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How a 6-Figure Financial Coach Manages Her Money
Curious how I manage my money as a financial coach?
How I Pay Myself as a Self Employed Person
I pay myself twice a month from my business, on the 1st and 15th of the month.
It is super important to me to actually get paid personally from my business on a consistent basis, not just to randomly take money. This supports my mental, emotional and physical health and allows me to show up for my loved ones, friends and clients as the best version of me because one of my basic needs are always being met.
I Save Monthly for Self Employment Taxes
I also make sure that I save on a monthly basis from my business to cover my income taxes. A percentage of my net income is transferred each month. I have a separate savings account that all I put in there is money for taxes. I also have to pay GST in my business, so I file & pay that on a quarterly basis. This makes it so paying taxes isn’t a scary thing that makes me want to rip my hair out.
I often see entrepreneurs struggling with taxes (it’s one element I help my entrepreneur financial coaching clients with when it comes to managing their personal & business finances) and what ends up happening if you’re afraid of taxes and they cause you a lot of stress, often you end up earning WAY lower because you feel so dis-empowered around them. I love helping my clients to feel safe paying taxes and paying more in taxes, because they are actually turning a profit!
I’m not going to dive too much into how I manage my business finances because this post is already long enough, but I want to share a graphic of how I manage my business finances and how I help entrepreneurs to manage their money as well. If you like graphics like this that are easy to understand about personal and business finances, join me on Instagram @mandyythomas and you can “save” my graphics to come back to later on!
My Expenses Are Automatic
All of my personal expenses are set up on automatic withdrawals. I want everything streamlined and I want to spend my time and energy on the most important tasks. I don’t want to be paying my fixed expenses each month which actually takes up a lot of precious brain calories as well as bandwidth that can be spent making more money or enjoying my time more.
All of my personal expenses are set up automatically to come out of my account on the 2nd and 16th of the month, so right after I am paid, my fixed expenses are paid and out of my account.
It’s really important to get the money out of your account right after you’ve been paid and to have it going to the places it needs to go. This really helps to reduce “accidental overspending” that can really contribute to you living paycheck to paycheck.
I Save Monthly for Bigger Upcoming/One Off & “Surprise” Expenses
I save on a monthly basis for my upcoming bigger, one off and whammy expenses. Automatic transfers set up on the 2nd and 16th of each month that transfer this money out of my chequing account into my individual savings “bucket” accounts. This helps me to even out my monthly expenses and it makes it so I feel really prepared for variable expenses. For example, I have separate savings accounts to save for:
Vehicle maintenance & yearly license & registration, etc
Miscellaneous yearly expenses (gym membership, taxes, etc)
Home repairs, home insurance
The way in which I figure out exactly what I need to be transferring each month is by sitting down and figuring out what the next 12 months will look like as well as take a look at what’s coming up in the pipeline. I plan for what I think these expenses will be and give myself a buffer for the ones that are more flexible. I take that yearly amount for each category and I divide it by 12 and that’s the number I have automatically transferred to my “savings buckets” accounts.
Then, when these types of expenses come up, I pay for them via my credit card or debit card. I transfer the money from my “savings account” to pay for it. This helps to even out my expenses from month to month so there’s not such a big swing. There’s WAY more consistency, which also means less financial stress!
These expenses are ones that totally throw people off and cause them to feel frustrated! That’s why it’s one of the very first things that I help my financial coaching clients to have clarity around. I help them figure out exactly how much money they need to be saving each month for these expenses for their personal situation.
I’ve saved WELL over $40,000 alone just from paying big expenses in full and not paying them on payment plans.
Some of the big expenses I’ve paid in full for are:
- Paying for school tuition for year in full
- Business expenses, coaches, programs
- Paying 2/3rd’s of my brand new vehicle in cash
- Vehicle Insurance
What to Do Before Investing
When it comes to investing, I think it’s SUPER important to understand that, you shouldn’t invest money you won’t need for 10+ years. Investing is about the long game. You don’t want to be investing money you might need right away, or you can lose a lot more than you could gain if you have to pull that money out at the wrong time.
I have an emergency fund that is 7+ months worth of my expenses that I have saved. As a self-employed person I believe you need to have more than someone who has a stable and consistent income. If you are thinking about investing, make sure you have an emergency fund first that is truly just for emergencies before you start putting money into investments. This is NOT a savings account that you dip into for expenses and when you want to buy stuff.
Where to Keep Your Emergency Fund
A great place to keep your emergency fund is in a high-interest savings account. By moving my emergency fund into a high-interest savings account, I was actually making a little money off of my emergency fund versus just having it in a regular savings account. Most regular savings accounts you make a sad 0.15-0.2% in interest (which does not keep up with inflation), but some high-interest savings accounts you can make up to 1.5% interest (the one I use Eq Bank is 1.5% interest at the time of me writing this). You’re not going to be making bank off it, but you will be earning more.
If you have any questions such as whether they pull your credit score, how they go about their verifying your identity, information about depositing/withdrawing funds from this account, time frames for withdrawing money, you can learn more about EQ Bank if it’s the first time you’ve heard about it, etc, you can click on the “FAQ” at the top to read the answers to these questions and more!
How I Set Up My Investments
I have a set amount of money each month that goes into my investments because I want to take advantage of the most important thing- TIME! My money needs to make me money, so I have it automated to put money into my investments each month. Dollar-cost averaging for the most part for my investing strategy is my preference.
Because of how I’ve been managing my money for years, I made $10,000+ in interest from two of my investing accounts in eight months. No- this wasn’t because I picked the “right” stock. It’s because I made it a huge priority of mine to put money into my investments as soon as I started at my first job out of college. And I didn’t just put in $50-$100/month. I had 10-18% automatically come off of my paycheck so I never “saw” that money, therefore, it never felt like I earned that extra money that I wasn’t seeing on my paycheck. And each time I received a raise, I would increase the amount I was setting aside for my investments, so I didn’t just increase my living expenses and have lifestyle creep holding me back from achieving my goals.
I Personally Don’t Use a Financial Advisor Anymore.
I changed my investment strategy and switched my portfolio to hold investments such as low-cost index funds through Wealthsimple. I’m really liking this change. I’m so glad I did because it’s saving me a ton of my hard-earned money. If you want to learn more about investing and the differences between a TFSA and an RRSP, click here to read this blog post of mine.
Wealthsimple has a really nice dashboard and I am a fan of it. It makes it super easy to understand and actually helps to educate you versus other platforms I’ve used before that gave you such minimal information and didn’t do anything to help increase your financial knowledge. I am big on transparency- especially in the financial world and when it comes to investments. I’ve had investments with companies where it was so hard to find anything out and that made it very difficult for you to see your investments. I don’t have those investments anymore.
Automating my savings and investments has been huge for me! There are many things that went into me being able to save $250,000 by the time I was 26 and this was definitely one of those strategies!
Ready to stop living paycheck to paycheck and finally get ahead financially? I would love to work with you as a financial coaching client, click here to read more!
My Favorite Books to Learn About Investing:
How I Make Money Using My Credit Cards & Have Over a 800+ Credit Score
I use my credit card regularly because I earn cashback (and never pay interest because I pay off my balance in full each month). For the recurring expenses that I have come off of my credit card, I have automatic payments set up that transfer money from my chequing account to pay my new credit card charges automatically for me.
Any new purchases I make on my credit card that aren’t recurring, I pay them off right away (I typically pay my credit card 2x a week depending on how many things I purchased that week). It is important to me to keep my credit utilization ratio low which is why I pay my credit card off often.
This also helps support my credit score because I am keeping my “credit utilization” ratio low by paying my credit card many times throughout the month, versus just paying it once at the end of the month.
I highly recommend if you don’t know what your credit score is, to find out here, it’s totally free!! PS – you checking your own credit score does NOT negatively affect it, onto when other people do.
I get an email every single month telling me my updated credit score and my score is always above 800+! It’s SO helpful knowing what your credit score is. It’s not just for vanity metrics, but I also use it to help me tell if there have been any potential issues with fraud. If my credit takes a big dive, it tells me that I need to immediately look into it and see if someone has taken credit out in my name. This allows me to deal with the issue as quickly as possible, versus having that affect me for years if I didn’t check it.
I teach all things credit scores in my Credit Score Crash Course masterclass! My next live training will be on October 6th, 2020 (if you can’t make it live no problem, you will be sent the replay). Click here to sign up for the Credit Crash Course so you can increase your score and save thousands of dollars! (it’s only $47 & you’ll save tens of thousands from this info!)
If you want more tips about how to improve your credit, I highly recommend checking out the posts I’ve written about it.
I Don’t Pay Bank Fees
I bank using a no-fee bank because it’s one of the easiest ways to save money. Honestly, if you’re still paying bank fees, I’d encourage you to switch to a no-fee bank. It will be worth it! I did the math for one of my financial coaching clients to show her how much her “little” monthly bank fees were adding up over the long run. Over 10 years she paid $5460 in bank fees! I know what you’re thinking, “Shut the front door!!” I paid $0, nada, nilch in ten years and she paid $5460!! Just think of all the better things she could have put that money towards. Tangerine is a great no-fee bank that I am a big fan of.
Managing my finances this way really streamlines things for me and allows me to spend more energy focusing on more important tasks!
I Spend in Alignment with My Values
I believe it’s really important to identify your top 3 values, so you can ensure you are spending in accordance with them to live your life the way you want to.
My Top 3 Values Are:
- My Health
I deeply understand what my values are, so I put money towards the things that align with them. I don’t put any (or little) towards the things that go against my values. Everyone’s values are unique and personal to them. How I spend money might be completely different from how you spend your money.
Because my top value is my health, I spend a lot more money on supporting my health than a lot of other people do. I was really sick in the past and I never want to experience that again,. Therefore, I prioritize and intentionally spend more on things related to supporting my health, which other people might consider crazy!
Some of My Health Expenses Are:
- Vitamins & supplements
- IV Therapy (vitamins and minerals given in an IV)
- I recently bought an “infrared sauna blanket” and I am in love with it! My functional medicine doctor recommended I go for sauna sessions 5x a week and that would be really hard to schedule in as well as would add up, so I decided to purchase a “sauna blanket” because it doesn’t take up a lot of room. I absolutely love it and I do it when I’m watching my favorite show (Vampire Diaries – hello Ian Sommerhalder). It was very cost-effective!
Health Insurance is a Non-Negotiable
I know this may not seem completely financially related, but, it is. It’s also very important to me to have health insurance. I grew up in a family who had/has many health complications and I realized from a young age how important it is to have health insurance. For health insurance, I pay on a monthly basis, and this gives me a lot of peace of mind. It also helps to protect my financial situation so, if something happened, it wouldn’t completely drain me. I often see people not valuing health insurance. This makes me so sad because I know how quickly things can change in the blink of an eye as well as how much it can change your financial situation.
Freedom is a Top Value of Mine
This is why I spend a lot less on housing and vehicle costs, than the majority of people. A vehicle payment doesn’t feel good to me. I prefer to save up and purchase used vehicles that are still in great condition. Someone else has paid and had it depreciate, therefore, it’s holding better value when I purchase it. I am currently saving $150/month in a TFSA which I am going to use when it’s time for me to get a “new” to me vehicle. I can totally see myself having the vehicle that I have right now for the next 5 years. Therefore, I plan on saving approx $150/month. When it comes time to buying another vehicle, I already have that money saved up in cash. But, instead of just leaving it in a savings account, I have it in a TFSA to earn some additional interest in the meantime.
We sold our bigger & newer house a year ago and moved to a much smaller and older house. Honestly, I couldn’t be happier! When I was younger, I thought I valued having all this extra space, but, in fact, it just meant there was more to clean! This reduced my energy and frustrated me. I am so much happier in a smaller home AND much lower housing costs really support my value of freedom!
I also don’t have hardly any subscriptions as I personally don’t see value in them.
Subscriptions I Don’t Have:
- Amazon Prime
- Disney Plus, Hulu (just Netflix)
- Satellite Radio
- Spotify, Apple Music
- Audible (I use Hoopla instead and get 4 free audiobooks a month! I’ve been doing this for 7+ years and still haven’t ran out of audiobooks to listen to)
- Subscription Boxes
- Any Monthly Apps
I’ve also saved a lot of money, over the past 11 years, because I don’t drink alcohol anymore. (It definitely adds up!).
If you are struggling with having enough money to invest or you need help with paying down debt and building up your saving and emergency savings, I would love to help you. You can find out more about my Cash Flow Confidence program where I help you to do exactly this, so you have a lot more money available to invest because you’ve paid down your debt!
Are there any parts of my strategy that you found really interesting and want to implement with your own finances now?!? Comment below!
I Share a TON of Financial Tips on Instagram, join me there! @mandyythomas
Click here to download my Realistic Budget template!