for itself. So the computer is a really easy example like I can't make money if I don't have a computer to do my work on. That's easy. But I think it's these kind of more intangible investments, like coaching and education, and travel that are a little more like, is this indulgent? Or is this an investment? Yeah, I

Emily Thompson 47:01
think going into those those occasions with intention, your plans of what you want to get out of it, one will make you more focused in actually making that thing happen. But two will give you some sort of guideline, like when you're done to see if it was actually worth it to you or not. I mean, that's really huge. So yeah,

Kathleen Shannon 47:18
okay, can we talk a little bit about retirement for creatives? I know, we don't have a whole lot of time. But I think that this is something that gives a lot of creatives, a lot of anxiety. And a lot of people are working day jobs for health insurance and for retirement benefits. So I want to talk about ways that you can start to build your own retirement into your business model. What are you and David doing over there for retirement,

Emily Thompson 47:42
David has set us up with some IRAs, and I don't know the extent of what he's done. But I know that has been part of what he's been doing. Literally, this is the stuff he does geek out about it. It's amazing. I'm so lucky. Um, so, you know, obviously, as a creative business owner, no one is setting me up a retirement plan, like I don't have money just automatically coming out of my check, someone else hasn't set this up for us. And so David took that into his own hands. And he set us up some IRAs that we're putting into every single month. It's a budget item on our like, it's a list, or it's a list item on our budget, every month, we're saving, you know, some money. And then once we get however much we need, he puts it into it. And and so it's just become like the utility bill like this thing you have to pay every month. And we did set some goals for next year that we're going to max out our IRA. So that's like part of our money goals is like not only do we want to have this much like salary for the year, but we will also be putting this much money in our IRAs. So it is possible to set that stuff up that Tony Robbins book was huge for David. And then there are also people out there who do some financial planning for creatives that can help you or maybe not for creatives with small business owners.

Kathleen Shannon 49:01
Yeah, I can jump in here because I read the Tony Robbins book, you want to find a fiduciary. I think that's how you say that

Emily Thompson 49:09
word

Kathleen Shannon 49:10
that you want to find a fiduciary. These are basically people who are legally obligated to having your best interest front of mind. So they're not trying to get you to pay for something that has fees that they take a commission on. They are purely there to help you make the best possible decision available. So be sure to speak with a fiduciary. I did end up meeting with a financial planner, through a bank, through the bank that we do our small business banking through and I was not super impressed. And whenever he told me I had a 0% probability of reaching my retirement goals. I was like, Okay, I need to invest elsewhere. So I actually buy real estate. That's how that's kind of my retirement plan. And really, it's all the same like you want to invest in areas that you feel really comfortable. I feel really comfortable buying homes and then renting them out. One of the, one of the pros of living in Oklahoma is that I can buy homes for really super cheap, and rent them out at a market rate and be making basically 100% profit. So it's kind of insane. So I really like doing that. Basically, every time we save up enough money to put 25% down on a small home, here we do it. So if you I want to get on a podcast and talk just about investing in real estate, I can right nerd out on that

Emily Thompson 50:40
you should and that's something that we've thought about too. And that's that's also like, The fun thing about doing what it is that we do, we're not locked in to whatever our like company decides is our retirement plan. Like we can invest in whatever we want. We have some stocks, and we have some CDs, and like we have some of those sorts of things. And, but also the sky's the limit, like we can put our money wherever we want. I think I might be bearing mine in my backyard. Soon, we'll see us buying some gold bars or some shit. But I do I do love that we do you have the opportunity to do it. And I do super love that I have someone who loves doing it for me. But retirement has absolutely been part of my plan. It took me six years to get to a point to where having retirement be part of my like business plan was was a thing. But I got there and I got there because it was always a priority. I just had to get there. And now and now that it is a possibility. It's happening. And it's something that I do want to max out, I want to I do want to retire early. I want I want to be in control of my money. And I think that is one of my very favorite things about doing what we do. But make retirement a priority. I think that's the one thing that sort of freaks the most people out, it shouldn't because you can have complete and utter control over it. And you can do it if you make it a priority. So make retirement a priority for yourself and use your like unlimited earning potential as just like, what is it called fuel to your flame to you know, have as much retirement as you want. But you do have to make it a priority and actually do it.

Kathleen Shannon 52:24
Yeah, one of the things I love about being an entrepreneur is I used to watch a what's her name that money, lady.

Emily Thompson 52:33
Sell No,

Kathleen Shannon 52:34
bitch. What is her name?

Emily Thompson 52:38
I don't know you're talking about

Kathleen Shannon 52:40
Anyway, she basically tells young people to stop buying coffee and stop taking trips.

Emily Thompson 52:45
Oh, that woman? Yeah, I'm talking I know you're talking about but I can't Susanna.

Kathleen Shannon 52:51
Susie Orman. Suzy Orman.

Emily Thompson 52:56
There we go. I think so. Sue? Yeah. Oh, yeah. Yes, Susie ormy.

Kathleen Shannon 53:00
Sorry to call you out. Susie, we'd love to have you on the show. But um, she talks about, you know, don't buy coffee, don't go on the trip. And I just don't believe in that. I feel like I would rather hustle to make an extra five bucks a week to earn that latte than I would cutting it out. Right? So

Emily Thompson 53:22
well. And I think that's the difference between those who are traditionally employed who can't make more money unless they negotiate really great raises for themselves consistently. That's the difference between those people. And those of us who do have unlimited earning potential, like, I can work as much as I want, I can create whatever I want, I can sell it to whoever I want. And I can make as much money as I want to like as long as I'm doing the work and giving value and all those good things. Whereas if I was in a day job, and I was like stuck at $45,000 a year, then if I wanted to do something extra I would have to cut back. And I'm glad that's not something we have to worry about. I will just hustle an extra 30 minutes every week to make however much more money and buy as many lattes as I want.

Kathleen Shannon 54:12
I will also say though, there is something to be said for living below your means as a creative and that's what really gives me a lot of financial comfort and security is that I feel like I live about the same lifestyle as I did whenever I was making $30,000 a year.

Emily Thompson 54:31
Same I mean, I mean the fact that we bought a house which is not a like nonsense investment and by any means, other than the fact that like our rent became a twice expensive mortgage. We're about the same as well. I mean, I feel like we're traveling, traveling a little bit more. But like I don't travel extensively, like David and I were both out of town and we came back and talked about how neither of us spent any money. We didn't buy anything. We didn't go anywhere ridiculous. Like we both just sort of chilled out where we were So same like I don't feel like I live any differently now, or much differently now than I did you know, three or four years ago when I was making a quarter as much money. And I think I think that is a powerful thing like, that's where people run into really big financial issues is one not knowing their numbers. They don't know how much they're allowed to spend, and two is overspending, even if they do know what the numbers are, I think both of those things can be really detrimental for a business. And you and I are really gubbins when my favorite things about working with you is you're right there with me in terms of like bootstrapping, and putting energy into it and saving your money for things that really require that money, like we will DIY whatever we have to DIY. But we also know when and where to put our money into something, which I think is is a really powerful trait for people who want to start and run businesses that are successful.

Kathleen Shannon 55:57
Yeah, I will say leveling up for us feels like learning how to let go of some of that bootstrapping mentality. And it's really easy to stay in it. But I feel more boss, as I can hire more people to do the things that they're best at. And oftentimes, they're better than me at it sounds really like type a controlling, but I think we

Emily Thompson 56:22
are we're creatives for sure.

Kathleen Shannon 56:26
When you've been bootstrapping for so long, it's hard to give up some of that control. But that is what makes me feel boss is giving up some of that control and letting other people do it and doing it better.

Emily Thompson 56:37
Right. And I just want to plug in here too, especially around employees, because I know a lot of folks who are probably listening to this, like hiring a VA, like just getting started, or you know, hiring a designer or a developer or like just contracting someone to do a single project for you, or whatever it may be. I think that I think that or I think about someone in the clubhouse recently who we got on because she had already hired her first VA and we're like, you know, how did it feel to like, make that scary commitment of bringing someone into your business, like making that investment, and running and how it is that you run your business. And it was just she like she was like, it's kind of addictive. Like I immediately hired someone to clean my house. And then I'm looking for someone to do you know, some other specialized work for her. And I was like, Yes, like, once you get over the fear of making that initial investment, it can be so much easier because you see the return on it, you see what it gives you she had so much more time to do the work that she wanted to be doing in her business. And I think that any investment, any smart investment will give you that. So um, I guess to wrap this up in a pretty little bow. whenever it comes to you know what your plans are for the new year, like make money a big part of it, you're a business owner. This is this is what makes you a business owner is not only knowing your numbers, but knowing what you're going to do with them how it is you're going to make them so do some good hardcore planning. Look at how you did last year. Think about what you want to do in the coming year. Make some plans around some expenses you want to invest in to better your business or and or yourself and make it do I'm excited now I want to go spend some cash to hire someone or something.

Unknown Speaker 58:22
I just want to scroll through my mint all day and see where I'm spending all my money right

Emily Thompson 58:26
check your subscriptions. That's a big one.

Kathleen Shannon 58:31
Thank you for listening to being boss. Find Articles show notes and downloads at WWW dot being boss club.

Emily Thompson 58:40
If you're a creative entrepreneur, Freelancer or small business owner who is ready to take your goals to the next level, check out the being boss clubhouse, a two day online retreat followed by a year of community support, monthly masterclasses book club secret episodes and optional in person retreats. Find more at www dot being boss dot club slash clubhouse.

Kathleen Shannon 59:03
Thank you so much to our team and sponsors who make being boss possible our sound engineer and web developer Corey winter. Our editorial director and content manager Caitlin brain, our community manager and social media director Sharon lukey. Our graphic designer Jessica Bramlett and our bean counter David Austin, with support from braid creative and indicia biography.

Emily Thompson 59:25
Do the work, be boss and we'll see you next week.

What's due it dealt with is in their court but I'm very impressed with your ability to say www that was clean. I liked it.

Kathleen Shannon 59:56
So I always wanted to be a voice actor.

Emily Thompson 1:00:00
So you're just practicing w,

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w w w w

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Unknown Speaker 1:00:04
I can't do it very long.

Emily Thompson 1:00:09
Good. w, w w w w w

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dubba dubba dubba

Kathleen Shannon 1:00:19
dubba dubba debit dot clubhouse comm three being bass club.

Unknown Speaker 1:00:26
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Unknown Speaker 1:00:29
Oh man