Many financial experts will give you advice on building the right investment portfolio and what percentage you need across stocks, bonds, mutual funds, etc. There is also a lot of advice on how much your mortgage, groceries, and charitable contributions should be in comparison to your monthly income. However, how many of you have ever been told how much you should budget for investing in yourself and your business?
Back in 2010, I read the book Secrets of the Millionaire Mind: Mastering the Inner Game of Wealth. It was a life-changing book for me. It shares the mental beliefs that hold people back in being successful in managing or attracting money. It is also specific in recommendations on the different broad categories and accounts that you should create in your budget and % to allocate to each from a personal finance perspective:
- Financial Freedom bank account – 10% of all your income (after taxes). This money is used for investments that will produce passive income for your retirement.
- Play – 10%
- Long-term Savings for Spending – 10%
- Education – 10%
- Necessities – 50%
- Give – 10%
- Financial Freedom jar – Deposit any loose change, even a single penny each day. This will put your attention towards achieving financial freedom.
Most of us see “Education” on the typical budget spreadsheet and probably think that this refers only to college tuition, private school, or even preschool costs for children. However, T. Harv Eker’s book is probably the only place where I’ve read the recommendation to have a monthly budget item where you use this money specifically for courses, books, training, one-on-one coaching, or any other method you choose to educate yourself. Successful people tend read and learn from other successful people, decreasing their learning curve and saving time and money.
How Much Should You Pay Yourself and Save For Your Business?
To put a business spin to T. Harv Eker’s book, I modified and replaced some of the categories, including:
- Financial Freedom – same
- Play = Owner’s Draw
- Long-term Savings – same
- Education –same
- Necessities = Operating Expenses + Taxes
- Give –same
If you haven’t started your business yet, an Education fund is important to give yourself the financial resources to gain knowledge and skills to successfully start and run your own business. While there is a lot of free information on the Internet, there is almost too much and it takes time to read through to find and curate the best content.
If you’re already in business, then set-up an automatic savings to a new checking or saving account for your Education Fund, keeping the money separate from your main business checking account. Budgeting a percentage of your sales and income to invest in yourself and gain new marketable skills will help you grow and expand your business.
Example: If your profit is $5,000 a month, here is a recommended % allocation from a business finance perspective:
How to Become a Better Business Owner
What falls into this Education bucket? How could you possibly spend almost $500 a month on education material? Here are examples that the money could be used for:
- Business Books, magazines, trade journals
- Training – online courses, certification courses
- Coaching – business or financial coaching, brand management
- Conferences and Seminars – registration fees, travel costs, meals, and childcare (*Read How Much Does It Cost to Attend Small Business Conferences? for a detailed breakdown of how to budget and plan for these expenses.)
- LinkedIn and Social Profile – professional help to write LinkedIn profile and other social media profiles
- Membership fees – Toastmasters, Meetup membership fees or meals/entertainment while attending lunch-and-learn sessions
When I was just starting out in my business, a colleague told me to attend a financial media conference to meet other financial experts and bloggers. It was going to cost me over $350 in registration fees, plus food, travel, and childcare costs. Having money in my Education fund allowed me to make a last minute decision to attend. It was one of the best conferences that I have ever been to, with access to published authors, successful bloggers, and social media experts. The knowledge and networking that I gained from this four day conference helped jumpstart my success as a business owner, with a far greater return than my initial investment.
- Be intentional and save 10% of your monthly net income to invest in yourself.
- Commit to reading at least one new book a month around money, business, or personal development.
- Research and write down 3 conference, seminars, training, or coaching that you could do that would further your kick-start or transform your business.
What skills and knowledge do you need to feel more confident in starting and running your business? I’d love to hear from you! Leave a comment with your thoughts, and I’ll share my favorite resources!